Norwegian Cruise Line Holdings' bulletin to save half a billion dollars may be a sign that the company is looking to raise some cash, according to a prominent sell-side analyst.
The Frank Del Rio-led owner of 62 ships on Monday announced plans to cut 2020 spending by $515m amid Covid-19 stresses, following unconfirmed reports of a possible stake sale.
The company's shares, which trade on the Nasdaq Stock Market under the symbol NCLH, gained 14.1% to $13.06 by mid-afternoon on Monday. UBS rates the stock at neutral with a $13 price target.
"We see a possibility that NCLH’s update could be in advance of a capital raise," UBS analyst Robin Farley wrote in a clients' note on Tuesday.
She said Norwegian's expectation to burn up to $150m less in cash per month beats UBS' expectation to spend $260m per month, but a capital raise could significantly dilute earnings per share.
However, this dilution could be offset by accretive factors, such as a $540m German debt holiday, a deferral of $160m in debt maturities and $500m in paid newbuilding financing.
Salary cut
Norwegian, whose chief executive Del Rio saw his yearly pay fall to $17m in 2019 from $22m in 2018, did not return calls.
Farley wrote that most of Norwegian's ships may not begin sailing again until 2021, barring changes in availability of virus vaccine, testing or treatment, reiterating a similar global-fleet forecast.
"We see further cruise suspension beyond July 2020," she wrote.
"We believe it is unlikely lines would be able to resume cruises in Alaska and Europe for the summer."
The three cruise majors have obtained billions of dollars in financing so far to survive the pandemic downturn.
Norwegian, which may have as much as 13 months of cash runway, is surviving off $1.55bn in credit.
Carnival has raised $9bn in financing for 15 months of liquidity, while Royal Caribbean Cruises has put together $2.7bn worth to last another 10 months without revenue.
