UBS suspects Royal Caribbean Cruises is on the prowl for more cash after disclosing up to $275m in monthly operating costs for an idle fleet of 62 ships.
The Richard Fain-led owner announced the expenditure Friday as part of an update that listed cost-cutting efforts such as putting some ships in cold layup during the pandemic.
"We believe RCL’s update is in advance of a capital raise," UBS analyst Robin Farley wrote Monday in a client note.
Calls to Royal Caribbean, whose shares trade on Wall Street as RCL, were not immediately returned.
Royal Caribbean, which has attained $2.45bn in financing to ride out Covid-19's negative impacts, is reportedly in talks with Morgan Stanley to offer $600m in additional bonds.
UBS puts Royal Caribbean's cash-burn estimate at a much higher $570m per month because it includes other factors such as $150m in monthly financing charges on newbuilding commitments.
The New York-listed company in March took out a $2.7bn in credit to boost liquidity to $3.6bn through other credit mechanisms, cash deposits and financing.
The company expects to incur a loss for 2020 but cannot estimate to what extent, given it is unknown how long Covid-19 will continue to impact the cruise industry and global economy.
By comparison, Arnold Donald-led Carnival Corp estimates spending $1bn per month on keeping its 104 ships laid up.
Frank Del Rio-led Norwegian Cruise Line Holdings is laying out up to $110m per month to keep its 28 ships idle during the pandemic, according to company estimates.
Shares for all three cruise majors, known collectively as "The Big Three", fell through late afternoon Monday.
Carnival's shares declined 3% to $13.81, while Royal Caribbean stock slipped 4.3% to $38.21.
Norwegian's shares went down 6.2% to $11.66.
