Royal Caribbean Group RCL is leaving no stone unturned to boost liquidity in a bid to counter the coronavirus crisis, which has driven the cruise industry to standstill. The company has secured a $700 million term loan facility from Morgan Stanley.
The company can withdraw the loan at any time prior to Aug 12, 2021. Following withdrawal of the loan, the company will bear interest at LIBOR plus 3.75% and mature 364 days from funding. We believe the company has enough liquidity to navigate through the ongoing crisis. As of Jun 30, 2020, the company had cash and cash equivalents of approximately $4.1 billion, compared with $3.9 billion at the end of Mar 31, 2020.
On May 19, 2020, the company completed its $3.3 billion senior secured notes offering. Further, the company announced that during suspension of its operations, its estimated cash burn is anticipated between $250 million and $290 million per month. This includes ongoing ship operating expenses, administrative expenses, debt service, hedging costs and anticipated necessary CapEx. Although the company’s long-term debt at the end of second-quarter 2020 stands at $17.7 billion, its anticipated debt maturities for the remainder of 2020 and 2021 are $0.3 billion and $1.3 billion, respectively.
Shares of the company have fallen 57.2% year to date, compared with the industry’s decline of 45.1%. Other major cruise operators like Norwegian Cruise Line Holdings Ltd. NCLH and Carnival Corporation & Plc CCL have declined 73.9% and 70.1%, respectively.
Healthy Sail Panel to Counter Ongoing Crisis
Notably, the ongoing pandemic has compelled companies to forget rivalries and come together to counter the scenario. Case in point, Royal Caribbean Cruises and Norwegian Cruise have teamed up to develop safety standards. Former Utah Governor Mike Leavitt and former U.S. Food and Drug Administration Commissioner Scott Gottlieb, are serving as co-chairs of a newly formed group of experts called the "Healthy Sail Panel." The expert panel, which has been working for approximately a month, will provide their initial recommendations by the end of August.
Zacks Rank & a Key Pick
Royal Caribbean has a Zacks Rank #5 (Strong Sell). A better-ranked stock worth considering in the same space includes Camping World Holdings, Inc. CWH, carrying a Zacks Rank #2 (Buy). Camping World Holdings’ current-year earnings are likely to witness growth of 327.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Carnival Corporation (CCL) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
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