ACL In Trouble?

According to its annual report for fiscal 1988, American Cruise Lines’ future may depend on its ability to obtain financing or refinancing which is needed to meet working capital requirements, payment of debt obligations, meeting the Federal Maritime Commission requirements to secure cruise deposits, and the eventual achievement of profitable operations.

ACL has incurred a net loss of more than $5.5 million in its 1988 fiscal year, which ended June 30, and has an outstanding debt of more than $18 million.

In the annual report it is stated that passenger days and cruise revenues were less than anticipated in 1988. Passenger days decreased 19 percent from fiscal 1987, and cruise revenues decreased 10 percent. Consequently, the company has not been able to make required principal and interest payments on the majority of its bank obligations since December 1, 1987.

ACL has also been notified by its insurance carrier that it will cancel its current bond with the Federal Maritime Commission as of December 1, 1988, and is currently seeking alternatives to satisfy the Maritime Commission.

The lower occupancy rates were attributed to increased capacity within ACL’s markets and the resulting competitive marketing pressures including increased promotion costs and price discounting.

In order to stimulate sales, ACL is redirecting its marketing efforts away from media advertising into telemarketing and direct mail solicitation, which it believes is more effective.

ACL is also the subject of a class action suit filed by a shareholder alleging misrepresentation and material misstatements of fact in the company’s prospectus of July 9, 1986. Also named in the suit is Advest, underwriters for ACL in its public offering.

The company’s shares have gone from a high of $10 in the quarter that ended June 30, 1987 to $.50 in the quarter that ended June 30, 1988.

In order to continue operations, the annual report states that the company must generate sufficient advance ticket sales for its 1989 cruises and must restructure its bank debt.

If the company is unable to find additional sources of financing or generate sufficient advance ticket sales, it may be unable to continue operations in the near term.

According to informed sources, the company has considered selling one or several of its ships to generate cash and has for some time been seeking persons and companies for a joint venture or merger, but has been unable to do so.

ACL has some 350 shareholders among whom Charles Robertson, Chairman and founder, holds 63.3 percent through his company Robx.

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