Regency IPO Update

Regency Cruises planned public offering may have been put on hold. Instead, the company is said to be seeking private placement. While company executives had not returned phone calls by press time, sources cited a difficult IPO market combined with the downturn of the cruise market.

According to sources, Regency plans to raise $30 million to $40 million.


According to a September (1994) filing with the Securities and Exchange Commission, Regency plans to use the proceeds to improve its cash position, to make partial payment on additional ships, as well as for working capital.

Plans call for the purchase of two or three additional ships including the 480-passenger Regent Jewel.

However, the company does not plan to use any significant amount to reduce long-term indebtedness, and will continue to be highly leveraged, according to the document. All of Regency’s ships are pledged as collateral for various financing arrangements.

Regency has approximately $99.1 million of debt outstanding including $37.3 million which is repayable through the end of 1995. Two thirds of the debt is subject to floating interest rates.

The company also expects to spend $6 million to upgrade its ships by 1997 to meet SOLAS and Montreal Protocol standards.

After the offering, Rainbow, a Lelakis Group affiliate, will continue to hold 76.09 percent of the outstanding ordinary shares.

Financial Position

Regency Cruises made its Initial Public Offering and launched service in 1985.

The company expanded from one ship to four ships before being taken private by one of its main investors, the Lelakis Group, in 1993.

Before the company was taken private, it owned one ship (Regent Sun) and operated three other ships under charter agreements. The company also reported cash and cash equivalents of $33.8 million and long term debt of $5.4 million in its first quarter report for 1993.

Now, a year and half later, the company has bought the ships it formerly chartered. They were owned by companies affiliated with the Lelakis Group. In the filing, Regency claims to have paid $164 million for the Sun, Sea, Star and Rainbow for an average per berth cost of $47,400.

ln 1987, Regency acquired the Regent Sun, the former Royal Odyssey, which was built in 1964, for $22 million. That would leave $142 million for the 729-passenger Sea, built in 1957; the 950-passenger Star, built in 1957; and the 960-passenger Rainbow, rebuilt in 1992.

Plans also call for Regency to buy two or three more ships from the Lelakis Group.

But while the company now owns six ships, it also has a debt of more than $90 million and has recently defaulted on most of its financial commitments, according to the documents filed.

Among the strains on its budget is also a $7 million cash account requirement to secure a credit card processor’s right to be reimbursed in case customers have to be refunded.

Regency reported costs and expenses to be 97 percent of revenues for the first quarter of 1994 compared to 98 percent for the same quarter in 1993, and reported operating income at three and two percent of revenues, respectively.

The company also reported average revenue per passenger day of $164 for the first quarter of 1994 compared to $150 in 1993.

Passenger occupancy ranged from 81 percent to 91 percent on the company’s various ships in the first quarter of 1994.

The filing also listed consolidated results for Regency for 1993 with a break-down of costs and expenses which listed ship operating costs at approximately 49.1 percent of revenues; marketing, travel agency commission and air costs at 32 percent of revenues; general and administrative costs at 8.6 percent and vessel depreciation at 5.4 percent.

The operating income margin was 4.7 percent and net income was 3.2 percent.


Since Regency was launched in 1985, the company has seen its fleet grow from one to six ships and seen revenues grow from $41 million to $172 in 1993.

Regency now believes it is the eighth largest cruise line in the North American market with a combined berth capacity of 4,532 passengers. It also claims to command about 3.7 percent of the cruise market.

While Regency was able to enjoy its first years in the Caribbean by offering unique itineraries, it has recently been crowded out of that market by price pressures afforded by the muscle of economies of scale of the big lines.

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