Kloster Cruise has announced that it has entered into a $110 million sale/charterback agreement under which it would sell its Star Odyssey and Royal Odyssey ships for cash and notes to a financial buyer.
Under the agreement, Kloster will charter the ships back for use in its fleet through April 1996, and has an option both to extend the charter period or to repurchase the vessels from the buyer.
Kloster promised that a complete description of the transaction would be included in the company’s quarterly 6K filing for investors.
Kloster said that the transaction will allow it to make all principal and all interest payments currently due, improve its cash position and liquidity, and pay down debt.
Adam Aron, President and Chief Executive Officer, stated “We said from the very beginning that there were alternatives available to the company to meet its immediate debt obligations. With this transaction, we will have succeeded in making all payments that are due, improving our cash position, decreasing our debt, and allowing our management to once again concentrate all of its efforts on providing excellent service to the travel industry and an outstanding cruise product to our customers.”
Royal Cruise Line
The transaction puts a questionmark on the future of Royal Cruise Line which, unless Kloster extends the charter or repurchases the ships, will have a two ship fleet after April of 1996.
The sale/charterback solves Kloster’s immediate cash problem, but long-run, the cruise company must still solve its financial problems.