Norwegian Cruise Line Holdings said in a press statement that prior to the suspension of cruise voyages, the company had begun developing a comprehensive and multi-faceted strategy to enhance its already rigorous health and safety protocols to address the unique public health challenges posed by COVID-19, including enhanced screenings, upgraded cleaning and disinfection protocols and plans for social distancing.
Several of these protocols were put in place prior to the voyage suspension.
The company is consulting with Dr. Scott Gottlieb, former Commissioner of the U.S. Food and Drug Administration and an experienced public health and medical policy expert, as an advisor to provide independent public health counsel as the Company develops the next level of health and safety standards to prepare for the resumption of voyages.
The company said will continue to work with the U.S. Centers for Disease Control and Prevention and other federal agencies, public health authorities and national and local governments in areas where it operates to take all necessary measures to ensure the health, safety and security of guests, crew and the communities visited once operations resume.
Reduced Operating Expenses
The Company anticipates estimated ongoing ship operating expenses and administrative operating costs combined to range from approximately $70 million to $110 million per month during the suspension of operations as a result of the following cost reduction measures:
• Meaningfully reducing cruise operating expense which includes reducing expenses associated with crew payroll, food, fuel, insurance and port charges. The majority of ships in the Company’s fleet are currently transitioning to cold layup.
• Significantly reduced or deferred marketing expense in the first half of the year.
• Introduced a temporary shortened work week and reduced work hours with commensurate 20% salary reduction for shoreside team members.
• Temporarily furloughed approximately 20% of the shoreside workforce through July 31, 2020. Furloughed team members remain employees of the Company and retain healthcare and other benefits. The Company is covering the employee share of medical insurance premiums during the furlough period.
• Implemented a company-wide hiring freeze.
• Paused employer 401(k) match contribution.
• Suspended travel for shoreside employees across the organization.
Reduced Capital Expenditures
The company has identified approximately $515 million of capital expenditure reductions, comprised of:
• Approximately $345 million, or an approximately 65% reduction of non-newbuild capital expenditures for the remainder of 2020.
• Approximately $170 million in expected deferred capital expenditures for newbuild related payments through March 31, 2021. The Company is currently finalizing documentation for deferrals of these payments. Upon completion, the company does not expect any newbuild related payments to have an impact on liquidity until April 2021.
• Total capital expenditures, net of expected deferrals of newbuild related payments, for the remainder of 2020 is expected to be approximately $195 million.
Improved Debt Maturity Profile
• Deferred approximately $385 million of payments related to guaranteed financing by Euler Hermes Aktiengesellschaft, the official Export Credit Agency of Germany, through April 2021 and amended associated credit agreements to incorporate this debt deferral in connection with an industry-wide initiative granting a 12-month debt holiday to provide interim debt service relief for amortization payments and financial covenants. The company is finalizing documentation for the deferral of the remaining approximately $155 million of ECA backed payments through March 31, 2021 with its other ECA lenders. Deferrals are to be repaid in eight equal semi-annual installments following the Debt Holiday.
• Secured a 12-month deferral for approximately $150 million of debt amortization through March 31, 2021 relating to the Term Loan A and Norwegian Jewel term loan. Deferrals are to be repaid 25% per year in equal installments following the deferral period with any outstanding balance paid in full at maturity.
• Extended $230 million Pride of America term loan by one year to January 2022.
• Extended $675 million Norwegian Epic revolving credit facility to March 2022.
Taken together, the aforementioned cash conservation measures and the deferral of near-term debt amortization and newbuild related payments, the company estimates its monthly cash burn to be on average in the range of, approximately $120 million to $160 million per month during the suspension of operations. This includes ongoing ship operating expenses, administrative operating expenses, interest expense (including approximately $12 million of additional cash interest expense per month for the next twelve months for debt refinancings and new financing transactions announced last week) and expected capital expenditures and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings. The increase versus prior monthly cash burn estimates of approximately $110 million to $150 million per month reflects additional interest expense.