Cruise lines voluntarily suspend all trips out of U.S. ports until Sept. 15, trade group says

The coronavirus pandemic has roiled the travel industry, hitting major cruise lines particularly hard. Since the outbreak began in China in late December, there have been several major outbreaks, quarantines and deaths aboard cruise ships.

While cruise executives have expressed confidence that the demand for cruising will return, the largest companies have been forced to issue fresh debt and seek new injections of cash to survive months of little to no revenue. 

In May, Norwegian Cruise Line, the smallest of the three major publicly traded cruise companies, said that it might have to seek bankruptcy protection, saying there’s “substantial doubt” about its ability to continue as a “going concern.” 

The company also announced on the same day that L Catterton, a private equity fund, invested $400 million in NCL Corp., a subsidiary of Norwegian. The day after the announcement, however, the company said it successfully raised more than $2 billion in a mix of stock and debt, ensuring the company can last at least the next year without any revenue if necessary.

While Norwegian’s larger rivals, Royal Caribbean and Carnival Corp., have not flashed warning signs of potential bankruptcy, both have also successfully sought additional funds since the coronavirus pandemic took hold. 

The ongoing suspension of operations and poor outlook for the future prompted ratings agency Moody’s to downgrade its rating of all three companies’ unsecured debt to speculative grade.

“Following recent downgrades of the only two investment grade cruise companies — Carnival and Royal Caribbean — our rated universe for this group is now entirely spec grade, an indication of the sector’s growing duress,” Pete Trombetta, a Moody’s assistant vice president, said on June 4.

Trombetta authored a report that predicted cruising will be suspended for most of 2020 and that when sailing does resume, the companies will suffer from a poor economic environment, among other factors. He added, however, that the three major publicly traded cruise companies have raised enough debt and equity to survive “at least through 2020.”