Cruise ship stocks increased on May 8 after Royal caribbean (NYSE: RCL) provided a commercial update. Actions of Carnival (NYSE: CCL), Norwegian Cruise Line Holdings (NYSE: NCLH)and Royal Caribbean increased by 5%, 3.6% and 5% respectively.
With their ships stranded in port due to shipping restrictions imposed by health agencies during the COVID-19 crisis, the major cruise lines are bleeding. In turn, Royal Caribbean, Norwegian and Carnival have all taken on more debt to raise the funds they need to survive until their ships can resume sailing.
Royal Caribbean said on Friday that it had approximately $ 2.3 billion in cash reserves as of April 30, which it increased by drawing $ 150 million from its senior secured credit facility on May 4. . “Since late January, we have taken several proactive measures to mitigate the financial and operational impacts of COVID-19,” said Royal Caribbean chief financial officer Jason Liberty in a press release. “Our goal is to strengthen liquidity through significant cost reduction, capital expenditure reductions and other cash conservation measures.”
Liberty went on to say that Royal Caribbean is considering other ways of obtaining money. “We continue to evaluate all the options available to us to further improve liquidity,” he said.
Cost reductions cannot go that far. And going into more debt to raise funds is not a panacea. Finally, the invoice will expire.
And while their ships are docked in ports, cruise ship giants continue to burn money. Royal Caribbean alone loses up to $ 275 million per month.
Thus, the holdings of Carnival, Royal Caribbean and Norwegian Cruise Line all remain high risk stocks.