Actions of Royal caribbean (NYSE: RCL) up 45% in April, according to data provided by S&P Global Market Intelligence.
Although this sharp rise offset some of the title’s losses for the year, the cruise line’s shares are still down 65% since the start of the year.
Cruise lines have been hit by bad news since the outbreak of the COVID-19 pandemic, with medical experts warning people not to board cruise ships and countries closing borders to curb the spread of the virus . Royal Caribbean extended its cruise suspension by canceling all crossings until June 11.
But there are signs that things may not be as bad as they seem. On April 8, the company changed the export loan-backed loan facilities of two of its vessels, Anthem of the Seas and Spectrum of the Seas. The move included a 12-month debt relief initiative offered by Germany’s official export credit agency to help cruise borrowers. On April 21, another vessel, Quantum of the Seas, had its loan facility changed with the same debt relief. These measures will help ease the burden of cash flow for Royal Caribbean as it goes through this unprecedented crisis.
The company also announced that it will lay off or lay off 26% of its workforce in the United States. This will affect nearly 1,300 of the company’s more than 5,000 employees in this country. Although drastic, this decision will save more money. Royal Caribbean is also rumored to be in talks with Morgan Stanley to raise new financing and to be discussing a package that may include the issue of convertible bonds or stocks. The goal is to raise up to $ 600 million to help overcome the pandemic.
Royal Caribbean has gone through many crises in the past. Although the current one seems to be the biggest challenge facing the industry in decades, the multitude of steps the company has taken to raise funds, consolidate its balance sheet and cut costs can help it survive.
The question now is whether business will return to normal even after the pandemic is contained, or whether it will take a long time for people to get back on a cruise ship. Whatever the case, it appears that Royal Caribbean’s finances have been strengthened and that the company should still be there to take advantage of the recovery.