Why cruise lines are raising capital to stay afloat during pandemic

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Since March 14, when the Centers for Disease Control and Prevention issued a no-sail order, cruise ships have been sitting idle with no passengers. The order is set to expire on July 24, but operators are extending beyond that on their own. Disney Cruise Line, for example, said its cruises will remain suspended until July 27.

The coronavirus has impacted the hospitality and tourism sectors, including cruises, greatly. Operators are raising capital so they can stay above water, and others even reportedly held talks with investors.

Carnival Corp. (NYSE: CCL), which raised $6 billion through a combination of debt, stocks and convertible notes, was in talks with Blackstone for financing before settling on the public deal, according to Bloomberg News. Carnival rejected Blackstone’s proposal because it was more expensive than the public market’s, Bloomberg reported. Most of Carnival’s fleet will remain suspended until August 31, and the company laid off and furloughed several hundred employees.

“Any resumption of cruise operations – whenever that may be – is fully dependent on our continued efforts in cooperation with federal, state, local and international government officials,” Carnival said in a statement. “In our continued support of public health efforts, any return to service will also include whatever enhanced operational protocols and social gathering guidelines that are in place at the time of the resumption of cruise operations.”

Carnival is not the only cruise company that is raising capital. Viking Cruises Ltd. announced a private offering of $675 million in the form of senior secured notes that will be due in 2025. Viking is mainly known for its river tours.

Businesses that offer services to cruises are also getting impacted by the coronavirus. Steiner Leisure and Neuberger Berman Investment Advisers are investing $75 million in L Catterton-backed OneSpaWorld Holdings Ltd. (Nasdaq: OSW), a provider of health and wellness services to cruise ships and resorts. “This investment substantially increases our financial strength and liquidity, and attests to investor confidence in our ability to weather this unprecedented crisis,” says OneSpaWorld executive chairperson Leonard Fluxman.

Historically, the cruise industry is a significant contributor to the U.S. economy and the sector is doing its best to protect that.

For more on the impact of the coronavirus on the middle market, see Dealmaking under quarantine.

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