Shares of Royal Caribbean Cruises Ltd (RCL 0.84%) jumped as much as 23.1% in trading Monday after the company announced a new debt offering. Shares closed up 18.6% and gave a little hope that cruise lines will make it through the current downturn in consumer spending.
Early Monday, Royal Caribbean announced that it has entered into a $2.2 billion secured term loan facility for the next year. This will give the company a total of $3.6 billion of liquidity to weather the current downturn in the cruise business.
Management expects to continue service on April 11, 2020, but even that seems quick given the current environment. And when cruise lines begin operating again, consumers may not be willing to jump aboard. If that's the case, even a seemingly massive $3.6 billion liquidity backstop may not be enough.
To put the liquidity into perspective, Royal Caribbean has $2.6 billion of debt maturing in 2020 and $2.2 billion obligated to new ship purchases in the next year. If operations don't get going soon, the new liquidity may not be enough to save Royal Caribbean. And I doubt the cruise business will be back to any sort of "normal" anytime soon.