Monday was a rough day for investors in cruise stocks. News reports that Carnival Corporation (NYSE:CCL) (NYSE:CUK) subsidiary AIDA Cruises is canceling planned early-August trips due to a lack of preapproval from the Italian government, that the Norwegian cruise ship MS Roald Amundsen is reporting 43 coronavirus infections aboard, and that Norway is restricting cruises for the next 14 days while it investigates the outbreak, reminded investors that all is still not well in the industry. The news sent shares of Carnival -- and Royal Caribbean Cruises (NYSE:RCL) and Norwegian Cruise Line Holdings (NASDAQ:NCLH), too -- down sharply in response.
Tuesday is a new day, however, and in early trading, circa 11:35 a.m. EDT, all three of the big cruise line stocks are bouncing back a bit, with Carnival stock up 4.8%, Norwegian Cruise up 4.5%, and Royal Caribbean stock gaining 4%.
And Royal Caribbean may be the reason for it.
In today's issue of Cruise Industry News, we learn that Royal Caribbean has successfully renegotiated three of its financing agreements, for a total of nearly $4.5 billion, to remove "fixed charge coverage and net debt to capitalization covenants ... through and including the fourth quarter of 2021."
In effect, this means that at the cost of agreeing not to repurchase shares or pay dividends through Q4 2021 (which probably wasn't going to happen in any case), Royal Caribbean has extended the period in which it can operate without fear of being declared in default (and having to repay its loans) through the end of next year -- giving the company additional flexibility as it navigates the effects of the coronavirus.
And flexibility is the name of the game here. With U.S.-operated cruise lines largely restricted to port by order of the Centers for Disease Control through Sept. 30, no one's going to be earning any money in this industry for at least another couple of months, and possibly longer than that. For the time being, investors need to focus on just ensuring they're invested in companies that will survive to fight another day.
In that regard, here are the latest tallies, according to data from S&P Global Market Intelligence:
- Carnival Corporation has $6.9 billion in cash and short-term investments available to it (versus $22.3 billion in total debt).
- Royal Caribbean has less cash -- but less debt, too -- $3.9 billion of the former and $16.8 billion of the latter.
- And Norwegian Cruise has $1.4 billion to keep itself afloat, and $8.8 billion in debt weighing it down.
Which cruise line stock do you like best: The one with the most debt and the most cash, the one with the least, or the one lying somewhere in between? You pays your money and you takes your chances.