The cruise ship operator has paused all cruises from most ports until November. With little money coming in and considerable expenses still to pay, Royal Caribbean has been burning through between $250 million and $290 million a month.
Yet with $4.1 billion in liquidity as of the end of June, after borrowing another $2 billion, and having debt maturities of just $300 million this year (but $1.3 billion in 2021) the cruise line still looks seaworthy.
Sailing on rough seas
Royal Caribbean said it has until Aug. 21, 2021 to draw on the new term loan, and once tapped, it will bear interest at LIBOR plus 3.75% with maturity 364 days thereafter.
The cruise ship company has been stuck in port since the COVID-19 pandemic swept the globe. Almost half of its customers for cruises that were canceled have requested cash refunds of their deposits rather than a credit or rebooking under its "Lift & Shift" program, which gives them passage on the same cruise line next year.
Around 60% of the bookings for 2021 are new with the rest coming from Lift & Shift. That, however, is impacting pricing, lowering rates to even with this year. If consumers choosing to rebook were excluded, pricing would be slightly higher.
Royal Caribbean's stock has tripled off its March lows, but still remains 56% below where it started 2020. With shares trading under $60 each, Wall Street analysts are pegging their price targets for the stock in the high-$60 to mid-$70 range.