Cruise ship operator Norwegian Cruise Line Holdings (NCLH 7.53%) sought to take advantage of a rebound in its stock price with a public offering of 47.58 million shares.
The cruise operator's ships are still stuck in port, but its stock has quadrupled from its year-ago low point on hopes of returning to the high seas soon. Shares have nearly doubled in the past six months and are up 50% over the past month.
Yet because Norwegian priced its offering at $30 a share, an almost 10% discount to where shares had closed the day before, the cruise line stock was sinking 11% on the news.
Capitalizing on an opportunity
While the offering is not a bad move by Norwegian because it ensures the cruise ship operator can raise a lot of money quickly -- there's also an additional 5 million share over-allotment as well -- it does amount to a serious dilution of existing shareholders as the offering represents over 15% of Norwegian's outstanding stock.
Norwegian says it plans to use the proceeds from the offering to repurchase debt issued by a subsidiary that's due in 2026. The notes were issued last May by L Catterton in a private placement in the amount of $400 million. L Catterton is the world's largest consumer-focused private equity firm.
The notes were issued as Norwegian came to grips with the COVID-19 pandemic, a crisis that caused it to subsequently take on billions of dollars of debt to stay afloat.
Norwegian's debt load ballooned to over $11.6 billion, though it also has over $3.3 billion in cash. That should keep it operational until it finally gets the green light from health authorities to begin sailing again.