Royal Caribbean Cruises Ltd. reportedly is in the best position among its peers to “navigate through this unprecedented operating environment,” Stifel research anaylsts predict.
Royal Caribbean (RCL) and the other two large publicly traded U.S. cruise companies — Carnival (CCL) and Norwegian Cruise Line Holdings (NCLH) — are burning through millions of dollars of cash as their ships sit idle, Barron's explained.
The cruise operator’s shares have tumbled 74% this year through Wednesday, giving it a market value of about $7 billion.
The Stifel analysts rate Royal Caribbean stock at a "buy" and raised the price target to $48 from $40. The stock was trading at about $37 late Friday in New York.
The Stifel analysts maintain that the company is in the best shape in terms of liquidity, with the ability to keep things going for about 10 months.
"However, liquidity estimates do vary among analysts, and there has been a lot of behind-the-scenes work to take steps to reduce cash burn—including slashing come capital expenditures and operating costs and pushing out some debt payments," Barron's quoted the Stifel analysts as saying.
Meanwhile, Royal Caribbean is in talks to raise new financing to weather the shutdown of the travel industry during the pandemic, people with knowledge of the matter told Bloomberg earlier this week.
The cruise operator has been discussing a package that may include as much as $600 million of bonds and is working with Morgan Stanley on a possible offering, said the people, who asked not to be identified because the talks are private.
The Miami-based company has also considered the potential for selling convertible bonds and equity, although the situation is fluid and no structure has been set, the people said.
Royal Caribbean, which extended its global suspension until June 11, said it’s cutting more than 1,300 U.S. jobs, about a quarter of its workforce in the country.
Royal Caribbean boosted its liquidity last month with a $2.2 billion secured term credit line led by Morgan Stanley. With that debt, it had more than $3.6 billion at its disposal, including cash deposits and other existing revolving credit facilities that haven’t been used, it said at the time.
S&P Global Ratings cut the company’s rating to junk earlier this month, while Moody’s Investors Service lowered its rating to one step above speculative-grade.
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