Royal Caribbean Cruises ltd (RCCL), the world’s second largest cruise shipping group, said it would book a large impairment charge in its first quarter interims and warns that future results would be impacted by increase debt service costs.
“For the three months ended March 31, 2020, we are finalizing certain impairment charges preliminarily estimated to be between $1.0 to $1.3 billion related to the impairment of goodwill attributable to our Silversea Cruises reporting unit and several of our vessels,” RCCL said in a statement.
Future profitability would also be impacted by increased debt service costs as a result of our liquidity actions, including our 364-day senior secured term loan and certain payments made in connection with the amendments to our existing indebtedness reported earlier.
“Our decision to suspend sailings of our global fleet through June 11, 2020 and the resulting trip cancellations have materially impacted the results of our operations. We have incurred and will continue to incur significant costs associated with cancellations as we accommodate passengers with refunds and future cruise credits; as well as assisting our crew with their return home, food, housing, and medical needs,” RCCL said.
The company continued by saying that although its cruise operations are currently suspended, it has incurred and will likely continue to incur significant overhead costs associated with layup of its fleet and enhanced COVID-19 related sanitation procedures.
“As we cannot control adverse media coverage and we cannot predict exactly when we will resume sailing operations, we are experiencing and may continue to experience weak demand for cruising for an undeterminable length of time and we cannot predict when we will return to pre-outbreak demand or fare pricing or if we will return to such levels in the foreseeable future<” RCCL pointed out.
“In turn, these negative impacts to our financial performance have resulted and may continue to result in impairments of our long-lived and intangible asset,” the company concluded.
