What Happened?
Shares of cruise company Norwegian Cruise Line (NYSE: NCLH) fell 3.2% in the morning session after its subsidiary, NCL Corporation Ltd., announced a proposed offering of approximately $3.25 billion in senior and exchangeable notes.
The significant new debt issuance includes $2.05 billion in senior notes, split into tranches due in 2031 and 2033, and another $1.2 billion in exchangeable senior notes due in 2030. This move adds to what is already a substantial debt load for the company, which stood at $14.59 billion as of the last quarter. The offering of exchangeable notes, in particular, can be a concern for shareholders as they can potentially be converted into equity, which would dilute the ownership of existing investors. The decision to raise a large amount of capital through debt is weighing on investor sentiment, signaling increased financial risk for the cruise operator.
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What Is The Market Telling Us
Norwegian Cruise Line’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 2% after positive investor sentiment following several favorable developments, including upward revisions to earnings estimates. Analysts have recently increased their earnings expectations for the cruise operator. The consensus estimate for the current quarter now points to an 18.2% year-over-year increase, while the full fiscal year estimate indicates 12.1% growth.
Looking ahead, the forecast for the next fiscal year suggests a 23% rise in earnings. Adding to the positive news, the company expanded its partnership with Wireless Maritime Services to enhance onboard cellular connectivity for guests and crew. Norwegian Cruise Line also celebrated its ten-year presence in the Australian market by opening a new Asia Pacific headquarters in Sydney, signaling a commitment to growth in the region.
Norwegian Cruise Line is down 4.4% since the beginning of the year, and at $24.79 per share, it is trading 14.7% below its 52-week high of $29.07 from January 2025. Investors who bought $1,000 worth of Norwegian Cruise Line’s shares 5 years ago would now be looking at an investment worth $1,338.
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