PortandTerminal.com, June 24, 2020
MIAMI, FL – On June 18th the Wall Street Journal reported that Carnival Cruise was planning on selling six of its cruise ships in the coming three months to help raise much-needed money.
“As it looks for cash, Carnival said it expects six ships to leave its fleet over the next three months and is working on additional agreements to dispose of more ships. Roger Frizzell, a Carnival spokesman, said the company will divest of its older ships, though he declined to specify them. The company said it is also working to potentially sell nonship assets.“
While it is understandable why Carnival would need to sell six ships from its fleet right now, it is less obvious who would want to purchase them at a time when the entire industry in “a complete mess” as one insider we spoke with summarized.
“Who’s buying Carnival’s 6 cruise ships?”
PortandTerminal.com contacted a number of brokers who specialize in the purchase and resale of used cruise ships and asked them point-blank – “Who’s buying Carnival’s 6 cruise ships?”
This is what the insiders told us:
“Nobody knows if this (news) is even real,” said two brokers, suggesting that the sale of the 6 ships was more wishful planning on Carnival’s part than anything concrete. ‘The market is in such a mess right now”.
It is certainly not out of the realm of possibility that Carnival is putting information out there that isn’t factually watertight. They’ve done it before through the course of the pandemic – put out information that served their commercial purposes but wasn’t true.
What Carnival needs right now are two things. One, they need a return to cruising ASAP, and two, until that happens they need to maintain investor confidence as they try to weather the storm. News that they are taking action to raise capital by selling ships would be good news to investors.
But if the news is actually true and they are selling ships, Carnival is probably not selling them to a competitor it was agreed by all of our insiders.
“It is, or at least it used to be, a holy grail never to sell a cruise ship to your competitor,” said one cruise ship broker that we spoke to, “You would never want to see your cruise ship being rebranded and put on the same route you used to use it on”.
Besides, “Which of the other major cruise lines has the money right now to stick its neck out and make such a risky bet?” one broker asked. “All of them (cruise lines) are burning cash at a furious pace and none have any clear idea when they will be able to start cruising again”. No one we spoke with sees a return to cruising until 2021.
Another option is that the ships are being sold to a foreign (Asian?) player who wants to get into the cruise business or expand their existing fleet. This option makes some sense.
The popularity of cruising amongst Asians has grown strongly right up until the pandemic hit. Is there someone with deep pockets out there that wants to be well-positioned when things return to whatever normal looks like in 2021?
“China’s annual growth for the cruise tourism market has exceeded 40 percent since 2006. It is expected to grow into the world’s largest cruise market by 2030, with 8 to 10 million customers per year, according to figures by the Shanghai International Shipping Institute.”
The third option was reported to us as a “rumor floating around the past few days” so take it with a grain of salt. The latest industry rumor is that the six Carnival cruise ships have been sold on the cheap to an investment fund as part of an asset leaseback deal. A leaseback is an arrangement in which the company, in this case, Carnival, that sells an asset can lease back that same asset from the purchaser.
Companies use leasebacks when they need to utilize the cash they invested in an asset for other purposes but they still need the asset itself to operate their business.
This seems like the most likely option to us.
The bottom line though is that none of the insiders that we spoke with know who has purchased the six Carnival cruise ships that are reported to have been sold or whether there is really even a buyer out there.
On a side-bar, one broker that we spoke with told us that despite the crisis in the cruise industry, his phone hasn’t stopped ringing off the hook. “I don’t think we’ve ever been this busy.”
Apparently, there is lots of interest in the market from investors who have considered repurposing smaller cruise ships into housing for the homeless, hospital ships and variations of The World “Cruise Ship Condo” concept.
“I am getting lots of calls from investors that I haven’t spoken to before” said one broker, “Business concepts that repurpose cruise ships are suddenly looking more interesting as ship values tank”.
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