Both companies have taken aggressive actions to shore up their balance sheets. In July, Norwegian borrowed more than $1 billion and sold $288 million in stock to raise money. At that time, the company assumed that it would be able to resume operations during the first quarter of 2021. However, as the daily case count for COVID-19 surged in the fall, Norwegian sold another $800 million of stock to buy more time. Royal Caribbean has not issued a secondary stock offering recently, but that day should be soon forthcoming. The company's balance sheet cannot absorb much more debt. At the end of September, Royal Caribbean had $17.6 billion in long-term debt compared to $8.4 billion a year prior. Norwegian's debt load was $10.5 billion at the end of the third quarter versus $6.1 billion the previous year. That's a lot of debt to carry when there is no cash coming in and a lot of money going out. Another GM in the Making? All that debt is collateralized by the only physical assets they own, which is their ships. Those ships won't be worth much to anyone other than another cruise ship operator given their specialized design. With all of the major cruise ship operators trying to raise money at the same time, those ships will be difficult to sell at a reasonable price. It is that concern that motivated S&P Global Ratings to place Norwegian and Royal Caribbean on their credit watch list this week. The crisis confronting the cruise industry reminds me of what the automobile manufacturers went through 12 years ago. At the depths of the Great Recession, it was feared that all of the major U.S. carmakers would go bankrupt. One of them, General Motors (NYSE: GM), did declare bankruptcy in 2009. Its stock went to zero. Investors that bet on GM going under made a killing. Your chance to make a killing... Now, I think there is a similar opportunity to score a huge gain on a failing business. This time, it's one of the major cruise ship operators that might go under. However, it's not one of the two mentioned above. I believe one of their competitors is in even worse shape than they are. If my hunch proves correct, an investment idea I recently pinpointed could skyrocket in value overnight. You can find out exactly what it is, along with several other special investment opportunities from my colleagues, by signing up for our 2021 Profits Mastermind roundtable discussion. During this special event, our editorial director John Persinos interviewed Investing Daily's team of chief investment strategists. In addition to me, John interviewed Jim Fink, Robert Rapier, Scott Chan, and Stephen Leeb. John asked us to reveal our top profit opportunities which could arise from a Biden presidency; "must-own" stocks for 2021; our most contrarian, "shoot-for-the-moon" stock picks; and much more. We're airing this event on December 18 at 2:00 p.m. Eastern Time. Don't miss out; spaces are going fast. To reserve your spot, sign up here. |
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