Royal Caribbean's JV Pullmantur Files for Restructuring

Zacks Equity Research
·3-min read

Owing to the coronavirus pandemic, Royal Caribbean Cruises Ltd. RCL and Cruises Investment Holding recently filed for the reorganization of their spanish Joint Venture — Pullmantur Cruceros. Following the announcement, shares of Royal Caribbean declined 6.2% during trading hours on Jun 22. Royal Caribbean holds a 49% stake in the JV. 

WIth sailings cancelled through Nov 15 due to the global crisis, filings were made with the respective authorities under the terms of Spanish insolvency laws. However, Royal Caribbean stated that its assets related to the JV were included in the non-cash asset impairment charges in first-quarter 2020 results released on May 3. 

Board of directors at Pullmantur stated, "Despite the great progress the Company made to achieve a turnaround in 2019 and its huge engagement and best efforts of its dedicated employees, the headwinds caused by the pandemic are too strong for Pullmantur to overcome without a reorganization."

However, for guests who have already booked cruises for future dates will be provided an option to reschedule through Royal Caribbean Cruises lines.

Notably, Royal Caribbean will be offering the option to sail on its brands, which include Royal Caribbean International and Celebrity Cruises. However, further details regarding the same are likely to be announced on a future date.

Although the virus has triggered a catastrophe in terms of lives lost and financial impact, Royal Caribbean appears resilient enough to navigate through these uncertain times.

Price Performance

Coming to price performance, shares of Royal Caribbean have declined 61.2% so far this year, compared with the industry’s fall of 47.1%. Notably, the company’s operations and global bookings have been hurt by the pandemic. Moreover, earnings estimates for 2020 have declined over the past 30 days, depicting analysts’ concern over the stock’s growth potential.

Royal Caribbean — which shares space with Norwegian Cruise Line Holdings Ltd. NCLH, Carnival Corporation CCL and Live Nation Entertainment, Inc. LYV in the Zacks Leisure and Recreation Services industry— has a Zacks Rank #4 (Sell) at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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