Premier: New financing should reassure trade

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MIAMI -- Responding to growing concerns about its finances, Premier Cruises said it will reduce its debt by $160 million and acquire $21 million in new working capital.

Premier's chief operating officer, Jon Erik Nygaard, said the steps will give Premier "a healthy balance sheet" and will enable agents to book the line "with full confidence." Premier said the reduction of its debt and addition of new working capital were part of an agreement in principal with its bondholders, expected to be implemented within two weeks.

The announcement came within days Standard & Poor's lowering of the line's credit rating, raising questions about Premier's continued financial viability.

In announcing the agreement with its bondholders, Premier indicated that travel agents were beginning to book away from the line. "The importance of this strategy is that it definitively addresses the issue of financial concern that had begun to affect our sales," said Nygaard.

The new plan eliminates any short-term risk that the company will have to default on its $160 million debt and file for bankruptcy, according to a Wall Street analyst who follows Premier's bond issue. "The plan buys Premier time and should give the agent community some comfort that the company's financial stress is lowered to some degree," said John Maxwell, an analyst for S.G. Cowen Securities, a unit of French financial company Securite Generale. "There really isn't a risk of Chapter 11 at this time," he said.

The $21 million of new credit is in place of new equity financing that Premier was discussing with potential investors, Nygaard said. He added that Premier chose the credit option because "it provides the company with a significantly superior balance sheet."

The advantage of the new balance sheet, Nygaard said, is that it eliminates any claim that the holders of Premier's $160 million in debt have against the company's assets, including its six ships. In exchange for giving up any claims on the assets, Nygaard disclosed, the bondholders have agreed to accept a 65% equity interest in the company. "We will be in a much better position because the bondholders have [unlinked] their claims on the assets of the company in return for equity," Nygaard said.

Under the recapitalization plan, Premier Cruises Ltd., which issued the $160 million bonds in March, will form a new operating company that will be given all the assets of the company without the $160 million bond obligation, Nygaard said.

The new company, which will continue to do business as Premier Cruises, will have the responsibility of paying dividends to Premier Cruises Ltd., which the latter company will use to service the interest on its $160 million debt issue, Nygaard said. But the bondholders will not have any claim against the new operating company, which will own Premier's ships, Nygaard said.

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