NEW YORK -- Premier Cruise Lines ceased operations Sept. 13
following a nightmarish summer marked by operational mishaps,
expulsion from two cruise associations, and severe financial
difficulties.
Premier's fleet was idled by its primary lender, Donaldson
Lufkin and Jenrette (DLJ), which holds mortages on Premier's ships
(excluding Big Red Boat II, which Premier operates via a charter
agreement), said Premier Cruise Lines CEO Bruce Nierenberg.
The ships were diverted from their normal itineraries to
disembark passengers. Oceanic was to arrive in Nassau Sept. 14, Big
Red Boat II will return to New York on Sept. 16, Big Red Boat III
docks in Nassau on Sept. 16, and both Rembrandt and SeaBreeze were
scheduled to dock in Halifax, N.S. Sept. 14.
Nierenberg said DLJ is paying to transport passengers to their
points of origin. Premier, he said, has no plans to file bankruptcy
at this point, but cannot operate because "we haven't any
ships."
The company will advise travel agents on all matters related to
existing bookings and commissions within the next few days, he
said.
Passenger deposits will be covered by the Federal Maritime
Commission (FMC) bond required of all operators, said Nierenberg,
although in past cruise-line failures (most notably Regency
Cruises' bankruptcy several years ago), the FMC bond has not
compensated depositors in a timely manner.
Indeed, ARTA is advising its members to stop payment on all
checks to Premier, and to contact credit-card companies to reverse
charges billed to Premier for scheduled cruises.
ARTA also is advising agents to check the terms of their travel
policies to determine if they cover defaults or bankruptcies,
although BerkleyCare, Premier's primary insurance provider, does
not cover defaults in its standard Premier policies.
Nierenberg said he has been "just a figurehead" at Premier since
April, as DLJ officials have effectively controlled the company
since then.
He said DLJ had tried to re-capitalize Premier for months. Other
sources said that as recently as last week, DLJ officials told
company employees their jobs were safe.
"DLJ is a banker, not a ship operator," said Nierenberg. A
particularly difficult summer, marked by higher fuel prices,
sharply lower cruise rates and myriad operational problems with its
ships, had effectively withered the lender's patience with Premier.
"[DLJ] just ran out of gas," he said.
At a news teleconference the evening of Sept. 14, Alan Twaits,
senior vice president and general counsel of Premier, said
negotiations had continued until late the previous night with DLJ
"over the possible sale of ships or restructuring and refinancing
of the company to keep Premier in business, but the negotiations
were not successful."
The midcruise timing of the seizure of the vessels was prompted
by competition among Premier's creditors when its financial
condition forced it to the brink of bankruptcy. According to DLJ's
director of communications Catherine Conroy, "DLJ became aware
recently that several parties were contemplaining seizure of
Premier's vessels due to [the line's] financial distress. We acted
quickly to take possession of the ships that were collateral
securing our loan to Premier because we believed that of all the
parties who were involved in the situation, DLJ had best capability
to address the passengers' needs for immediate safety and suitable
transportation home."
Twaits said no passengers would be stranded and would all end up
where they began, either by air or on the Big Red Boat, which
traveled back to New York.
Twaits said agents owed commissions by Premier may be considered
creditors under the bonding arrangement. The number to call for
refunds is 800-327-9766.
Meanwhile, Carnival Cruise Lines has notified Houston-area
agents that it can "assist in re-booking guests" scheduled to sail
on Premier's Houston departures on Big Red Boat III.
David Cogswell contributed to this report