Some of the bigger deals in cruises these days are taking place in courtrooms and board rooms. Regency Cruises, a six-ship line that targeted the budget market, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Manhattan recently, and Kloster Cruises, the parent company of Norwegian and Royal cruise lines, is discussing a takeover by Carnival.
Regency, based in New York but incorporated in the Cayman Islands, announced on Oct. 29 that it had "ceased operations," adding in a statement: "Passengers on current cruises will be accommodated with return air flights home from their port of disembarkation. Regency understands its obligations to the travel-agent community, passengers and vendors; before any further statements can be issued, however, the company is awaiting advice from legal counsel." Regency's bankruptcy filing said it owed secured creditors $20.28 million and unsecured creditors $21.75 million.The Regency court filing said its financial problems were caused by several factors: an industry-wide slowdown in cruises, the failure of the company a year ago to raise $40 million through a stock offering, increased administrative costs when management was expanded in anticipation of the stock offering being successful, and the expenditure of $31.4 million in the purchase and renovation of its sixth ship, the Regent Jewel.
A Regency spokeswoman did not return calls.
In addition to the Regent Jewel, Regency operated these five other ships - the Regent Sea, Regent Star, Regent Sun, Regent Rainbow and Regent Spirit - that carried from 400 to 960 passengers. All six ships were built in the mid-1950s and early '60s.
The line targeted a budget audience, which helped cause its financial problems, one cruise-industry analyst, who asked not to be identified, noted. "They got a lot of debt," he said. "Regency has been looking for capital for over a year. ... They had $100 or less net revenue per person per day. I suppose with all this price cutting (in the industry), Regency wasn't getting the per diems it needed. ... Older ships don't have big casinos and a large number of passengers." (Lines such as Carnival and Royal Caribbean make a lot of money from bars and large casinos, which Regency did not.)
Passengers due refunds should send claims as soon as possible to Regency Cruises, 260 Madison Ave., New York, N.Y. 10016, Attn.: Refund Dept. All cruise lines, including Regency, are required by the Federal Maritime Commission to post financial performance bonds covering all passengers embarking from U.S. ports, up to $15 million.