Will DCL go bankrupt?

[VWLforever]

I'm one of the several thousand folks with a June Alaska DCL cruise that has been cancelled. Trying to figure out whether I should just take the refund, or take the incentive and book for next year.

I've been on 6 previous DCL cruises, and have loved them all. Emotionally I 100% want to take the credit toward a future cruise. So I'm about as far away from a DCL naysayer as you can get. But something occurred to me. Even after strict social distancing and business closures subside, the cruise industry is going to be absolutely devastated in the short and middle future terms. What if DCL goes bankrupt?

Magical Cruise Company is an indirect subsidiary of the Walt Disney Company. They do business under the name "Disney Cruise Lines". It appears entirely plausible that Magical Cruise Company could declare bankruptcy, without triggering liability on the part of the remainder of the Walt Disney Company. That separate corporate liability is one of the main reasons they bothered to make separate corporations for each division, after all.

So, if that were to happen, what would it mean for the folks who have money down on future cruises? Would they be made whole first, or would they get in line with other major lenders to receive pennies on the dollar in reimbursement?

To be clear, I have zero insider knowledge. I'm just a random guy trying to figure out whether it would be safest to take my money and run, or if I should roll my thousands of dollars worth of cruise payments into a 2021 cruise. I'm posting here because I know there are a lot of smart folks who contribute to these boards.

So the questions are, how well capitalized is Magical Cruise Company if cruising completely stops for half a year or more- and then comes back at a tiny fraction of the popularity it had pre-COVID? And, what is the actual exposure to loss that would be experienced by those of us who have significant money down on future cruises, if such a bankruptcy actually happens?

 

[TXDCLfan]

All I can say is that we canceled a Carnival cruise six weeks ago and still have not received our deposit back..with that said I would try to get my money back in my pocket FAST...I work for a major airline and we are hurting

 

[Mainsail Minnie]

I'm one of the several thousand folks with a June Alaska DCL cruise that has been cancelled. Trying to figure out whether I should just take the refund, or take the incentive and book for next year.

I've been on 6 previous DCL cruises, and have loved them all. Emotionally I 100% want to take the credit toward a future cruise. So I'm about as far away from a DCL naysayer as you can get. But something occurred to me. Even after strict social distancing and business closures subside, the cruise industry is going to be absolutely devastated in the short and middle future terms. What if DCL goes bankrupt?

Magical Cruise Company is an indirect subsidiary of the Walt Disney Company. They do business under the name "Disney Cruise Lines". It appears entirely plausible that Magical Cruise Company could declare bankruptcy, without triggering liability on the part of the remainder of the Walt Disney Company. That separate corporate liability is one of the main reasons they bothered to make separate corporations for each division, after all.

So, if that were to happen, what would it mean for the folks who have money down on future cruises? Would they be made whole first, or would they get in line with other major lenders to receive pennies on the dollar in reimbursement?

To be clear, I have zero insider knowledge. I'm just a random guy trying to figure out whether it would be safest to take my money and run, or if I should roll my thousands of dollars worth of cruise payments into a 2021 cruise. I'm posting here because I know there are a lot of smart folks who contribute to these boards.

So the questions are, how well capitalized is Magical Cruise Company if cruising completely stops for half a year or more- and then comes back at a tiny fraction of the popularity it had pre-COVID? And, what is the actual exposure to loss that would be experienced by those of us who have significant money down on future cruises, if such a bankruptcy actually happens?

DCL and the cruise industry are not one and the same. Unlike the other cruise lines, DCL is backed by the corporate behemoth, Disney. They also only have 4 ships in service, so they aren't taking the same kind of beating that Carnival, Norwegian & Royal are currently taking. DCL has better optics than the other mass market lines because of the Disney branding, so it's going to retain most of its clientele after this storm passes. And the upcoming (non-cancelled) cruises are still pretty full. It's not like everyone is jumping ship. I have deposits currently on a December 2020 cruise and a July 2021 cruise, and am not worried about losing that money at all.

 

[mike314]

I doubt they will go bankrupt, roll it into a 2021 trip. The reality is everyone is hurting right now but this is temporary. No one knows when this will end and that's the troubling part but eventually people will travel, take vacations, resume entertainment. I think 2021 is a save bet things will normalize

 

[LAX]

I have been thinking about this since the cruise industry as a whole came to a screeching halt. I think the key question is how much of a financial hit would DCL be to Disney should no cruising be extended for another few months and a relatively slow and dragged out recovery after that. If it's projected to be a substantial financial hit to Disney, then it would become a question of whether it's better for Disney to take a hit to its bottom line (keep DCL afloat by bleeding cash) or reputation (cut DCL loose and get relief of the financial obligations).

LAX

 

[SL6827]

Got two grand invested with DCL right. This makes me nervous as heck. I will keep an eye on the situation and will cancel by the end of June if I think I need to.

 

[Maggie'sMom]

One thing people need to keep in mind is that bankruptcy doesn't necessarily mean a company will cease to exist. There are different types of corporate bankruptcy, and I saw a lot of confusion over this during the 2008/2009 financial crisis. I'm not familiar with bankruptcy laws in the Bahamas so I don't know how this translates into the laws which govern DCL in regards to a liquidation bankruptcy (chapter 7 in US law) versus a restructuring bankruptcy (Chapter 11), and how Bahamian law would treat creditors in the form of cruisers holding credits from cancelled cruises.. But I don't see cruise lines completely disappearing as a result of bankruptcies caused by this shut down. More likely, there will be a lot of restructuring with either bailouts or government support that might fall short of full scale bailouts but still be significant enough to keep the cruise lines in business. There might be some mergers and acquisitions. Remember that the Bahamas receive a significant economic boost from the cruise industry. They aren't going to want that to go away, so they will do what they are able to keep the cruiselines "afloat" (yes, bad pun, I know) so the ships can continue to visit Bahamian ports and pour money into the local economies.

 

[Karin1984]

No, they won't. Disney as a company is strong enough to rescue it, and they only have 4 ships. Their total business doesn't depend on it. Plus they wouldn't let them go bankrupt as it would harm the Disney brand and the trust people have in the brand. Yes, the Disney Wish will probably be delayed, but other then that, as soon as they can sail again, they will.

 

[Chemist]

That's my big concern, we also have a substantial investment on a June Alaska cruise. We are probably going for the refund, I don't trust Disney to not go bankrupt.

I highly doubt they will disappear. I don't expect that to happen. However, I would worry about "restructuring".

Parent Disney is also bleeding money with the parks/hotels/movie theaters closed indefinitely. (Think about it, Onward went to Disney Plus because no one was able to watch it in the theaters and they are delaying ALL their spring/summer movies.)

 

[LAX]

One thing people need to keep in mind is that bankruptcy doesn't necessarily mean a company will cease to exist. There are different types of corporate bankruptcy, and I saw a lot of confusion over this during the 2008/2009 financial crisis. I'm not familiar with bankruptcy laws in the Bahamas so I don't know how this translates into the laws which govern DCL in regards to a liquidation bankruptcy (chapter 7 in US law) versus a restructuring bankruptcy (Chapter 11), and how Bahamian law would treat creditors in the form of cruisers holding credits from cancelled cruises.. But I don't see cruise lines completely disappearing as a result of bankruptcies caused by this shut down. More likely, there will be a lot of restructuring with either bailouts or government support that might fall short of full scale bailouts but still be significant enough to keep the cruise lines in business. There might be some mergers and acquisitions. Remember that the Bahamas receive a significant economic boost from the cruise industry. They aren't going to want that to go away, so they will do what they are able to keep the cruiselines "afloat" (yes, bad pun, I know) so the ships can continue to visit Bahamian ports and pour money into the local economies.

I am not sure how much financial clout the Bahamian government has to be able to bail out a business the size of DCL, especially when its own economy is heavily dependent on the tourism industry. I am not arguing DCL will take the BK route, but I think corporate Disney would be more likely to keep DCL afloat than the Bahamian government.

LAX

 

[BartmanLA]

I think I read somewhere that DCL only produces like 3% of the entire revenue stream for whole Disney company, so while the cruise line itself might take a big financial loss if the shut down goes on for an extended period, I'm pretty confident that they're going to survive. The crux of the issue at this time is developing a affordable treatment, and ultimately a vaccine that can offer protection for the masses from future infection. They might delay the new ships by a year each which would give them time to recover enough to put them in the water. But barring any global overhaul of the entire pleasure cruise industry with new restrictions I feel pretty confident that Disney Cruise Line will be back bigger than ever.

 

[Garyjames220]

I’m not sure if it’s the same in America but here in the UK even if DCL did go bust I would get the money back through my credit card company anyway

 

[DisneyWishes14]

I would take the refund. And I’m not saying that out of any fear that DCL will go bankrupt. I don’t think they will. I would rather take the cash and cruise again when I’m ready than take an FCC with restrictions which may not even be enough to cover the future cruise I choose because DCL prices go up so much every year. The cash is far more valuable right now.

 

[DCLCruiseFan09]

As many have said, I don't fear for DCL in any way because of the parent company. In fact, I think they are in great shape. With three new ships set to sail in the next few years, if anything they are in a great position to reinvigorate the business and drive sales to increase.

I can't tell you how many times I've seen people say on here "I'm waiting to sail again till the new ships come out"

Now, Royal, Carnival and Norwegian I feel will be a completely different story but that's a totally different thread.

 

[cvjw]

We are having the same discussion in our house right now, and honestly we don’t have an answer yet. We have $9000 tied up in a cruise on the fantasy in a month. Disney hasn’t cancelled yet, but we for sure will not be sailing.

If Disney cancels, we are thinking about taking the 125% credit and booking the 9 night southern Caribbean cruise on the fantasy next July.

But, this cruise is double - $18,000 for our family of 4. We already paid half of it, and we would get the extra credit from Disney, and hopefully use our placeholder, but we would be rolling the dice on $15,000 if DCL goes bankrupt.

I have already cancelled our 3 cruises on the dream in September, so it would be nice to have a cruise to look forward to. But, that is a lot of money to lose if things get even worse.

 

[daedelus]

As others have eloquently stated, I wouldn't worry about too much about this. DCL has one thing other cruise lines do not, the Disney brand. Disney has shown time and time again that they are fiercely protective of their brand and will go to great lengths to protect it. In the eventuality that any kind of negative action were considered for the cruise line, I think they would opt for the protection of the brand.

We were on the WBPC recently and received our refund within 10 days of disembarking. I've heard others like the previous poster who have not received money back from other cruise lines. DCL doesn't play that game. Their customer service and guest relationships are a top priority for them, and they will continue to act as such.

I also agree that the most drastic action we're likely to see is Wish delayed. But if you think about it, that's really not impactful to customers (outside of a little disappointment) as there were no sailings scheduled yet and no money has changed hands with customers. So that would actually make pretty good business sense, assuming that's a course of action open to them, contracts with the yard being what they are.

At the end of the day, we just don't know how long the plague will last and what the lasting outcome on our world will be. But at the risk of being incredibly cheesy, a little "faith, trust and pixie dust" might just be what we all need right now!

 

[dvcgirl67]

No, DCL won't go bankrupt. They're a boutique cruise line that is owned by a behemoth of a corporation that came into this crisis with a rock solid balance sheet. What does that mean? It means that Disney has a lot of cash, and also enormous access to revolving credit that they have tapped. It's the equivalent to having access to a home equity line of credit, and then actually pulling the trigger, calling your lender and having them deposit that home equity loan into your bank account.

To give you an idea, DCL's revenue last year was 950 million dollars. The Walt Disney Company's 2019 revenue for the entire company was 71.54 BILLION. That's just a teeny fraction of their gross revenue. Parks, at 26 Billion... is a much bigger issue, and yet I believe that will survive as well. However, expect tough times again for the company overall as they navigate these tough times. There will be big layoffs for the company and that's very sad. But for now, Disney will have to contract on the theme parks/DCL side in order to come out the other side of this crisis.

 

[MomOTwins]

We bought a ton of Disney stock when they were at their lowest. It's already come back up quite a bit. If there is any travel-related company I had to bet on to bounce back quickly it is Disney. They are diversified, as others have said, but more importantly they have a lot of goodwill--their fan base is loyal through and through. And they make people happy, which we can all use after this time.

 

[dclpluto]

They have been almost charging double the price for years. There is no way they are going to go bankrupt.

 

[fredandkell]

All I can say is that we canceled a Carnival cruise six weeks ago and still have not received our deposit back..with that said I would try to get my money back in my pocket FAST...I work for a major airline and we are hurting

Same here, canceled a Cunard cruise almost 4 weeks ago and no $$ back yet.