Kloster Cruise continues to fight for its independence and possibly the survival of its present company and fleet structure.

Having difficulties meeting its debt obligations, the company needs to restructure its debt once more. In the meantime, Carnival Corporation has acquired $101.5 million worth of bonds issued by Kloster, which gives Carnival a say in Kloster's future.

Kloster is scheduled to make interest and principal payments on the bonds in November plus payments on ship mortgages. Failing to make the bond payments could enable bondholders to force a restructuring of the company, presumably putting Carnival in control.

Carnival paid $87 million for the bonds, which were discounted, and is now probably the biggest holders of Kloster bonds. Kloster has about $300 million of bonds outstanding.

While Carnival Corporation would not comment on its intentions, holding one third of Kloster's bonds will presumably give Carnival a significant say in a possible restructuring of the troubled cruise company.

ln the meantime, trading in Vard, Kloster's parent company, has been suspended on the Oslo Stock Exchange at the request of Vard.


Initially, Carnival could lend a helping hand to Kloster Cruise, while also helping itself.

It would be in Carnival's interest to avoid the possible demise of a major cruise line which would most likely have a negative impact vis-a-vis the public and the financial communities.

Secondly, through its business savvy Carnival Corp. might be able to restructure Kloster with sufficient economic efficiencies within the Carnival family of cruise lines, to make the company profitable.

Several questions arise, however, as to the payment of debt obligations as well as to the interests of existing shareholders.

Analysts also said that the equity value of Kloster Cruise was "very unclear."

Carnival Corp. is not altruistic. If Carnival can turn Kloster around, it will be at a price and on terms that are beneficial to Carnival. Hence, initial Carnival control of Kloster Cruise means eventual ownership.

The most likely scenario has Kloster's Norwegian Cruise Line division continuing as a separate brand name, although its product and market identity would seem to overlap with both the Carnival brands of Carnival Cruise Lines and Holland America Line., unless clearer nuances can be made to establish NCL in a middle ground.

The same goes for Kloster's Royal Cruise Line division, which could be positioned between Holland America Line and Seabourn Cruise Line while its smaller ship is transferred to Seabourn.

Ship sales and management changes are also in the cards. it is known that there is little lost affection between Carnival and Kloster executives.

If the present brand names are maintained, the key to Carnival's success will be to develop clear product nuances for all the brand names within the Carnival family, without creating family competition for its already successful products.

More far-flung scenarios have Carnival moving NCL and RCL to Europe as well as to the Far East

No White Knight

Carnival Corp. has never been confused with a white knight, and there are those who wonder why Carnivai cannot let Kloster sail its own course.

Kloster's management was said to have a restructuring package of their own in hand, and Carnival's overtures can only muddy the waters for these efforts.

Carnival, however, has been waiting on the sidelines for some time. Last year, the company had acquired some of Kloster's outstanding bond debt, which it then re-sold at a profit.

ln the end, however, Carnival muscle and stability may be the "best thing" that has happened to Kloster Cruise in years.

Without Carnival, Kloster would only sail on to the next debt payment and face the same pressures all over again, unless another suitor can be found.

Both Royal Caribbean Cruise Line and Princess Cruises have been quiet, although both will face increased competition from Carnival Corporation if Carnival gains control of Kloster Cruise.

On the other hand, both Princess and RCCL are committed to one-brand name operations hence they may have little interest in controlling or acquiring Kloster Cruise except to maintain market balance.

Market Balance

Carnival Corporation, which presently consists of Carnival Cruise Lines, Holland America Line, Windstar Cruises as well as an interest in Seaboum Cruise Line, includes 22 ships and 26,443 berths with an estimated annual passenger capacity of more than 1.5 million passengers in 1995. This gives Carnival a 28 percent share of the industry capacity potential. But since its ships sail full, Carnival has in fact a 33 percent share of the actual North American market which saw 4.5 million cruise passengers in 1994.

Kloster's two cruise companies, NCL and RCL, have nine ships together, with 9,747 berths, and an annual passenger capacity of 465,625 passengers, giving Kloster a 8.5 percent share of the current market capacity.

Combining the fleets would give Carnival a 36.5 percent share of market capacity and, based on full ships in today's market, nearly 45 percent of the actual market. Carnival ships would be carrying nearly half of all North American passengers.

Carnival could be good for Kloster; whether Kloster is good for Carnival is a different question.

Meanwhile, Carnival fortifies its position as the General Motors of the cruise industry.