Ambassadors International (AMIE),plans to break up its American river cruising subsidiary, Majestic America Lines, piecemeal rather than as a whole, company officials said during its third quarter earnings briefing.
Ambassadors has tried to sell Majestic since early this year, but failed to find a buyer. Chairman Joe Ueberroth said four of the remaining five vessels will be sold individually.
Majestic allowed a creditor to take back the 2003- built, 223-passenger Empress of the North in August. The line will likely allow the same creditor, the United States Maritime Administration (MARAD), to take the 1995-built, 436-passenger American Queen as well in coming months, he said.
"When we talked to potential buyers, they just weren't interested in a vessel with that amount of debt," Ueberroth said.
There is a severe lack of financing options for potential buyers in the current tight markets, which Ueberroth said his company did not see coming. Majestic has stopped taking bookings beyond December 2008. If the line's remaining vessels do not sell by then, they will likely be laid up - an undertaking that could cost in the millions each year, Ueberroth warned.
Aside from the ships and its customer database, Majestic has few other assets, he said. "The Majestic brand, we own it, and I don't think it has much value," Ueberroth said. The majority of Majestic's shoreside operations had already closed down.
Ueberroth, who has announced he will step down as president, CEO and chairman in September 2009, said the decision to get into the river cruising business "was a bad one. We flat got it wrong."
Ambassador's other businesses - a construction consulting firm, travel and events coordination, and Wind star Cruises - are in much better shape and are not currently for sale, Ueberroth said. Ueberroth also said there were no plans for Majestic to file for bankruptcy protection.
Ambassadors reported a net income of $9.6 million, or $0.81 per share for the three months that ended Sept. 30, 2008, compared to $0.4 million, or $0.03 per share last year.
Ambassadors reported revenue of $83.5 million for the third quarter, compared to $95.4 million last year - a decrease of $11. 9 million.
Cruise revenue were down $5.7 million in the third quarter of 2008 compared to last year due to a decrease of $4 million from Majestic and a decrease of $1.7 million from Windstar - both as a result of lower occupancy and fewer operating days, the company said.
Ambassadors' losses were partially offset by allowing creditors to foreclose on the Empress of the North, which was "voluntarily returned" to MARAD "which is in the process of foreclosing on the first preferred mortgage on the vessel," the company reported.
The company previously reported owing about $32 million on the American Queen. If repossessed, that debt would come off the line's books leaving a "slight loss," said Blake Barnett, CFO. Ambassadors also recovered $1. I million in the settlement of an insurance claim related to the grounding of the Empress of the North in 2006 near Juneau, said Barnett.
Ueberroth said future goals for the company included instituting "a leaner management structure," emphasis of preserving cash liquidity, and exploring every possible option to weathering what he called hard financial times ahead.
He said the company was generally pleased with Windstar's performance. "We are pleased with our position in the market place," Ueberroth said. Bookings, however, may become a concern in the future. "We have concerns about bookings going forward. We have real concerns."