Fearnley & Eger, parent company to Renaissance Cruises, is desperately seeking the participation of major investors, that would also allow the company to continue its cruise operations. The Norwegian shipping company, Fearnley & Eger, is financially strapped and owes creditors $211 million. It has until Easter to reach an agreement on payment.
According to the latest reports from Norway, Kvaerner, which was regarded as a primary candidate, has declined participation. Kvaerner recently acquired a major stake in Masa shipyards in Finland. However, the company was said to be interested in the industrial shipping interests of Fearnley & Eger and not its cruise activities. Other discussions with I.M. Skaugen and Mitsui have not been successful.
Sale is not imminent
Although American companies have expressed interest in Renaissance Cruises and its fleet of ships, it is not true that a sale is imminent as reported in the shipping press, said Ole Lund, the company's lawyer. Sources said that none of the major operators seemed to be interested.
Renaissance Cruises represents a $200 million investment in eight small cruise ships, ranging in capacity from 100 to 113 passengers, and are between 3,500 and 4,000 tons. Three of the ships are still under construction in Italy scheduled for delivery during 1991 and 1992.
Last year, Renaissance Cruises sought to raise $45 million through private placement. It listed its debt at $194 million. Renaissance also listed its net asset value at $112 million based on the projected net replacement cost of its eight ship fleet at $306 million.
Analysts here said the value of the ships were over-estimated and thus reduced the attractiveness of the investment. It is unknown if any investors participated. Also, last fall, company executives here would not comment on the prospectus, which presented industry statistics and forecasts very favorable to Renaissance.
Fearnley & Eger appears to have had a rough time in the cruise industry. The company previously owned the Explorer Starship and the North Star which were leased to Exploration Cruise Lines, which went bankrupt in 1988. Fearnley & Eger reportedly had to pay expenses incurred by the respective ships in ports before they could be claimed.
It is also speculated that Fearnley & Eger never intended to get into the cruise business directly. When the company contracted the eight ship fleet, it was thought that the intention was to build at low cost benefiting from. Italian subsidies, and be able to charter or sell the ships at considerable profit. Instead, Fearnley & Eger eventually formed its own wholly-owned cruise line.
Analysts here have frequently stated that small ships require marketing and sales overhead and operations costs that preclude profitable operations. Analysts also say that the market will not sustain the high level of per diems required to make small-ship operations profitable.
The cost threshold for new cruise lines to enter the market have also become increasingly high.
Since its first ship was launched in 1989, however, Renaissance has managed to establish a market position as a destination-oriented luxury cruise. Whether that was enough to generate sufficiently profitable operations is unknown.