Monday, April 20, 2009

SeaDream Yacht Club - Is a Nightmare Looming? UPDATED

It has been reported in the Norwegian media that CG Holdings, owner of SeaDream Yacht Club, may be filing for bankruptcy imminently. What this means for SeaDream really is not known; especially as their are conflicting reports.

According to reports, the Chief Financial Officer of CG Holdings says all of CG Holdings assets are up for sale, but SeaDream Yacht Club Chief Executive Officer Atle Brynestad insists it is not...and asserts that SeaDream has already reached 80% of its revenue goals for 2009 (though I am not sure how that was calculated) and that its ships are sailing essentially full (though I do not know how many of those cabins are highly discounted or on travel agent rates).

If you recall, Larry Pimental left SeaDream in January 2009 (Pimental Departs SeaDream Yacht Club after it was claimed that Mr. Brynestad wanted to deplete SeaDream's coffers to support his other businesses, which have, apparently, been suffering.

So what does this all mean? To me it signals that SeaDream may be a viable company, but it has been substantially weakened by the troubles of its parent company and Mr. Brynestad's interests (if they are different) and that the reported differences in approach are a "red flag" for when there is conflict rather than coordination everything suffers. On the other hand, possibly SeaDream will be bought out by Byrnestad - though I am not sure how understanding the above financial turmoil.

In the meantime, as I mentioned months ago, SeaDream's change to seeking cash early on and allowing cruises to be deferred for extended periods with no penalty was a clear sign of rough seas. My biggest concern is that with legal maneuvering being what it is, the ships may be seized at some point as control is wrestled in bankruptcy proceedings or shareholder fighting.

Would I cancel my SeaDream cruise? No, but I would be prepared for turmoil and the possibility (if even remote...I just don't know) that your port of disembarkation may be earlier or at another location. Also, if you have put off your cruise under the 48 Hour Cancellation Program and are holding a credit toward a future cruise, you may want to take that cruise sooner than later. (I would be concerned as to whether your credit card coverage applies to that program and if there is insurance for same.)

As I learn more, and can confirm facts versus rumor, I will let you know. I caution everyone not to act on rumor or media reports, but to simply be prepared and keep your eyes and ears open.

UPDATE: Carolyn Spencer Brown, Editor in Chief of CruiseCritic, posted that the bankruptcy of SeaDream appeared to be "fiction". I think that is a great disservice, though well intended. As I reported earlier this morning, SeaDream may not be in financial difficulty by itself, but it's parent company is. Even the reports cited by CruiseCritic confirm that Mr. Byrnestad's efforts are apparently to liquidate all he can to address the many unpaid creditors of CG Holdings.

Now, this is where it can get ugly. According to Cruise Business Review, Byrnestad's plan is to keep three good companies (SeaDream and glass and porcelain companies) and fold them into a new holding company. That may sound great, but it is not very easy to suck out the viable assets so that the creditors go unpaid in whole or in part. The creditors just might have something to say about that...and if it is found that that the profitable companies were not handled appropriately something similar to a receiver can be appointed. (How do I know this? I was involved in a litigation against a Norwegian shipyard that had financial difficulties.)

Now, to me, saying that SeaDream is not in trouble is, well, "fiction". I wish SeaDream well and I oh so want it to survive and thrive, but I have to call it as it is; not as I or Mr. Brynestad wants it to be. So be optimistic, but realistic.