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Apollo takes 50 per cent stake in Miami-based cruise line

Private equity group Apollo Management has agreed to make a USD1bn investment in NCL Corporation, parent company of Norwegian Cruise Line and NCL America, in exchange for a 50 per cent equ

Private equity group Apollo Management has agreed to make a USD1bn investment in NCL Corporation, parent company of Norwegian Cruise Line and NCL America, in exchange for a 50 per cent equity stake and board control. Apollo’s investment alongside NCL’s existing sole shareholder, Star Cruises, is designed to strengthen the company’s balance sheet and its ability to continue to expand its fleet.

‘To have an investment on this scale by one of the very top names in the private equity world is a huge vote of confidence in the new NCL we have created since Star Cruises became the owner in 2000,’ says NCL president and chief executive Colin Veitch.

Apollo partner Steve Martinez says: ‘Our investment will help NCL complete its transition into the youngest fleet in the cruise industry, with a truly original next generation product with its F3 concept ships. We believe the NCL brand has significant growth potential over many years to come.’

Under the terms of the investment, which includes an agreement for additional future distributions to be made directly by NCL to Star, Apollo will become the 50 percent owner of NCL and name a majority of the NCL board, with certain consent rights retained by Star, which will retain a 50 percent stake in the recapitalised company.

‘Apollo’s significant financial commitment in NCL’s common stock means we have an equal partner who believes in the business as much as we do,’ says Star Cruises chairman and chief executive Tan Sri KT Lim. ‘This is a powerful validation of what we have achieved so far and of our vision for the future. It is also truly the start of the next – and most exciting – chapter for this great company.’

The proceeds of the Apollo investment will be used to repay existing NCL debt and increase the liquidity available to fund a continuation of the building programme that has seen eight purpose-built Freestyle Cruising ships introduced to the fleet in six years. The NCL-owned fleet (excluding four chartered ships) currently stands at 19,740 berths, with another 15,000 berths under construction and under option, including the Norwegian Gem due for delivery in October.

Apollo and Star have entered into a sub-agreement relating to NCL’s US-flagged Hawaii operations under the NCL America brand providing for deferred consideration to be paid to Star by NCL in the future, giving NCLA time to realise the benefits of recent measures to raise revenue yields and to lower crew turnover and payroll costs. This added element of the transaction implies a total enterprise valuation of NCL of approximately USD4bn. Completion of the transaction is expected early in the fourth quarter and is subject to regulatory approval, Star Cruises shareholder approval, and Star and NCL lender consents.

NCL Corporation oversees the operations of Norwegian Cruise Line, NCL America, and Orient Lines. The company recently took delivery of its newest ship, Norwegian Pearl, is currently building Norwegian Gem for delivery in October, and plans to build up to three new third generation Freestyle Cruising ships for delivery between 2009 and 2011.

Star Cruises, the third largest cruise operator in the world, has a combined fleet of 21 ships with about 32,300 lower berths in service with an additional three ships and some 10,800 lower berths due to be delivered by 2010, and also operates under the Star Cruises and Cruise Ferries brands.

Founded in 1990, Apollo employs more than 120 professionals at offices in New York, Los Angeles, London, Singapore, Frankfurt and Paris. Since its establishment, Apollo has managed more than USD33bn in capital invested in a wide variety of industries, and its most recent private equity fund and co-investment affiliate have capital commitments of some USD11.6bn. Apollo is already active in the cruise industry, having invested in the upper premium Oceania Cruises brand earlier this year.

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