Will NCL's F3 Float Again?

November 14, 2008

When a cruise industry financial analyst reported last week on Norwegian Cruise Line's third quarter earnings (very positive, by the way), she noted that the company's press release included a reference indicating its innovative F3 project might be back on track.

As you may recall, NCL has been involved in a major dispute with the French shipyard, STX Europe, that's building these two 150,000-ton, 4,200-passenger ships. The dispute between the shipyard and cruise line was related to extravagant requests for design changes (by NCL) that resulted in equally extravagant fee assessments (STX Europe). Ultimately, the project was derailed and work on the second vessel, which was in the very early stages of construction, reportedly had stopped. (F3, the moniker for the still-not-named duo, would not only be the largest ever built for the line, but also would feature most unlikely cruise ship features such as an ice bar, wavy-walled staterooms and a velvet rope-style beach club -- plus no main dining room or main theater).

In the midst of all of this, NCL's new hierarchy (private equity firm Apollo Management became part owner of NCL in early 2008 and has since made a multitude of changes) basically dismantled the cruise line's F3 executive team, demoting company president Colin Veitch, the visionary on the project, to consultancy status.

So UBS analyst Robin Farley's "catch" raised eyebrows -- and hopes -- that F3 was back on.

It's not to be, at least not yet. In what looks to be a simple case of a cut-and-paste error (the press release writer apparently accidentally used a pre-dispute boilerplate mentioning "two ships" in place of the newer, more vague one referring simply to "a project"), the ships, which had both been slated for a 2010 debut, are still in netherland status. NCL, when contacted for confirmation, would not comment. But according to Cruise Business Review, an industry publication, STX says the dispute is ongoing.

Even still, there is, according to industry sources, some thawing out between NCL and STX Europe and insiders predict we may be hearing positive news soon -- with some caveats. Some of the ships' more innovative features may well be toned down to make F3 more of a cruise ship and less of an innovator.

--by Carolyn Spencer Brown, Editor in Chief

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