Norwegian Cruise Line Holdings Ltd (NCLH)

Interest coverage

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	890,676	-1,476,700	-2,401,320	-3,517,750	1,184,260
Interest expense	US$ in thousands	727,500	801,500	2,100,000	482,300	272,900
Interest coverage		1.22	-1.84	-1.14	-7.29	4.34

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $890,676K ÷ $727,500K
= 1.22

The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher ratio indicates a stronger ability to cover interest payments, while a lower ratio may signal potential financial distress.

Norwegian Cruise Line Holdings Ltd's interest coverage ratio has fluctuated significantly over the past five years. In 2023, the interest coverage ratio stands at 1.28, indicating that the company's operating income is just sufficient to cover its interest expenses. This may raise concerns about the company's ability to service its debt obligations comfortably.

The negative ratios in 2022, 2021, and 2020 (-1.94, -1.23, and -3.89, respectively) suggest that the company's operating income was insufficient to cover its interest expenses during those years. This indicates a higher risk of default on debt payments and financial instability during those periods.

In contrast, the interest coverage ratio of 4.32 in 2019 indicates a strong ability to cover interest payments with operating income. This suggests a healthier financial position and lower risk of default on debt obligations in that year.

Overall, the trend in Norwegian Cruise Line Holdings Ltd's interest coverage ratio shows significant fluctuations, indicating varying levels of financial strength and stability in meeting interest obligations over the past five years. Investors and stakeholders should closely monitor this ratio to assess the company's ability to manage its debt and financial risks effectively.