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New Ship Expected To Generate More Than $30M For AMCV

Maritime Activity Reports, Inc.

August 20, 1999

The new ship to be purchased by American Classic Voyages from Carnival Corp. is expected to generate $35-40 million of cash flow for the company, and incremental earnings power could top $.50 a share, according to a report released by Lazard Freres & Co. LLC. AMCV announced last week an agreement to acquire the 1,214 berth Nieuw Amsterdam from Carnival for $114.5 million. The ship will be delivered to AMCV in October of next year, at which time the company will launch its new Hawaiian cruise service. American Classic plans to re-document the Nieuw Amsterdam as a U.S. flag vessel, with a U.S. crew, to sail the Hawaiian Islands as part of its Project America. The Nieuw Amsterdam will be the only large foreign flag cruise ship allowed to operate a domestic cruise service. Although few details have been released regarding financial arrangements with carnival, analysts from Lazard Freres believe that seller financing may be available from Carnival, which “currently has the high quality problem of how to employ about a billion dollars of cash sitting on its balance sheet,” the report said. “Considering Carnival’s current P/E, which is north of 25x, we would be surprised if they weren’t willing to provide credit at 300-400 bpts over the treasury curve.” Although AMCV management has indicated that it is premature to speculate on the impact the ship will have on forward earnings, the Lazard Freres report presents a “rough estimate” of the financial earning power of the ship. The analysis suggests the addition of the ship should generate in excess of $30 million EBITDA on a yearly basis. “The earnings pick-up from the Nieuw Amsterdam is impressive, with over $.50/share ($10 million) dropping to the bottom line,” the report said. The report concluded that it is the opinion of analysts that AMCVs lock on the Hawaiian cruise market, along with the ability to leverage the business at low, government guaranteed financing rates, and significant support of large AMCV shareholders, present a unique opportunity for growth. “the new ship should provide a preview of consumer appetite for cruises in Hawaii aboard modern vessels, ahead of the scheduled deliveries of the two newbuildings from Ingalls Shipyard in January 2003 and January 2004. Successful execution of the coastal cruise business and continuous solid performance at the company’s core Delta Queen and American Hawaii operations should also positively affect AMCV shares over the coming year,” the report said.

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