Ambassadors skips $1.8 million interest payment; going-concern status in doubt

By Caroline Salls

Pittsburgh, April 15 - Ambassadors International, Inc. did not make a $1.8 million interest payment due April 15 on its 3.75% senior convertible notes, according to a 10-K filed Wednesday with the Securities and Exchange Commission.

The company has until May 15 to make the payment before an event of default occurs. Ambassadors said it intends to cure the default before that deadline.

In addition, Ambassadors said it received a notice of payoff on its working line of credit under which Bank of the Pacific exercised its right of setoff, and the $1 million outstanding under the line of credit was fully repaid using funds in the company's account maintained at the bank.

The company said it was in violation of some financial covenants under the working line of credit at Dec. 31, and the bank issued a non-compliance notice and demand for payment on March 23.

Ambassadors obtained a waiver of the covenant violations through April 9.

The company said the default on the working line of credit triggered a cross-default on its $1.6 million note payable with Bank of the Pacific.

As a result, the full amount of the note was presented as a current maturity in Ambassadors' financial statements.

According to the 10-K, Ambassadors will need additional sources of cash in the immediate future in order to fund its operations in 2009 because of the decrease in vacationers' discretionary spending, decrease in corporate spending on incentive programs and the tightening effect of the credit market on financing for construction projects. As a result, the company announced in February that it intends to sell its non-Windstar Cruises related assets, including the operations of marine, travel and events, Majestic America Line and insurance.

The company said it is also seeking additional financing sources and renegotiating existing debt obligations.

If it cannot sell the assets in question or obtain additional financing, Ambassadors said it will be forced to extend payment terms with vendors where possible and/or suspend or curtail some of its planned operations and possibly seek bankruptcy protection.

The company's 2008 financial statements include a statement from its independent accounting firm expressing substantial doubt about Ambassadors' ability to continue as a going concern.

Ambassadors is a Newport Beach, Calif.-based cruise and travel company.

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