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Cruise News for the Corporate Travel Professional

October 2009 Edition

Ambassadors Takes Impairment Charges of $31.95 Million

Ambassadors International Inc. said it expects to record impairment charges of $31.95 million for the quarter ended Sept. 30, of which $27.7 million relate to Windstar Cruises and $4.25 million to vessels from the now-defunct Majestic America Line vessels. The company sent a letter to travel agents and clients updating them on the financial situation. In September, the company announced that it commenced an exchange offer for $97 million of outstanding 3.75 percent convertible notes due in 2027, which is set to close in November. Due to the exchange offer, management assessed the fair value of Windstar’s three-ship fleet as well as Queen of the West and Columbia Queen based on current economic conditions.

“Since all of these assets were purchased at the height of the market, and as with many assets, current economic conditions and markets indicate lower recoverable values at the present time. Accordingly, the company has reduced the carrying value of the aforementioned assets,” Ambassadors CEO Art Rodney and Windstar President Diane Moore wrote in the letter to agents. “This is a very positive move for the company since the exchange offer will reduce the company’s outstanding debt and decrease its annual cash interest expense. The company believes that reducing its outstanding debt is appropriate in light of its ongoing restructuring and will promote its long-term financial viability by strengthening the company’s balance sheet. Moreover, reducing its annual interest expense should make additional cash available to fund operations.”

“We would like to assure you that this is a non-cash charge and does not affect the company’s viability in the marketplace,” the letter continues. “Windstar Cruises remains a strong, award-wining product and the proposed exchange offer provides long-term viability for the company. We look forward to sharing some exciting news about Windstar Cruises next week when we will officially announce the next phase of our Degrees of Difference initiative, which is a continued investment in our outstanding cruise product.”

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