Mother Ship of Ferry Operator Nearly Ceased Operations in November
Hornblower, the company that operates the popular but heavily subsidized NYC Ferry franchise, declared bankruptcy last Wednesday. The company lost more than a quarter of a billion dollars in 2020, and came within days of shutting down entirely last November, according to court documents. The firm is also more than billion dollars in debt, and spends in excess of $100 million per year in interest alone on these obligations according to the same source.
A filing with the United States Bankruptcy Court for the Southern District of Texas says that, “in late November 2023, the Ad Hoc Group [a special committee of creditors and investors] provided the Company with a $60 million incremental superpriority financing… to bridge the Company’s financing needs through December 31, 2023. Without the critical funding provided by the Incremental Superpriority Facility, the Company would have been unable to fund its operations beyond mid-November.”
According to the court filings, cash infusions from investors and lenders in the past few years “were a critical lifeline for the Company, allowing it to stabilize and continue its operations through the pandemic. However, they did not come without a cost, as the Company’s aggregate debt load increased from $630 million in 2019 to $1.2 billion in 2023, and its annual cash interest expense grew from approximately $38 million to $115 million over the same time period.”
These financial woes for the mother ship have accrued in spite of generous support from New York City taxpayers, who have subsidized the operations of Hornblower’s NYC Ferry subsidiary with more than $750 million dollars between 2015 and 2021 (almost a third of which was not properly disclosed), according a 2022 audit by City Comptroller Brad Lander. (Hornblower also received $114.7 million in Covid relief aid in 2021, according to federal disclosures.) Mr. Lander’s audit estimated that, as of the end of 2021, the average subsidy for NYC Ferry had reached $12.88 per passenger on each ride. This subsidy declined to an average of $8.55 per passenger/per ride after the fare was raised from $2.75 to $4.00.
In court filings, Hornblower alleges that its troubles stem from rising interest rates and the failure of another subsidiary, American Queen Ventures, which operated a fleet of seven vessels offering luxury river and lake cruises around the United States. Hornblower has said in multiple statements that its NYC Ferry operations will not be affected by the bankruptcy filing. The plan restricting outlined in the bankruptcy plan aims to reduce Hornblower’s debt by more than $700 million.
Last August, the administration of Mayor Eric Adams approved a five-year extension of Hornblower’s contract to operate the NYC Ferry service, with two optional extensions of three years each. For the first five-year term, Hornblower will be paid $405 million.