Posted on: Tuesday, December 23, 2003

Cruise-line dispute spoils 750 vacations

By Andrew Gomes
Advertiser Staff Writer

About 750 vacationers planning a Christmas and New Year's cruise to Hawai'i had their visit canceled yesterday after Royal World Cruises could not resolve a dispute with lenders.

The Olympia Explorer cruise liner was supposed to have departed Los Angeles at midnight last night en route to Hilo, Hawai'i; Kahului, Maui; Honolulu; Nawiliwili, Kaua'i; and Kona, Hawai'i, after a stop in Ensenada, Mexico.

The 14-day trip was canceled over a dispute that came to a head in Honolulu last week when two German banks holding delinquent mortgages on the Explorer prepared to seize the ship as it was docked in Honolulu.

Royal World filed for bankruptcy to avoid losing possession of the Explorer, and was allowed to complete last week's cruise, which continued to Hilo and arrived in Los Angeles yesterday.

But an order approved by bankruptcy judge Robert Faris prevented the Liberia-registered ship from visiting any foreign port, after lender agents argued that other unpaid creditors would try to seize the ship while it was outside the jurisdiction of U.S. bankruptcy law.

Under the Passenger Vessel Services Act, foreign-flagged cruise ships sailing between U.S. ports must stop at a foreign port.

Passengers were informed not to show up for the cruise, though it was unclear how they would be reimbursed for the trip that cost between $2,000 and $10,000 per person. Royal World could not be reached yesterday.

Generally, cruise-passenger payments are paid into an escrow account until cruise completion.

Royal World's Greece-based parent company, Royal Olympic Cruise Lines Inc., which isn't in bankruptcy, issued a statement yesterday that said future plans for the Explorer and a sister ship returning to Florida from the Virgin Islands depend on negotiations with lenders and bankruptcy judge approval.

The German banks, Kreditanstalt für Wiederaufbau and Fortis Bank, said that Royal World and affiliated company Olympia World Cruises defaulted on mortgages secured by the Explorer and Olympia Voyager, which cost more than $160 million each. Royal World estimated assets and debts each at more than $100 million, the same as Olympia World.

Royal World began offering regularly scheduled cruises to Hawai'i this year. The next cruise for the Explorer is scheduled to depart Los Angeles on Jan. 5.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.