Semester at Sea Entered into Deal with Creditors to Sell Ship

July 16, 2014

The nonprofit institute that manages the well-known Semester at Sea study abroad program has signed a “standstill agreement” with a German bank to prevent action by its creditors after it missed payments on an $83.5 million loan for its cruise ship, the Daily Progress of Charlottesville, Va., reported. The May 2 agreement required the Institute for Shipboard Education (ISE) to pay $400,000 at signing and $100,000 every subsequent month as the institute attempts to sell its cruise ship, the MV Explorer.

The standstill agreement came one month prior to a “mutual" decision on the part of the ISE and its university partner, the University of Virginia, to end Virginia’s academic sponsorship of Semester at Sea programs as of May 2016. A June amendment to the contract between ISE and U.Va., obtained by Inside Higher Ed via an open records request, outlines several other conditions under which the academic sponsorship could be terminated before the agreed-upon 2016 date, including if the institute violates any terms of the standstill agreement or if for any consecutive three-month period the difference between its cash balance and its accounts payable is either negative or 15 percent lower than projected figures. The document requires ISE to consult with Virginia officials no later than 45 days prior to the start of each of its scheduled Semester at Sea voyages to ascertain whether it has sufficient resources to complete the program as planned. 

Lauren Judge, a spokeswoman for ISE, said in an email to Inside Higher Ed that the institute “is not in a precarious financial situation and is current on all financial obligations. ISE has ended its fiscal year (May 31, 2014) with positive operating results, improving the financial condition reflected in ISE’s balance sheet over that of the previous year.”

“The primary purpose of the standstill agreement between ISE and its creditors is to provide an orderly process for the sale of the MV Explorer, as ISE is returning to its original business model of two voyages per year,” she said. “Under this model, ISE no longer requires the use of a ship year-round. In returning to a leasing model for another ship, ISE will be relieved of the financial risks and burdens of ship ownership. The standstill agreement states that ISE is no longer responsible as a guarantor for ship debt and payment. Additionally, upon the sale of the MV Explorer (or at the latest May 15, 2015 if a sale has not been completed by that date), all financial obligations will be removed from ISE’s consolidated balance sheet.”

According to an article on its website, ISE purchased the MV Explorer in 2008 after leasing a ship for the 40 years before that. The article cites escalating fuel costs and the impact of the economic crisis on enrollments as some reasons for selling the ship.

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