August 20, 2007 -- Private equity group Apollo Management is making a $1bn cash equity investment in NCL Corp in exchange for a 50% stake and board control in the recapitalized company.

The investment, in the form of common stock alongside NCL's existing sole shareholder, Star Cruises Ltd (SCL), is designed to strengthen NCL's balance sheet and its continued growth, NCL said in a statement on Friday.

SCL, which recently won rights to develop a gambling complex in Singapore, is widely believed to have pulled back from NCL in order to better support its growing non-cruise operations.

SCL will hold a 50% stake in NCL, but Apollo will name a majority of the NCL board while certain consent rights will be retained by SCL, according to Moody's Investors Service.

The recapitalized company has an enterprise value of $4Bn with 50% in equity and 50% debt.

Steve Martinez, partner at Apollo Management, added, "We are very excited to be forming this partnership with Star Cruises and the existing management team of NCL." He said the investment will help NCL complete its transition into the youngest fleet in the cruise industry with its F3 concept ships, under construction at Aker Yards France.

The cash infusion will be especially important especially in light of the transaction's anticipated effect on NCL's bond rating: Moody's has put NCL Corp Ltd's 'B1' corporate family rating and the 'B3' senior unsecured bond rating on review for possible downgrade, as support from SCL is now expected to decline.

"While the fresh capital will improve NCL's capital structure and key credit metrics upfront, the improvement may not be sufficient to offset the impact of a potential reduction in the current two-notch rating uplift derived from the expected support from SCL and [SCL major shareholder] Genting Berhad (other-otc: GEBEY.PK)," said Kaven Tsang, Moody's lead analyst for NCL.