The San Francisco company responsible for ferrying about 1.7 million visitors annually to Alcatraz Island has filed for bankruptcy.
Hornblower Group—best known locally as the official tour operator for the prison island-turned-museum—filed for Chapter 11 bankruptcy protection Wednesday in a Texas court due to a substantial debt load related to financial challenges worsened by the pandemic.
Hornblower said in legal filings that it has around $1 billion in assets against $1.2 billion in liabilities.
Hornblower Group CEO Kevin Rabbitt said that the bankruptcy filing will not impact the company’s services in the Bay Area and that operations are running normally and without interruption.
“We look forward to welcoming guests on Alcatraz City Cruises and our City Cruises SF dining operations well into the future,” Rabbitt said in a statement.
The National Park Service, which manages Alcatraz, awarded a Hornblower Cruises subsidiary a 15-year contract to operate the route to the island that started in 2019.
Hornblower Group was founded in 1980 and has grown to employ around 6,000 people and encompass a fleet of more than 250 boats operating dozens of routes globally, including at major tourist destinations like Niagara Falls, the Statue of Liberty and the River Thames in London.
The company’s headquarters is a former ferryboat moored at Pier 3 on San Francisco’s waterfront.
One particularly troubled business line for the cruise operator was American Queen Voyages, which operated overnight cruises along the Mississippi, Columbia and Snake rivers. Although most of Hornblower’s business lines have recovered to pre-Covid levels of profitability, the challenges at American Queen Voyages have continued to drain the company’s cash reserves.
A notice on American Queen Voyages’ website said the company has been shut down. Hornblower plans to put the business up for sale and, if unsuccessful, will wind down its operations.
According to a declaration from Jonathan Hickman, the company’s chief restructuring officer, the bankruptcy filing was related to a dramatic drop in cash supply due to the pandemic’s impact on Hornblower’s business. Company revenues peaked in 2019 at $690 million before dropping by more than 70% in 2020 to $175 million due to Covid shutdowns and restrictions.
Subsequently, Hornblower was forced to borrow funds, which, coupled with high inflation and interest rate hikes, left the company overleveraged. Hornblower’s debt load essentially doubled from $630 million in 2019 to $1.2 billion in 2023. Over the same period, annual interest expenses grew from $38 million to $115 million.
As part of a rescue and restructuring plan for Hornblower, investment firm Strategic Value Partners is acquiring a majority ownership stake in the company, while private equity firm Crestview Partners will retain a “significant minority position” in the cruise operator.
The deal will inject $121 million in new capital into Hornblower and reduce its debt by around $720 million. Deutsche Bank will also contribute $300 million to help refinance an existing loan. The company expects to emerge from bankruptcy in about four months.