The Hornblower boat cruise approaches the Niagara Falls on July 14, 2020.Glenn Lowson/The Globe and Mail
One operator of the iconic Niagara Falls boat tours that have been a staple of countless vacation plans for more than 180 years has been saved after operator Hornblower Group found a financial saviour.
Years of losses and a billion-dollar debt pushed the global conglomerate with rights to ferry passengers near the falls to file for bankruptcy protection in the United States and Canada. Now, as the San Francisco-based company navigates a complex restructuring process that involves its private equity owner selling a majority stake in the business, Hornblower’s Canadian operations are being touted as key to its recovery.
Hornblower has a deal with the Niagara Parks Commission to be the exclusive provider of Niagara Falls boat tours on the Canadian side of the border through 2043. Roughly 2.5 million guests don ponchos and board one of Hornblower’s three sightseeing vessels in the Lower Niagara River each year, the company said in a court filing last month.
“This longevity, paired with the high volume of clientele, makes Hornblower Canada’s business an essential aspect of the company’s restructuring,” the filing said, noting boats have been taking passengers within soaking distance of the falls since 1840.
The Canadian operations represents a tiny fraction of Hornblower’s global business, accounting for just 7 per cent of revenue in 2023. The parent company boasts operations in more than 100 countries, with roughly 6,000 employees. Scale, however, was not enough for the company to survive the onset of COVID-19.
“In 2020, the COVID-19 pandemic had a direct and profoundly adverse impact on the Company’s financial condition and operating performance,” the filing said. “Hornblower’s losses in 2020 alone exceeded US$287-million on a net income basis.”
Debt quickly started piling up, nearly doubling from US$630-million in 2019 to almost US$1.2-billion by the end of 2023. Annual debt interest charges tripled from US$38-million to US$115-million at the same time as rates rose rapidly over that period.
Geoffrey Morawetz, Chief Justice of the Ontario Superior Court of Justice, approved Hornblower’s application under the Companies’ Creditors Arrangement Act (CCAA) for its U.S. Chapter 11 proceedings to be recognized in Canada on Feb 21. Had approval not been granted, however, Hornblower warned in its filing there was “a concern” that the Niagara Parks Commission “may take steps to terminate” its exclusivity deal.
That deal “is critical to the Canadian business,” Hornblower said. “If NPC were to purport to terminate the agreement, this would have a drastic effect on the continuation of the Canadian business.”
The Canadian business – in addition to Niagara Falls tours also includes day cruises in the Toronto harbour and in the Thousand Islands near Gananoque, Ont. – has only recently started to recover from its pandemic-related slump. After reporting net losses of US$11.8-million and US$7.8-million in 2020 and 2021 respectively, the Canadian business only returned to profitability in 2022.
Hornblower is fully paid up on its rental obligations to the Niagara Parks Commission, NPC chief executive David Adames said in an interview.
“Right now we have no concerns,” he said. “As long as they meet all of their financial obligations to us, meaning the rent payments, then everything is fine.”
On Feb 21, the same day Hornblower submitted its bankruptcy filings, the company announced that investment firm Strategic Value Partners LLC would be acquiring a majority stake in the business from private equity investor Crestview Partners LLC. The transaction, which has yet to close, includes US$300-million in debtor-in-possession financing from Deutsche Bank and US$121-million in financing from SVP-managed funds and Crestview.
The company’s total debt is expected to fall by approximately US$720-million once the deal is completed, Hornblower said.
“The steps we are taking to transition the ownership of Hornblower Group and strengthen our financial foundation will have no impact on the land- and water-based experiences and transportation services we provide globally,” Hornblower chief executive officer Kevin Rabbitt said via e-mail. “We are continuing to serve guests in Niagara without interruption.”
In fact, NPC’s Mr. Adames said Hornblower has been approved to start Niagara Falls tours earlier than usual this year. Tours usually do not begin until mid-April or even May, he said, though this year Hornblower tours are set to commence on March 28.
“It is a good way to kick-start the traditional summer tourism season a bit earlier,” Mr. Adames said. “If they go a bit earlier, that really sends a strong signal to the tourism industry that we are geared up for a strong 2024.”
CLARIFICATION: This article has been updated to clarify that Hornblower is only one of the Niagara Falls boat tour operators. While boat tours have been offered for more than 180 years, Hornblower began more recently.