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**Ally** · 05-30-2007, 07:44 AM

Frank Del Rio, chairman and CEO of Oceania Cruises, started his cruise line on a shoestring budget and has now sold a majority state to Apollo Management.

The voyage of Oceania

• January 2003: Oceania opens offices in Miami with 20 employees.
• July 2003: Maiden voyage of the Regatta, its first leased R-class ship from bankrupt Renaissance.
• April 2004: Maiden voyage of its second R-class ship, the Insignia.
• November 2005: The Nautica, its third R-class ship, begins cruises.
• November 2006: Oceania buys its three leased ships and buys out CruiseInvest's stake.
• February 2007: It sells majority stake to Apollo Management.
• March 2007: Oceania orders two new ships for $1 billion with an option on a third.
At the annual SeaTrade cruise convention in Miami Beach, news of an ambitious $1 billion shipbuilding program came not from the industry's 800-pound gorillas, Carnival Corp. or Royal Caribbean Cruises, but from Frank Del Rio, chairman and CEO of fledgling Oceania Cruises.

Del Rio, a brash, 53-year-old Cuban immigrant, was on a roll. He'd already sparked a buzz two weeks before the March convention when Apollo Management -- the New York-based private-equity giant -- agreed to take a majority stake in Oceania in a deal that values its equity at a lofty $475 million.

He co-founded the upscale Miami-based Oceania line in January 2003 with one leased ship and $14 million in capital -- a paltry sum for a business that typically requires major backing.

The ascent of Oceania, which has carved out a niche offering many of the amenities of luxury cruising at a more affordable price, marks a remarkable comeback for Del Rio. Six years ago, the industry maverick was fired as co-chief executive of Renaissance Cruises, as new investors took over. Five months later, the loss-ridden line collapsed into bankruptcy court.

He was an industry outcast, he says, tarred by that failure and so reviled by the powerful travel agents, who dominate cruise sales, that he was a veritable untouchable to other cruise lines.

''That's why I started Oceania,'' quips Del Rio, a gregarious and frank man with a penchant for self deprecation. ``Nobody would hire me.''

Del Rio, an accountant by training who started as an auditor at Florida Power & Light, succeeded by taking a big gamble on a rare opportunity and spying an unserved sector in a crowded cruise market.

Oceania made its mark by focusing on fine food and exotic itineraries. Plying waters in Europe, Asia and South America, its three 684-passenger ships call at alluring ports and spend more time there. Sample itineraries: Rome to Singapore or Bangkok to Beijing. And its prices start at $2,000 for a 10-day European cruise -- more than the cost of premium cruises but below luxury cruises.

While Del Rio was at Renaissance, the line had alienated the mighty cruise agents by bypassing them with direct sales. Agents, in turn, snubbed Renaissance, even as it was growing rapidly, adding eight new ships in 32 months. Though Del Rio eventually tried to make amends with agents, the line struggled with continued losses.

Five months after Del Rio got the boot, economic fallout from the Sept. 11, 2001, attacks finished off Renaissance, prompting the federal bankruptcy filing. The cruise operator's French lenders and France's export credit agency, Coface, repossessed its fleet of nearly new ships.

In the close-knit cruise industry, the line's failure triggered a lot of I-told-you-so's. With ever-larger ships chasing economies of scale, many doubted Renaissance's elegant but smaller vessels could turn a profit.

Soon after the repossession, two vessels that were in Tahiti were bought by Princess and one was leased to Swan Hellenic, at the time a unit of P&O Princess. The other five ships were lined up in the harbor in Marseilles, France, where they sat. The ships wound up under the control of CruiseInvest, a Marshall Islands company set up to manage the vessels and find homes for them.

But with the slump in worldwide travel after 9/11, they were hardly hot items. The big lines were wondering how they were going to fill all the cabins coming from their own existing ship orders.

''The general sense was the world was a pretty risky place with Afghanistan going on, and the SARS epidemic in Asia, and a bunch of factors,'' says James G. Dolphin, a managing director of AMA Capital Partners, a boutique investment bank in New York hired to help CruiseInvest place the ships.

CruiseInvest decided to solicit proposals from cruise veterans who might be interested in launching a new line with the idle ships. Among those invited to compete were Art Rodney, former president of Disney Cruises; Joseph A. Watters, a former president of luxury line Crystal Cruises; and Frank Del Rio.

Guy-Olivier Bygodt, a French banker whom Del Rio knew well, came to Miami to gauge his interest, but Del Rio says he turned him down -- twice. ``I didn't really think I'd be given a fair shot, given my association with Renaissance.''

Del Rio finally resolved to give it a whirl and set to work on a business plan.

During the summer of 2002, Del Rio submitted his plan for creating a new line, as did his competitors. The submissions were judged on ability to raise money, their plans for attacking the market and positioning the ships, and the deal they were willing to cut with CruiseInvest.