- Carnival plans to issue $1.25 billion in stock, $3 billion in secured notes and $1.75 billion in convertible notes all due 2023.
- Carnival’s stock dropped by about 15% in premarket trading after the announcement, but recovered after the markets opened and was up more than 9% by midday.
- The coronavirus pandemic has roiled the travel industry, particularly major cruise lines.
Beleagured cruise ship business Carnival to raise $6 billion in stock and debt, writes William Feuer for CNBC.
Financial obligation
Carnival is issuing $6 billion in stock and financial obligation as the beleaguered cruise ship company attempts to support its financial resources after suspending operations following COVID-19 outbreaks on at least three of its ships.
- The company said it plans to issue $1.25 billion in stock, $3 billion in protected notes and $1.75 billion in convertible notes all due 2023.
- Carnival’s stock stopped by about 15% in premarket trading after the statement, however recovered after the markets opened and was up more than 9% at midday.
“We can not anticipate when any of our ships will start to cruise again and ports will resume to our ships,” the company stated in a securities filing.
It added, “Moreover, even once travel advisories and restrictions are lifted, demand for cruises might stay weak for a significant length of time and we can not anticipate if and when each brand will return to pre-outbreak demand or fare pricing.”
COVID-19 pandemic startles the cruise industry
The coronavirus pandemic has actually roiled the travel market, particularly major cruise lines. Because the outbreak started in China in late December, there have actually been numerous significant break outs, quarantines and deaths aboard Carnival-owned ships.
Carnival said the coronavirus outbreaks and deaths on some of its ships have resulted in “negative publicity which might have a long term impact on the appeal of our brand names, which would reduce need for holidays on our vessels.”
The business’s stock has cratered by about 75% because Jan. 1 to around $14 per share. The company also announced that it is suspending dividend payments to shareholders.
Based upon these actions and presumptions relating to the impact of COVID-19, it is concluded that the cruise line will be able to produce adequate liquidity to please their commitments and remain in compliance with their existing financial obligation covenants for the next twelve months.
On March 13, the business fully drew down its$3 billion revolving credit line.
Financial stabilization fund to be of not much help
Earlier this month, Moody‘s and S&P Global downgraded Carnival’s financial obligation ranking and placed the business on evaluation for further downgrade, which would make it more costly for Carnival to raise money.
The announcements might imply Carnival executives are concerned they won’t get assistance from the federal government, Gordon Haskett analyst Don Bilson stated in a note Tuesday.
President Donald Trump has actually shown that the federal government will help the having a hard time cruise market, which utilizes more than 400,000 Americans, according to the Cruise Lines International Association.
“What we take away from this is an acknowledgment that the recently passed $500bn ’Financial Stabilization Fund’ does not figure to bring the cruise industry much help,” Bilson composed.
“If low interest or no interest loans were going to be provided, it appears unlikely that [Micky] Arison, who is the chairman of CCL and owns 17% of the company, would be heading down this path so suddenly.”
Previously this month, the Cruise Lines International Association, of which Carnival is a member, announced a 30-day suspension of North American operations amid the COVID-19 pandemic. Carnival stated it was extending that into Might for several of its brand names.
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Source: CNBC
