Carnival Sells Bonds To Stay Buoyant

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  • The once mighty international tourism industry is among the worst hit of the Covid-19 pandemic.
  • The world’s largest cruise group is selling bonds to international investors in both euros and U.S. dollars, according to people familiar with the matter who asked not to be identified because the information isn’t public yet.
  • Cruise ship operator Carnival Corp. is back in the debt markets this week, adding around $1 billion to the nearly $7 billion it’s borrowed since the coronavirus pandemic devastated the international tourism trade.
  • The deal will come at a price. Early discussions with potential investors have suggested yields of around 10.5% on the euro debt and 11% on the dollar portion, according to one of the people.
  • But that’s marginally cheaper than the 11.9% yield on a bond offering in April, before a sustained recovery in credit markets.
A recently published news article in the Bloomberg deals with the collapse of cruise operator Carnival due to this pandemic.

Carnival left with huge overheads

Cruise operators such as Carnival have been left with the huge overheads that come with operating fleets of ships when revenues have collapsed.

The firm said last week that it expects to burn through $650 million of cash every month through to the end of the year.

Those costs have made the company a regular user of the international credit market as a source of funds since the pandemic took hold.
Its latest offering comes less than a month after it raised $2.8 billion of loans in dollars and euros. It also sold $4 billion in bonds in April.

Latest bond transaction 

The notes being marketed this week are secured against its ships but are junior ranking to the loans and bonds raised earlier this year, according to the people familiar with the matter.

That means investors who buy the new debt will get paid after those that bought into the earlier offerings if the company runs into trouble.

JPMorgan Chase & Co, Goldman Sachs Group Inc. and Deutsche Bank AG are leading the latest bond transaction.

Carnival shares rose about 1% in pre-market U.S. trading on Tuesday. While still down 70% for the year, the stock has gained around 80% since Carnival completed its last bond sale.

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Source: Bloomberg