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Carnival looking to raise another US$1b in debt
CRUISE ship operator Carnival Corp is back in the debt markets this week, adding around US$1 billion to the nearly US$7 billion it has borrowed since the coronavirus pandemic devastated the international tourism trade.
The world's largest cruise group is selling bonds to international investors in both euros and US dollars, according to people familiar with the matter who asked not to be identified because the information isn't public yet.
The deal will come at a price. Early discussions with potential investors have suggested yields of around 10.5 per cent on the euro debt and 11 per cent on the dollar portion, according to one of the people. But that's marginally cheaper than the 11.9 per cent yield on a bond offering in April, before a sustained recovery in credit markets.
The once mighty international tourism industry is among the worst hit of the Covid-19 pandemic. 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 US$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 US$2.8 billion of loans in dollars and euros. It also sold US$4 billion in bonds in April.
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.
Carnival shares rose about 1 per cent in pre-market US trading on Tuesday. While still down 70 per cent for the year, the stock has gained around 80 per cent since Carnival completed its last bond sale.
The company has reduced its annualised operating costs by more US$7 billion and has accelerated the removal of older hardware, with 13 ships - or about 9 per cent of capacity - set to exit the fleet by the end of fiscal 2020. In addition, Carnival has reduced the number of ships expected to be delivered before the end of fiscal 2021 to five from nine. BLOOMBERG