At Sea At Peace

Nothing new or unusual. A continuation of what was authorized in 2021 again. It's not 'using its cash, it issues and sells one and uses the proceeds to by the other. https://www.carnivalplc.com/news-releases/news-release-details/results-annual-general-meeting-and-extension-stock-swap-program#:~:text=Under the Stock Swap Program effective June 2021%2C the Boards,if any%2C for general corporate As a result of the shareholders approving the Carnival plc general share buy back authority (Resolution 20), Carnival Corporation & plc also announce an extension of the Stock Swap Program (as described below) until April 30, 2023, under the same terms as previously announced. The Stock Swap Program allows us to realize a net cash benefit when Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares. Under the Stock Swap Program, we may elect to offer and sell shares of Carnival Corporation common stock at prevailing market prices in ordinary brokers’ transactions and purchase an equivalent number of Carnival plc ordinary shares in the UK market. Under the Stock Swap Program effective June 2021, the Boards of Directors authorized the sale of up to $500 million of shares of Carnival Corporation common stock in the U.S. market and the purchase of an equivalent number of Carnival plc ordinary shares and use the remaining net proceeds, if any, for general corporate purposes. As previously announced on June 28, 2021 and January 31, 2022, Carnival Corporation & plc announced that Carnival Corporation had filed a prospectus supplement with the United States Securities and Exchange Commission (the “Commission”), under which it may offer and sell shares of its common stock through its agent, BofA Securities, Inc. (the “Agent”), having an aggregate offering price of up to $500 million, from time to time through an “at-the-market” equity offering program (the “Offering”). All Carnival plc ordinary shares purchased under the Stock Swap Purchase Program will be held by Carnival Corporation in accordance with the terms of the articles of association of Carnival plc and will carry no voting rights for so long as they are held by Carnival Corporation or its subsidiaries. None of the purchased Carnival plc ordinary shares will be cancelled or held as treasury shares.

Good questions. First, the SA Public Investment Fund, is currently a $600 billion sovereign wealth fund. Here's what they have at risk (appears <1% based on above and below). They built their stake to 8.2% pre-March 26th, 2020 when the shares were floating between $15-$17 (reported to be $700+ million; no billions and billions). Within weeks the shares dropped to almost $10. So, they are patient. Oddly, Carnival announced April 1st that they were issuing 71.875 million shares in stock in an offering at $8. 😲 In 2022 there were reports that Carnival was in negotiations to sell the Seabourn luxury line to the SA PIF. It reports that its current stake in Carnivals stock is 5.1% and some $50-$70 million in bonds (no billions here either). The Saudi tourism has reportedly boomed 121% over pre-pandemic levels. They also have something in the ground, being pumped and sold at historic rates that the rest of the world mostly does not or does not choose to. So, they are likely the top candidate to be at the bidding table for a luxury subsidiary line of CCL or RCL, or even the entire NCL line. They won't be paying top dollar under these conditions. JIMO

Yep, it was a nasty process then and it very convoluted still. Employees 'earned wages' do have some protections, but not for much more especially if there is nothing left. If not by an official CCL announcement, little 'birdies' might be early warning signs; fuel, alcohol and food vendors and suppliers wanting to be prepaid or COD. There is no requirement to disclose such unless it rises to the level of a 'material event.' The best scenario, if CCL can't make it, is to work with the largest secured debtholders with a 'prepack' plan to bring to the court in reorganization. Equity gone, lower levels of debt impaired 25-50%, senior levels taking 25-50% in equity in NEWCO and the rest in new debt with long maturities. Keeping vendor relations and customer relations (honoring FCCs and deposits) as part of the deal to sell to the court. We'll see. Good luck to all and hope that I am completely wrong in my observations. 😲

That's correct, but it is by far an undesirable process, the beginning of which would be a group of creditors, or a third party, offering to finance the continued operations guaranteed post-petition by the court. When the term "company could restructure," the company becomes the Debtor, massive reorganization firms, professionals and law firms enter the scene and are appointed by the court to take over the DTD affairs of the business, usually with retention of select, key management. Generally, the Board dissolves. The restructuring of "their debt" will be at the negotiated terms of the debtholders with the most senior security positions. They are hedge funds and similar vultures quite experienced in this process. The customer deposits issues is unique - - - customer deposit cash is not sitting there protected for use by those customers. The cruise lines are burning the advance customer deposits to provide cruises for those currently (and soon to be) cruising. So, how does a bankrupt cruise line with "no cash" give "cash" back to customers (or to the asserted credit card companies)? The airlines have been funded by the USA government to the tune of almost $100 billion since 9/11. The cruise have received essentially nothing, and are clearly not in line to get anything at all.

Well, to the extent that the court jurisdiction will allow the Debtor to repay such, i.e., supposedly under the Fair Credit Billing Act, first we should agree that such is a USA legal standard. So, let's look at that, just to start. https://www.travelweekly.com/Mark-Pestronk/The-fine-print-on-credit-card-refunds "Contrary to popular belief, most of your clients do not have a legal right to a refund just because they paid by credit card. The clients need to depend on the nonbinding "policy" of their credit card issuers, which does not always result in a refund. The only relevant law is the Fair Credit Billing Act of 1974 (FCBA), which provides a refund under only these ridiculously limited circumstances: a) you have tried in good faith to get a refund from the merchant, b) the place of purchase must have been in your home state or within 100 miles of your mailing address and c) you must not have fully paid for the purchase. For most clients, the 100-mile rule and the not-yet-fully-paid parts of the rule mean that clients outside South Florida, where Crystal credit card purchases were processed, or clients who paid in full, including clients who used future cruise credits to pay for their cruises, have no legal rights under the FCBA." Legal interpretations are like opinions, everyone has one. Read the FINE PRINT in this article. There is so much out there that confirmation bias is easy to achieve by reference. 🙄 It's clear we can agree to disagree. 🙂 You contend using a credit card makes everyone safe, I simply cannot purport such.

Well, reading the article totally supports everything that I purported as concerns. If a cruise line goes down, the author even points out the FCCs are worthless. Regarding the deposits, the author affirms that Customers (Deposits) become creditors WAY DOWN THE LINE and behind the hedge funds and institutions that hold all of the senior, secured debts and their collateral. Customer Deposits, only have a hope and a glimmer of being above 'other unsecured creditors.' So, thank you for the quote that totally supports the concern about the $4-$5 billion in Customer Deposits should CCL head into reorganization. Also, thanks for others contributing to the credit card companies; they are also not bailing anyone out, especially to the tune of $4-$5 billion, whatsoever. 😉

Sorry, I was being very technical with SEC and Generally Accepting Accounting Principles regulations and professional standards. The Going Concern period to determine and assert by Management that it can continue to pay its future obligations is for a 1-year period, from the date of the release of the financial statements. At year end, Management, and the Board as Governance, has to further contend with the Independent Auditors on their determination and assertion. Here's a look at MSC, a subsidiary with a cash-laden parent shipping sugar daddy, in their annual report and with the Auditor's assessing the Issues, Factors and Analysis of the Going Concern issue. Search (CTRL F for "Going Concern") and you will see the issues and conclusions. https://www.msccruises.com/en-gl/Assets/A-R-2021.pdf CCL, RCL and NCLH haven't done this level of disclosure of such to date. So, while I agree the quarters ahead are critical, and they are expected to continue to expect less than stellar bookings, rates and costs, I agree that they could experience an event or a culmination of events that accelerate its consideration of a reorganization.

If you could cite an article, credit card policy or historical court decision, it is tough for me to agree with this. I do know there are 'some' agreements regarding some of the deposits, but it likely does not cover this massive amount. The jurisdictional court, in a hypothetical filing, would have this issue up front and center. The odds of the Debtor and Creditor's Committee leaning towards allowing the these Customer Deposits to be retained and a 'go forward basis, are only increased if the eventual 'debtholders that win the emerging entity' and want to preserve some level of Customer satisfaction. CCL does not have the cash to pay these amounts (neither do the other two in the big three). Likely, they could not draw on any unexpired lines of credit to do so either. Back to the credit card issuers, by brand or originating bank, they'll make their best efforts to unwind what they can, but they certainly aren't issuing refunds in cash or into accounts of their customers.

Well, that is easier said than done. Cruise line debt is pretty uniquely tiered and stratified, vertically and horizontally. Like a 'web. At the corporate level there are priority levels of secured (some by specific assets, some by all assets, which is a conundrum) and unsecured, some specific ship or groups of ships, some specific islands and port projects, etc. So, filing the Petition, to start out, Equity is generally fully jettisoned. There really isn't much left to assert Equity has any value when stripping the assets for the debtholders. Then, it's a big dog-eats-little dog Creditor Committee fight with the Debtors legal and financial consultants (they can run up almost a billion in fees quicker than going down the Dragons Breath zip line). The big dogs know what secures each of the debt issuances; i.e., the prioritization. There also are some hidden assets that pop up during or after emergence. In some cases, if handled correctly, some abandonments of subsidiary (lines) may quality for Net Operating Loss carryforwards. The big dogs know this all too well also. Regular Net Operating Losses, in the tens of billions for the cruise lines, are generally only preserved if a certain percentage of Equity (shareholders) control the resulting emerged entity. But that doesn't mean there aren't other ways to generate such as noted above. The Creditors "on the top of the security totem pole" will get paid first and the most. Less secured and unsecured creditors will get "hosed" in that order. Unless a group of creditors align to proffer to the court to arrange to finance forward to keep "floating," the valuations of the assets will sink very fast. IN THE MIDDLE of all this, $4-$5 BILLION of Customer Deposits. Unsecured. Uncertain of the regulatory rights to refund status based upon the jurisdictions of the court and the countries of the Claimants. Claw back attempts by financial intermediaries (credit card companies and bank, travel agent agreements, etc.) on behalf of customers are unpredictable at best. It will be very, very messy. I will be shocked (although not much) if management, from the CEO to the CFO, and the Board (Governance) can allow the filing of the upcoming 10Q WITHOUT a GOING CONCERN warning; which is that it is unlikely that it can meet its current (12-months from "release date" of filing) obligations with existing and planned resources. The AUDITORS will have to agree with such determination for the year end audited annual report and financial statements.

Could be, yet to see. IMO, RCL is the pickle in the middle. CCL is simply too big to sail. NCL is small enough to be eaten (acquired). RCL, with its own brand, plus Celebrity and Silverseas (and 50% interest in others), looks to have a fleet (some paid for, a lot of new and trending) of its own, the Celebrity 'upclass and age' demographic that will continue more so in tougher times, etc. re: Silverseas. Its debt, although heavily leveraged, is backstopped though 2023 for revolving debt to settle expiring maturities. That puts it 'pretty much in the clear' until 2024 'sans any other surprises. Just IMO.

Actually, you have to combine the two Carnival entities, under stock symbols CCL and CUK, to get the total Carnival Market CAP. EOD today (pretty ugly the three leaders for the biggest losers for the day on Yahoo finance) ~ CCL $9.017B CUK $7.700B =$16.717B NCL $4.787B RCL $9.668B

Possibly. However, this 'was supposed to be' the best quarter, profitable and to sustain it through the next 2 quarters which are historically weak; never mind during a massive economic malaise where discretionary spending is heavily scaled back. IMO, they've adjusted the 'spin' with the EBITDA focus. Wouldn't everyone like to not take into account their Interest Expense (a cash outflow) and Depreciation (huge for a cruise line with ships)? The cruise industry operators, through no fault of their own, were building on an expanding customer base by both age and geographic demographics, rolling out new ships at record sizes and rates. Their growth rate was solid. Then... Covid. Lockdowns. CDC. Vaccinations. Masks. Fuel surge. Food cost surge. Labor shortage. Now, an economic collapse. Now, cruising for a large piece of the planned (rightfully so, no finger to point) customer growing base, it, as well as the cost to fly to a port and stay at a hotel, is totally 'discretionary' as people deal with the problems of massive inflation, hard costs of gas to drive, fuel to heat homes, electricity powered by the same, and the cost of food (obscene IMO).... A mess. IMO, the final domino. The cruise lines will be crushed in their current form. None will make it. CCL is the elephant in the room. It will go down first, and hard. A beast to unwind also. The newest, most efficient and best ships will still sail; under what organizational umbrella is still yet to be seen. 🙄 The 'debt issues' trading is nasty also. Regardless of the debt collateral held, in a reorganization process there is 'the cost of the process' (nasty law firms, reorganization support firms etc.) and the potential for 'a haircut' on the debt, on top of suspended interest payments, add to the debtholders desire to unload.