Will CCL survive the Coronavirus?

[rkacruiser]

8 minutes ago, npcl said:

One additional note if CCL stock goes up and the convertible fully converts to shares Carnival would have increased its number of stock shares from 670 million shares to a little over 900 million. Or put another way  was if Carnival were to get back to its December market cap when its stock price was $51  the stock price for the same market cap would be $38.

 

Ouch!  But, I realized this when I learned that the number of shares would increase.  And, if and when a dividend is paid again, it likely will not be what the March, 2020 dividend was.  

[IPB4IGO]

1 hour ago, npcl said:

One additional note if CCL stock goes up and the convertible fully converts to shares Carnival would have increased its number of stock shares from 670 million shares to a little over 900 million. Or put another way  was if Carnival were to get back to its December market cap when its stock price was $51  the stock price for the same market cap would be $38.

 

That would be fine with me. I bought 100 shares today at $8. It will be entertaining to watch what it does over the next few years.  I'll either have bragging rights or slink quietly into the night. <g>

[rkacruiser]

5 minutes ago, IPB4IGO said:

 

That would be fine with me. I bought 100 shares today at $8. It will be entertaining to watch what it does over the next few years.  I'll either have bragging rights or slink quietly into the night. <g>

 

I wish you well.  During the 2008-2009 financial crisis, I purchased Royal Caribbean shares at just above its lows.  What a nice ride since then....until recently.  If I sold today, I would still have a capital gain.  But, not what it might have been.  

 

[npcl]

Carnival's 10-Q for the quarter ending Feb 29.  Just before everything fell apart. So this still reflects fairly normal operations with the only impact being in Asia.

 

According to that filing current assets totaled 2,885 million and current liabilities totaled 10,716 million

 

Cash on had was 1,354 million 

 

Compared to

1.004 million in short term borrowing

2,196 million in current portion of long term debt

4,690 million in customer deposits  X .55 = cash payout 2,580 million

 

 

Now it has been indicated that they have been effective in converting 45% of cancellations into FCCs (which is actually smart on their part because one converted to FCC's the customer is locked in and cannot convernt them back to a cash refund)

 

We have the cash from their revolving line of credit of 2.8 billion and their recent cash raising effort yielding 6.25 billion 

if we add that in we get 10,404 million in cash

 

So doing at little back of napkin calculation we get 

 

10404 minus 5780 million in current liabilities

 

would give 

 

CCL about 4,624 billion in available cash

 

Now I do not think that they were able to save much in operating costs in March with savings from cruises not operating offset by increased payouts due to the less than smooth shutdown process, contract terminations with vendors, crew transport costs, etc

 

So  normal operating costs per month are around 1.8 billion

that gives CCL something like 3 billion plus or minus a billion to fund costs until this is over.  (plus whatever cash bookings are occurring for the end of this year and next year).

 

They certainly need to resume by the end of 2020.

 

 

 

 

 

[DaveOKC]

20 hours ago, npcl said:

One additional note if CCL stock goes up and the convertible fully converts to shares Carnival would have increased its number of stock shares from 670 million shares to a little over 900 million. Or put another way  was if Carnival were to get back to its December market cap when its stock price was $51  the stock price for the same market cap would be $38.

Excellent point - and one that most people miss.

 

[HAL4NOW]

54 minutes ago, npcl said:

Now it has been indicated that they have been effective in converting 45% of cancellations into FCCs (which is actually smart on their part because one converted to FCC's the customer is locked in and cannot convert them back to a cash refund)

 

Actually a person may choose Option #1 (125% FCC) and then change their mind later.

This is a clarification regarding the Option 1 Future Cruise Credit ("FCC"). If a guest elects Option 1 and does not use his/her FCC and wants a refund thereafter of the original base cruise fare paid, between June 1, 2020 and December 31, 2021, the guest can request Holland America Line to exchange the FCC for a refund of their base cruise fare paid.

[ontheweb]

On 4/2/2020 at 12:53 PM, KirkNC said:

Don’t get too concerned over that discussion.  It is a required risk discussion in every 10-K.  Every industry and every company have similar doomsday discussions.  After reading one you would wonder why anyone would buy the stock of any business.  
 

Having said that, I think the question of the OP is legit.  I think bankruptcy is a real possibility, can’t assign a probability to it.  Personally we have cancelled all our travel thru July of next year (multiple providers, not just HAL) and are anxiously awaiting our deposits.  

Refunds are going to be a long wait. We cancelled a Princess Norwegian fjords cruise earlier today for July. The TA said they are still processing March refunds so do not expect it any time soon.

 

Maybe we'll cruise again if they ever return somewhat to normalcy. Who knows maybe we'll be with you an entire roll call like we were on the Maasdam a few summers ago.

[Wonderingabout]

One other way to look at the bond issue being so high.  Perhaps these bond buyers are betting that Carnival will declare bankruptcy and need to recapitalize with the current shareholders receiving nothing and the bond holders taking over the Company at pennies on the dollar.  If I were a shareholder, I am not so sure I would see the sale of the bonds as a statement that their investment will survive.

 

Note that GM survived but not the Shareholders.  In that case neither did the Bond Holders but that was due to the Government stepping in and changing the rules of Bankruptcy Court.  It is highly unlikely that the Government will step in in the case of Carnival going bankrupt and in any case it is no solace to the current shareholders even if they did. 

[npcl]

1 hour ago, Wonderingabout said:

One other way to look at the bond issue being so high.  Perhaps these bond buyers are betting that Carnival will declare bankruptcy and need to recapitalize with the current shareholders receiving nothing and the bond holders taking over the Company at pennies on the dollar.  If I were a shareholder, I am not so sure I would see the sale of the bonds as a statement that their investment will survive.

 

Note that GM survived but not the Shareholders.  In that case neither did the Bond Holders but that was due to the Government stepping in and changing the rules of Bankruptcy Court.  It is highly unlikely that the Government will step in in the case of Carnival going bankrupt and in any case it is no solace to the current shareholders even if they did. 

The way I look at it is

 

1. They get a very high interest rate

2. The bond were 2 points over where other Carnival bonds were trading if they wanted to flip for a quick profit

3. They were senior secured notes with the collateral being ships and intellectual property they they were in good shape in case of a BK

 

In others words a no lose situation for the buyers no matter what they wanted to do.

[DFD1]

To the OP...If it were me, I would cancel the 2021 cruise. You'll avoid possibly losing your money and you'll sleep better at night. There's plenty of time to rebook it down the road. It may cost you a bit more, but you've had the peace of mind in the meantime.

 

Good Luck.

[iancal]

Agreed.  I would not give any cruise line a dime of my money at this point in time.  I would wait until this shakes out.   Same for airlines and other travel products.  When this is over I cannot imagine that the cruise lines are expecting a quick return to business as usual.

 

If I were given a choice between a cash refund or a future credit of 125 percent I would most definitely take the refund.  No matter what cruise line.   

 

Moreover, once my choice was made I would be checking with my credit card issuer to understand the process and the time frame rules around disputing the past charge for the cruise....just in case it was prudent for me to start the process.

 

Who really knows the financial health of any subsidiary cruise line of an umbrella corporation?   The parent may survive at the expense of one or more of it's subsidiaries.   Bottom line....in the off chance of a bankruptcy you can be assured that those with deposits or cruise credits will be at the very tail end of the creditor list.  Unless of course you can successfully dispute the charge with your credit card issuer.

Edited April 4, 2020 by iancal

[kstrittm]

Thank you all for your input.  I have decided to cancel the trip and let things settle out to see if I should re-book.  Your advice, as always, was much appreciated...

[Sir PMP]

On 4/2/2020 at 10:04 AM, cbr663 said:

 

I also think that bankruptcy is a real possibility.  Fact is that the cruise industry is capital intense - it spends a lot of money to make a profit.  This isn't an industry with a 300% mark up, for instance.  Even passengers requesting the return of deposits will negatively affect its cash flows.

A split off might be coming..

[iancal]

I learned a long time ago....never let emotion cloud  good common sense business or financial judgement.

Edited April 4, 2020 by iancal

[shanni-shanni]

Let me see.

 

If I cancel my upcoming cruise in 2021, I wonder when I would actually see my deposit refunded.

 

I was told it will take 4-8 weeks to get to my April 15, 2021 cruise cancellation processed.

 

If and when they get to my 2021 cruise and  if a bankruptcy does happen, am I better off being a creditor? If not, I would have lost a booking and have to start from scratch again.

 

No, I'll stay and support HAL.

 

Tom

[Boatdrill]

On 4/2/2020 at 4:55 AM, wesport said:

 I read an article that bookings on cruises in 2021 are up 9%.  

I know several  people who have booked, or rebooked, for 2021.  Destinations and length of cruise vary,  but all of them are looking forward to getting back on a ship.   

[Boatdrill]

2 hours ago, iancal said:

 I would not give any cruise line a dime of my money at this point in time. 

What about airlines ?

[HAL4NOW]

1 hour ago, Boatdrill said:

What about airlines ?

We just booked a flight to San Diego for a Feb. 2021 cruise to Hawaii. We booked through Flight Ease and don't have to pay until November 2020. We booked the cruise last April (2019). 

We had an Alaska cruise scheduled for May this year that has obviously been cancelled. 

[DFD1]

The airlines are a part of national security. The are less likely to be allowed to go bankrupt because they are more likely to receive Federal support. That is very different from the cruise lines.

[bajakiter]

12 hours ago, iancal said:

I learned a long time ago....never let emotion cloud  good common sense business or financial judgement.

One of the best posts I have seen on CC!

Unfortunately, I am as guilty as the next, especially recently.

[Boatdrill]

4 hours ago, DFD1 said:

The airlines are a part of national security. The are less likely to be allowed to go bankrupt because they are more likely to receive Federal support. That is very different from the cruise lines.

You didn't answer my question.  🙂

[DFD1]

38 minutes ago, Boatdrill said:

You didn't answer my question.  🙂

I would not give them any either.....but if I did, it would be less likely to disappear because of them going bankrupt.

[rkacruiser]

20 hours ago, iancal said:

never let emotion cloud  good common sense business or financial judgement.

 

You offer wise advice at an exceptionally emotional time.

 

As the late Kenny Rogers sang:  "You have to know when to fold 'em.  Know when to hold 'em..."

 

Let the "dust settle" a bit more before one decides what one should do:  Fold, hold, or buy more.

[cbr663]

21 hours ago, iancal said:

I learned a long time ago....never let emotion cloud  good common sense business or financial judgement.

Great advice.  Locally, I am seeing many requests for us to support our closed small businesses by buying a gift card that can be used later when the business opens.  When it opens?  Shouldn't that be "if" it opens?  I would no more buy a gift card for a closed business than I would make a deposit on a cruise for a closed cruise line as I am not willing to lose that money.

[jtdlmc]

Not cancelling our Feb 2021 cruise and as a matter of fact just told my TA to rebook with the Have It All promo.