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Windsurfboy

Would carnival bankruptcy be a good thing resulting in lower prices

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Threads on this forum have questioned how long Cruise companies can keep going. What happens if they can't start up in October 

 

Carnival is building up huge debt,  which in the end we the customers will help them pay back via HIGHER PRICES.

 

If they went bankrupt then the hedge funds who invested in them will take the hit not consumers, except those with FCc. New owners can buy ships for peanuts and start cruising again with much lower costs

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6 minutes ago, Windsurfboy said:

Threads on this forum have questioned how long Cruise companies can keep going. What happens if they can't start up in October 

 

Carnival is building up huge debt,  which in the end we the customers will help them pay back via HIGHER PRICES.

 

If they went bankrupt then the hedge funds who invested in them will take the hit not consumers, except those with FCc. New owners can buy ships for peanuts and start cruising again with much lower costs

And who do you imagine these new owners will be?

If Carnival were to go bust, not all the ships would necessarily find buyers. Fewer ships = greater demand = higher prices. 

Be careful what you wish for! 

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Bankruptcy is not the right word, but that aside there's something in what you say.

 

Whatever happens to Carnival,  or indeed any company,  the assets remain. And if a company, in UK terms, goes into receivership or liquidation and assets are sold off, they're often sold off at bargain prices.  Much like the huge shopping centres Intu may well be disposing of.

 

In Carnival's case the ships are major assets, though now heavily counterbalanced by equally major debts. 

 

If those ships were sold at low prices,  a new or different operator might well have a competitive advantage  - though it too would have to take on debt. Prices,  though, reflect what the market will bear - simple supply and demand  - so I doubt there'd be much overall impact. 

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Harry, I  don't  think  the new owners will have to take on debt. The ships are security against the loans.  The lenders will repossess them Then sell them of to recover as much money as they can.

 

The new owners will have the debt from buying ships but at below cost. Cunard if it survived has debt from buying /building ships at cost plus debt from 6 months or more of no income but considerable expenditure.  In the end youre right market  demand will dictate prices. Have to wait till 2023 when FCC is out of system for true demand .

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2 minutes ago, Windsurfboy said:

Cunard if it survived 

If Carnival goes bust, how can Cunard still survive?

 

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1 hour ago, Windsurfboy said:

Threads on this forum have questioned how long Cruise companies can keep going. What happens if they can't start up in October 

 

Carnival is building up huge debt,  which in the end we the customers will help them pay back via HIGHER PRICES.

 

If they went bankrupt then the hedge funds who invested in them will take the hit not consumers, except those with FCc. New owners can buy ships for peanuts and start cruising again with much lower costs

I think that you have to also consider that in what I still believe to be the unlikely event of a Carnival insolvency, their position in the British cruise market is such that access to those types of holidays would be restricted. 

 

It's worth bearing in mind that with a vaccine (eventually) and the poor customer service excluded, the underlying product was growing in popularity.  This suggests higher prices.  

 

The possibility of lower prices is assuming that from 2022 Carnival no longer has the artificial demand of FCCs, but still has legacy and perception issues to confront.

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I also think that any potential buyers would only be interested in the larger, modern ships - Iona, Britannia,  Ventura etc.

The smaller older ships lack the economies of scale, and would be less likely to find buyers.

Again, less capacity in the market will lead to higher prices.

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The longer this goes on, the more likely imo that one or more cruise companies will go bust. As customer demand is likely to be depressed for some time once the effect of FCC wears off, I cannot see a stampede to buy redundant ships. Rather, I would see the remaining companies adjusting to the new reduced demand and keeping capacity at or slightly below it, creating a sellers market. This would enable them to increase prices and margins. Instead of price they would probably compete on quality, as my logic (is it correct?) is that the major part of the cost of a cruise is keeping the ship sailing, the cost of food etc is relatively small. So we could end up like we were a generation ago, with cruises being once again expensve luxury holidays.

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3 minutes ago, Denarius said:

.........So we could end up like we were a generation ago, with cruises being once again expensve luxury holidays.

I think that’s the most likely outcome of all.  The glory days of cruising retuning, but for the wealthy.

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Interesting thing going bankrupt any company who purchased the business would need to maximise there return,so prices would go up and the extra onboard credit would disappear and they would aim for the younger market.

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Anyone claiming OBC as a shareholder would no longer be able to get this money set against their on board cruise account and oh yes they lose all their capital too. I think this would be unpopular with the shareholders.

 

Regards John

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4 minutes ago, john watson said:

Anyone claiming OBC as a shareholder would no longer be able to get this money set against their on board cruise account and oh yes they lose all their capital too. I think this would be unpopular with the shareholders.

 

Regards John

They lose everything anyway if the company goes bankrupt plus those who get the extras for the the amount of cruises they taken would lose that as well.

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5 minutes ago, john watson said:

Anyone claiming OBC as a shareholder would no longer be able to get this money set against their on board cruise account and oh yes they lose all their capital too. I think this would be unpopular with the shareholders.

 

Regards John

I’ve pretty much written mine off, John. Anything I ever get will be a bonus.  Popular or not, we’re going to have no control over the outcome.

 

Harry

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1 hour ago, Harry Peterson said:

I think that’s the most likely outcome of all.  The glory days of cruising retuning, but for the wealthy.

Not 100% sure I agree with you on this to be honest Harry.

 

Equally a possibility that cruises would become more expensive as supply and demand become less balanced; margins increase to recoup losses; investment squeezed in to existing ships.

 

Remaining customer base remains loyal.

 

Ergo cruises become more expensive, but the glory days remain in the past.

 

On that cheery note 😒

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3 hours ago, Windsurfboy said:

Threads on this forum have questioned how long Cruise companies can keep going. What happens if they can't start up in October 

 

Carnival is building up huge debt,  which in the end we the customers will help them pay back via HIGHER PRICES.

 

If they went bankrupt then the hedge funds who invested in them will take the hit not consumers, except those with FCc. New owners can buy ships for peanuts and start cruising again with much lower costs

 

No cruising anytime soon from the US that is for certain, or any cruise anywhere with US passengers, so sad.  I really was planning a cruise this summer, and likely next summer is a bust too.

 

https://www.nbclosangeles.com/news/coronavirus/cdc-says-way-too-much-virus-in-us-to-control-pandemic-as-cases-surge/2388057/

 

Work and no play will make chip go crazy, LOL

 

When you go to Bankruptcy you get to re-negotiate your debts, if some silly rich group buys they still got to deal with re-nogiation with the debtors as they are first inline, someone always pays.

 

 

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2 hours ago, chipmaster said:

 

No cruising anytime soon from the US that is for certain, or any cruise anywhere with US passengers, so sad.  I really was planning a cruise this summer, and likely next summer is a bust too.

 

https://www.nbclosangeles.com/news/coronavirus/cdc-says-way-too-much-virus-in-us-to-control-pandemic-as-cases-surge/2388057/

 

Work and no play will make chip go crazy, LOL

 

When you go to Bankruptcy you get to re-negotiate your debts, if some silly rich group buys they still got to deal with re-nogiation with the debtors as they are first inline, someone always pays.

 

 

Next summer????

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4 hours ago, Denarius said:

, I cannot see a stampede to buy redundant ships.

Absolutely agree. It will be a buyer's market (if indeed there are any buyers). Older, inefficient ships will be sold for scrap value.  

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I see elsewhere that all the Pullmantur ships are going to be scrapped leaving the name as the only company asset. Apparently the ships were owned by RCI who took them back and then sent them for scrapping in Turkey. Maybe Pullmantur will get another RCI ship next year.

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12 hours ago, Denarius said:

The longer this goes on, the more likely imo that one or more cruise companies will go bust. As customer demand is likely to be depressed for some time once the effect of FCC wears off, I cannot see a stampede to buy redundant ships. Rather, I would see the remaining companies adjusting to the new reduced demand and keeping capacity at or slightly below it, creating a sellers market. This would enable them to increase prices and margins. Instead of price they would probably compete on quality, as my logic (is it correct?) is that the major part of the cost of a cruise is keeping the ship sailing, the cost of food etc is relatively small. So we could end up like we were a generation ago, with cruises being once again expensve luxury holidays.

Very true. No business in any industry can last for long periods without income.. 

I keep reading that Carnival have all this investment so they will be fine.. It only works if they can start repaying the loans quickly and still make a profit. 

Outside investment will have no sentiment...

If they manage to get cruising soon, the tipping point could be 2022/3, when the fcc has gone and prices have to increase substantially to repay this current investment. 

Andy 

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We have a cruise for next summer, that we transferred to from this april, on the assumption that all this would be done and dusted by then. 

I then read last night (pass as to where) some medical person said they thought the virus was something we would have to live with for years, and it wouldn't disappear like SARS did. The world would have to adjust its way of living to accomodate the virus.

That really depressed me, as does this thread. I hoped that things would be better next year, now I am not so sure. With Carnival UK making hundreds redundant in Southampton yesterday, I just feel there is a whole world out there that will not exist in a years time. 

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1 hour ago, AndyMichelle said:

Very true. No business in any industry can last for long periods without income.. 

I keep reading that Carnival have all this investment so they will be fine.. It only works if they can start repaying the loans quickly and still make a profit. 

Outside investment will have no sentiment...

If they manage to get cruising soon, the tipping point could be 2022/3, when the fcc has gone and prices have to increase substantially to repay this current investment. 

Andy 

Carnival in the last couple of days, have borrowed yet more money at an interest rate of 7.5% over LIBOR, in order purely to service the interest on their existing debts.

Their existing shares are virtually worthless, and the company is in a negative cash flow position.

Another delay in resumption of cruising could be the final straw.

I totally agree with you - if the company survives,  I would expect prices to rise, and costs to be cut in order to try and pay off the mountain of debt.

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2 hours ago, wowzz said:

Carnival in the last couple of days, have borrowed yet more money at an interest rate of 7.5% over LIBOR, in order purely to service the interest on their existing debts.

Their existing shares are virtually worthless, and the company is in a negative cash flow position.

Another delay in resumption of cruising could be the final straw.

I totally agree with you - if the company survives,  I would expect prices to rise, and costs to be cut in order to try and pay off the mountain of debt.

I’m not sure I’d call a share price of £9.40 virtually worthless, but I take your point.

 

Logic tells me I should sell ours now (I ditched everything else 3 weeks ago because I think prices are way too high) but the OBC is telling me - quite illogically - to keep them.

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1 minute ago, Harry Peterson said:

I’m not sure I’d call a share price of £9.40 virtually worthless, but I take your point.

 

Logic tells me I should sell ours now (I ditched everything else 3 weeks ago because I think prices are way too high) but the OBC is telling me - quite illogically - to keep them.

I'm keeping mine, probably for the same illogical reason as you,  and in the hope that things might improve.

I've held my nerve on my other investments,  and am now not that far off where things were pre-endemic.

Long term (10 years) I think I'll be ok - and to be honest, where else are you going to put your savings? I'm sweeping dividends into premium bonds at the moment.

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25 minutes ago, wowzz said:

I'm keeping mine, probably for the same illogical reason as you,  and in the hope that things might improve.

I've held my nerve on my other investments,  and am now not that far off where things were pre-endemic.

Long term (10 years) I think I'll be ok - and to be honest, where else are you going to put your savings? I'm sweeping dividends into premium bonds at the moment.

It's just a gamble, isn't it.  I take the view that markets are far higher at the moment than they should be, given the structural damage done to economies and companies, so it's sitting in a stocks and shares ISA, all in cash, waiting for a rebuying opportunity.  That may not come, of course, in which case my timing will have proved wrong - yet again!

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