Could the HAL Brand be sold off?

[AKJonesy]

So glad we used up the last of our FCC on the B2B cruises.  We would book with HAL, but it's going to be last minute for us which is what we've been doing since the restart.  We aren't worried about cruises being full because, for the most part, they have not been.   

[LMaxwell]

There's no buyer for HAL. Carnival would have to accept pennies on the dollar to find someone to take on the expense/debt of the new ships. HAL wouldn't be sold for value of its assets, but rather to make it someone elses problem. One less mouth to feed.  And who is looking for that right now? I see no takers in the current environment. 

[rkacruiser]

20 hours ago, LMaxwell said:

I see no takers in the current environment. 

 

I see no takers in any environment.  I cannot imagine that the company that Mr. Arison has assembled is going to be disassembled during the time he remains involved with Carnival Corporation.  His family has worked too long, too hard, and invested so much into this company to allow it to just "go away".  

[Guest ldtr]

On 7/7/2022 at 7:38 PM, BermudaBound2014 said:

Lol- Now I understand. The data for celebrity being 55-56 comes from a “non public” secret reference only you have access to. Enjoy your cruise and thanks for the giggles :). 

if you want I can give you the name of the firm where you can purchase it.

 

if you notice Celebrity has not been very forth coming with there information, including in the CLIA data.

 

They have been on a campaign for a few years in trying to appeal to younger passengers. As a result they have been very tight with anything in their marketing data and public info release that counters what they are trying to accomplish.

 

Funny that the Celebrity data having a lack of a public source  is what you are now focusing on.  You laughed about the HAL data then finally recognized that there was a public source. Same with Princess.

[iancal]

15 hours ago, rkacruiser said:

 

I see no takers in any environment.  I cannot imagine that the company that Mr. Arison has assembled is going to be disassembled during the time he remains involved with Carnival Corporation.  His family has worked too long, too hard, and invested so much into this company to allow it to just "go away".  

My understanding is that the  family does not own a majority of shares.

 

I would assume that the institutional and mutual fund holders, along with the major debt holders may hold as much or more influence. 

 

I have no idea if, or how many reps, they have on the Board.

 

As an OP said.....you need a buyer in order to sell. That may well  be the bigger challenge.

Edited July 10, 2022 by iancal

[HappyInVan]

15 hours ago, rkacruiser said:

 

I see no takers in any environment.  I cannot imagine that the company that Mr. Arison has assembled is going to be disassembled during the time he remains involved with Carnival Corporation.  His family has worked too long, too hard, and invested so much into this company to allow it to just "go away".  

 

It's not a matter of 'going away'. Its a matter of survival. Choosing a good time to raise cash in order to live on to fight another day. Too often, companies and individuals go BK because they are unwilling to do the emotionally hard things.  Allowing the crisis to spiral downwards until the matter is out of their hands.

 

I would hope that the Arison family would behave in a responsible way to protect all shareholders (themselves included) and their employees.

 

That said, it is difficult to find new investors because of the uncertain nature of covid. Nonetheless, HAL is IMO an attractive proposition. Having less debt because it has expanded its fleet less than other Carnival subsidiaries. It has a loyal customer base, and a good reputation.

 

As a customer, I hope that HAL is soon sold to strong investors. Allowing HAL to escape a conglomerate that has over-expanded and has cut too many corners.

 

[RClark6369@aol.com]

When I first started cruising in the early 1990's, embarkation lunch was at 1 location - the lido deck.   Carnival's food choices were hamburger, hot dog, fries, a cup of fruit and maybe a choice of hot and cold finger sandwiches - cucumber was my favorite.   Not much else beyond else those choices.   Royal Caribbean was very similar but may have included some cold salad choices as side items.   The price to get on the ship was much higher back then (intro inside cabin) than it is today.  No one complained.  You went on your cruise, then took your stories about the wonderful life on a cruise ship back home to family and friends which would then encourage all of them to want to go on a cruise.     Look at how the industry has evolved.   A million dining and entertainment options were added and the base price has actually declined... (double stab ).  To account for this, passenger space ratios were decreased and more cabins were added to ships for the rev shortfall.   Fast-forward to today, we have so many cruise lines to choose from.   I am grateful for these choices in cruise lines,  but the downside is that branding has lost its way.   In my opinion, of all the brands, Princess and HAL have suffered the most from branding loss while attempting to stay afloat with the competition.   Once upon a time, each of these two lines had elegant ships with wonderful passenger space ratios.  Each had service levels and dining quality  that were the envy of mainstream cruising.  (NO, there were not 10 alternative restaurants on their ships back then.)  The amusing part is that if you read threads from this site from the 1990's people were complaining about HAL cost cutting then.... "I am done with HAL".   "I will never sail with HAL again, its not the line it use to be."   "Cuts in service are killing the HAL experience."   All of this, yet HAL exists 30 years later.    An industry shake down and a change in service models should bring a "win" to the industry.    If Carnival emerges a bit smaller, then so be it.  They will still be a leader for others to follow.    The Carnival brand is strong and is here to stay.    As for Princess, HAL, Celebrity.... I worry about their future due to branding fractures.   Just my 2 cents.

[rotjeknor]

2 hours ago, HappyInVan said:

 

 

I would hope that the Arison family would behave in a responsible way to protect all shareholders (themselves included) and their employees.

.

 

The Arison family have always been it for the money. I really don’t think they will protect anything else but their own pockets.

[BermudaBound2014]

Arison has been selling big chunks of Carnival stock since 2015. He sold an additional 5 million shares in 12/20 which gave the stock a jolt.

 

According to Bloomberg he only owns an 8.8% stake in Carnival today and has lost 1.6B dollars in the last year.

 

 

 

A sale for pennies on the dollar seems likely.

[ljones]

On 7/5/2022 at 6:09 PM, BermudaBound2014 said:

What I'm seeing still shows HAL skewing much older than both Celebrity and Princess.

A part of the reason HAL may seem to have on average an older crowd is their Grand Voyages. 

 

How many Millennials or families with children in school can go on cruises that last 30 - 94 or more days? 

 

Those itineraries are primarily enjoyed by retirees who want a longer cruise that involves fewer flights and multiple cruises to reach the same goal of seeing what the Grand Voyages provide: 

Circumnavigation of Africa, S America, Australia /NZ, etc.  

 

And I hope that HAL will continue to provide those opportunities.

Edited July 10, 2022 by ljones

[BermudaBound2014]

3 minutes ago, ljones said:

A part of the reason HAL may seem to have on average an older crowd is their Grand Voyages. 

 

How many Millennials or families with children in school can go on cruises that last 30 - 94 or more days? 

 

Those itineraries are primarily enjoyed by retirees who want a longer cruise that involves fewer flights and multiple cruises to reach the same goal of seeing what the Grand Voyages provide: 

Circumnavigation of Africa, S America, Australia /NZ, etc.  

 

And I hope that HAL will continue to provide those opportunities.

 

Absolutely. There is a market for a more mature cruiser 🙂

[iancal]

We have been retired for 12 years but have been cruising for a much longer time.

 

Since retiring we have spent far less time cruising that we did pre retirement and far, far more days on independent travel. 

 

We expect to carry on doing this for quite a few more years.  At some point cruising days will overtake land days.  But not yet at this point in our lives.  We are only late 60's/early 70's

 

The popular cruise lines all seemed to be moving down to the lowest common denominator pre covid.  This trend, and perhaps post covid changes, will probably see us shopping and trying some of the premium offerings for a change.  We suspect that they may cost more but will actually deliver better value for us.

Edited July 10, 2022 by iancal

[sofietucker]

There are 2 much larger demographic groups by age in the US: the younger boomers (55-70--a weirdly flat cutoff at 70) and the Millennials, 24-45. So the lines are doing everything possible to entice that younger group--because the older folks are already "sold" on cruising. This is also the group most likely to have kids at home, who will therefore be cruising along. Yet HAL has been famously the least family-oriented cruise line of the mid-priced brands...

I predict HAL will take more of a turn to family-focused spaces, activities and itineraries. Kids and teens areas expanded. Another restaurant (anyone been to Petit Chef on Celebrity? Animated show on tabletops). Different types of entertainment and theater movies. I could see visits in the Baltic to Legoland (Denmark), Madurodam* (Netherlands), Moominland (Stockholm). Etc. We already don't cruise during holidays or when school's out, but this sort of change could push us further toward the smaller ships...

*If you Google it, you'll see many photos of a city--cathedrals, government buildings, etc.--but these are all waist high! Very cool place.

Edited July 15, 2022 by sofietucker

[Sir PMP]

On 7/10/2022 at 1:56 PM, BermudaBound2014 said:

Arison has been selling big chunks of Carnival stock since 2015. He sold an additional 5 million shares in 12/20 which gave the stock a jolt.

 

According to Bloomberg he only owns an 8.8% stake in Carnival today and has lost 1.6B dollars in the last year.

 

 

 

A sale for pennies on the dollar seems likely.

He started selling off since 2015, that's about the time he gave us Orlando and Arnold.

[MarkWiltonM]

On 7/10/2022 at 2:39 PM, ljones said:

A part of the reason HAL may seem to have on average an older crowd is their Grand Voyages. 

 

We cruise on Celebrity and HAL, usually every other cruise is one or the other, and we see very little  difference in the age of cruisers. I think Celebrity does have a few more youngish couples and families with young children, but not THAT many. Most of the passengers on both lines are couples in their 50s, 60s, and 70s. We started on these lines in our late 40s and are now in our mid-60s. 

[Guest ldtr]

19 minutes ago, MarkWiltonM said:

 

We cruise on Celebrity and HAL, usually every other cruise is one or the other, and we see very little  difference in the age of cruisers. I think Celebrity does have a few more youngish couples and families with young children, but not THAT many. Most of the passengers on both lines are couples in their 50s, 60s, and 70s. We started on these lines in our late 40s and are now in our mid-60s. 

There is some stratification with Celebrity.  The  newer Edge class ships tend to attract, on average, a younger audience, that the Solstice and Millennium class ships.  Just as the newer larger HAL ships tend to appeal to run slightly younger  than the older smaller ships.

[iancal]

CCL has changed.  According to Motley Fool....  

 

-the number of outstanding  common shares has increased 67 percent.   That    dilution has reduced the value of each share.

 

-debt has increased by 170 percent.  Much of it is junk bond status paper @10%. 

 

 Not good.

Edited July 15, 2022 by iancal

[Guest ldtr]

14 minutes ago, iancal said:

CCL has changed.  According to Motley Fool....  

 

-the number of outstanding  common shares has increased 67 percent.   That    dilution has reduced the value of each share.

 

-debt has increased by 170 percent.  Much of it is junk bond status paper @10%. 

 

 Not good.

If CCL could get their occupancy rate back to 2019 levels with similar operating revenue and expenses, they could do well enough to retire the debt, though they would not be building new ships for a while.

Stock price would be about 25 to 33% of 2019 value though until a substantial portion of that debt is retired and earning per share increases.

 

The question is if they can get back to that occupancy rate and even if they could it looks like we will be entering a period of higher operating costs (especially fuel, but also potentially food and labor), limited pricing ability (potential recession),  potential over capacity in number of berths available in the industry, and higher interest rates for any new credit or refinancing of existing credit.  

 

Will not be an easy time for any of the cruise lines.  CCL's loss of 1.47 billion in operating income this last quarter gives an idea of just how high of a hill they need to climb.

Edited July 15, 2022 by ldtr

[iancal]

4 minutes ago, ldtr said:

If CCL could get their occupancy rate back to 2019 levels with similar operating revenue and expenses, they could do well enough to retire the debt, though they would not be building new ships for a while.

Stock price would be about 25 to 33% of 2019 value though until a substantial portion of that debt is retired and earning per share increases.

 

The question is if they can get back to that occupancy rate and even if they could it looks like we will be entering a period of higher operating costs (especially fuel, but also potentially food and labor), limited pricing ability (potential recession),  potential over capacity in number of berths available in the industry, and higher interest rates for any new credit or refinancing of existing credit.  

 

Will not be an easy time for any of the cruise lines.

Here is what CCL's debt load represents (Motley Fool).   Keep in mind that most of their new debt carries a comparatively high interest rate.

 

The ballooning debt should be massively concerning to current and prospective investors. The current long-term debt is more than all the cash generated from operations (CFO) reported in the seven years before COVID-19 combined! This is illustrated below.

[BermudaBound2014]

4 minutes ago, ldtr said:

If CCL could get their occupancy rate back to 2019 levels with similar operating revenue and expenses, they could do well enough to retire the debt, though they would not be building new ships for a while.

Stock price would be about 25 to 33% of 2019 value though until a substantial portion of that debt is retired and earning per share increases.

 

The question is if they can get back to that occupancy rate and even if they could it looks like we will be entering a period of higher operating costs (especially fuel, but also potentially food and labor), limited pricing ability (potential recession),  potential over capacity in number of berths available in the industry, and higher interest rates for any new credit or refinancing of existing credit.  

 

Will not be an easy time for any of the cruise lines.

 

You do realize there is 35 Billion (with a B) indebt since the pandemic? That's a full 25 Billion (with a B) more than 2019. Occupancy rate isn't going to do it. The math no longer works. They would barely make enough to cover their interest payments alone. It's all about the debt at this point.

[Guest ldtr]

8 minutes ago, BermudaBound2014 said:

 

You do realize there is 35 Billion (with a B) indebt since the pandemic? That's a full 25 Billion (with a B) more than 2019. Occupancy rate isn't going to do it. The math no longer works. They would barely make enough to cover their interest payments alone. It's all about the debt at this point.

Yes is is 35B with a B, but a lot of it is tied to country guaranteed loans from the countries involved in the ship building business, most of the rest is in secured loans at fairly decent interest rates.

 

This last quarter CCL lost 283 million on just the operations portion of the business (not even looking at line items like depreciation  and S&A.  Their occupancy rate was  69% with capacity of   16,666,000 available passenger berth days 

 

Back pre-Covid.  their occupancy rate was 105.3%, with 21,645,000 available passenger berth days.  Debt level at that time was about 11.2 billion

 

So about 25 billion was added in debt.

 

Now considering that most of the operating debt is fixed for a given cruise (staffing, fuel, etc) and just about all ships are now back in service we should expect expenses for everything except food (relatively small expense) and commissions to remain near current levels with some adjustments for the categories mention.  If the cruise lines were able to reach 2019 occupancy levels an increase of 52%.  Then operations would change from a loss of around 300 million to a profit of around 1 billion per quarter.  before depreciation and S&A.  So you would have break even in operations, but a cash flow positive rate of about 600 million per quarter which would be sufficient to meet their debt payment requirements.

 

So yes, even with the increase in debt, if they were to get back to pre-2019 occupancy levels at current pricing, they would be able to deal with the debt.  They would not have much wiggle room in case of an economic down turn or other negative factors, but they could cover it.

 

 

[Guest ldtr]

38 minutes ago, iancal said:

Here is what CCL's debt load represents (Motley Fool).   Keep in mind that most of their new debt carries a comparatively high interest rate.

 

The ballooning debt should be massively concerning to current and prospective investors. The current long-term debt is more than all the cash generated from operations (CFO) reported in the seven years before COVID-19 combined! This is illustrated below.

Keep in mind that your are comparing 7  years of operating profits to total debt, some of which is it extends well beyond that period. Have seem some of the debt going well beyond 2030.  Keep in mind that operating profits do include depreciation so do not reflect the total amount generated cash.

 

According to the last 10Q the primary concern would be the roughly 19 billion in debt due in the next 5 years.  One would expect a substantial portion of that to be refinanced depending upon interest rates at the time (no reason to expect that the secured loans would be refinanced or extended, same with the guaranteed loans from the ship building countries.  

 

So that would make the about of concern to be the unsecured loans and the interest on all loans.  However the recent unsecured load of  1 billion at 10.5% is actually due in 2030 if not retired earlier.

 

So if they do get back to full occupancy at current pricing that would give them about 2.4 billion per year in generated cash flow, even though their financials would reflect break even due to depreciation.  That should be enough to cover debt payments and provide an environment for refinancing existing debt.  Would limit their ability to buy new ships, but not eliminate it since those loans are heavily subsidized by the countries where the ship yards are located.

 

All bets are off if there is a down turn in the economy, spike in interest rates, or they cannot get back to full occupancy.

[BermudaBound2014]

7 minutes ago, ldtr said:

Yes is is 35B with a B, but a lot of it is tied to country guaranteed loans from the countries involved in the ship building business, most of the rest is in secured loans at fairly decent interest rates.

 

This last quarter CCL lost 283 million on just the operations portion of the business (not even looking at line items like depreciation  and S&A.  Their occupancy rate was  69% with capacity of   16,666,000 available passenger berth days 

 

Back pre-Covid.  their occupancy rate was 105.3%, with 21,645,000 available passenger berth days.  Debt level at that time was about 11.2 billion

 

So about 25 billion was added in debt. Exactly what I said up there lol

 

Now considering that most of the operating debt is fixed for a given cruise (staffing, fuel, etc) and just about all ships are now back in service we should expect expenses for everything except food (relatively small expense) and commissions to remain near current levels with some adjustments for the categories mention.  If the cruise lines were able to reach 2019 occupancy levels an increase of 52%.  Then operations would change from a loss of around 300 million to a profit of around 1 billion per quarter.  before depreciation and S&A.  So you would have break even in operations, but a cash flow positive rate of about 600 million per quarter which would be sufficient to meet their debt payment requirements.

 

So yes, even with the increase in debt, if they were to get back to pre-2019 occupancy levels at current pricing, they would be able to deal with the debt.  They would not have much wiggle room in case of an economic down turn or other negative factors, but they could cover it.

 

 

 

I disagree. Approximately 15 Billion is adjustable rate debt. Going up each quarter. CCL doesn't hedge fuel, who knows where that's heading. Operating cost is far from fixed at current inflation rate of 9.1%.  Best I can figure they have about a 500 Million dollar interest only payment due. You keep talking about no money to build ships, but they are already under contract. Restructuring changes all that. Time will tell of course. 

[Guest ldtr]

35 minutes ago, BermudaBound2014 said:

 

I disagree. Approximately 15 Billion is adjustable rate debt. Going up each quarter. CCL doesn't hedge fuel, who knows where that's heading. Operating cost is far from fixed at current inflation rate of 9.1%.  Best I can figure they have about a 500 Million dollar interest only payment due. You keep talking about no money to build ships, but they are already under contract. Restructuring changes all that. Time will tell of course. 

Keep in mind that the 9.1% inflation rate was looking backward.  Most of which was in fuel, food, and to some degree US labor.  So that increase is pretty much already in the last quarter numbers.  Going foward we are seeing oil prices coming down off of the peak.  As far as interest rates the floating rates depend upon what it is linked to, usually Libor.  While Libor rates are certainly higher than they were a year ago.  Most of that would be included in the last 10Q.  They have gone up about 30 basis points since that data would have been prepared so nothing major If the loans were structured such that all of it passed through on the full 15 billion that would result in about a 45 million annual increase.  Again as with inflation the question is how high are interest rates going to go.  While the FED is certainly raising the FED funds rate in the US, the bond market rates have pulled back from their recent peaks.  So while interest rates may continue to go up as far as Libor is concerned, they also might not.

 

Actually that 45 mil number is probably quite high because the longer term libor rates are actually flat to down since the report was generated for example the 1 year has only increased by 6 basis points in the last 30 days (.06%).

 

Any ship building already under contract also has guaranteed loans associated with them by the countries in which they are being built.  Loans that those countries are happy to make under very friendly terms since they like keep those shipyard workers employed.  Expect any new construction to have extrememly favorable terms and long due dates.

Edited July 15, 2022 by ldtr

[iancal]

I am not in any way speculating that Carnival is in trouble.

 

I do believe, however, that their share value has been greatly depreciated by the share dilution and by increased debt levels.    Both will have a very negative impact on EPS and on future share price if and when things in the industry volumes return to normal.