Carnival Corporation & plc Announces Anticipated Debt Pre-payment of $1.2B and Refinancing Transaction

[BlerkOne]

https://www.carnivalcorp.com/news-releases/news-release-details/carnival-corporation-plc-announces-anticipated-debt-pre-payment

[firefly333]

Great news. The good thing about these high cruise fares. 

[ninjacat123]

Thanks for posting @BlerkOne!

[BlerkOne]

44 minutes ago, firefly333 said:

Great news. The good thing about these high cruise fares. 

Supply and Demand. + onboard spend

[chengkp75]

Correct me if I'm wrong, but they are creating $1.5 billion in new debt, to retire $1.2 billion in old debt.  While this will represent a considerable reduction in interest payments, I don't see how the "high cruise fares" enters into this.  Yes, they said that they will use "cash on hand" (i.e. money from cruise fares) to retire the old debt, they will be repaying this operating cash with the new debt.

[BlerkOne]

I don't care about the mechanics, this is the takeaway:

 

"This is yet another step forward in our deleveraging journey, building on the $1.4 billion we already early retired this year. With this debt repayment, we now expect our year end debt balance to be less than $32.0 billion , an improvement over the  November 30, 2023 debt balance of less than $33.0 billion provided in our June guidance."

 

[chengkp75]

He can say whatever he wants to, and use whatever financial reporting voodoo he needs to, the mechanics says that it's a wash on debt balance.

[BlerkOne]

32 is less than 33. It would be illegal for Carnival to give false guidance.

[jimbo5544]

considering the stance of lenders from the previous action, it is DEF a good position from there to here.  There is no smoke and mirrors here, it is a long road out of covid hell.

[firefly333]

2 hours ago, chengkp75 said:

Correct me if I'm wrong, but they are creating $1.5 billion in new debt, to retire $1.2 billion in old debt.  While this will represent a considerable reduction in interest payments, I don't see how the "high cruise fares" enters into this.  Yes, they said that they will use "cash on hand" (i.e. money from cruise fares) to retire the old debt, they will be repaying this operating cash with the new debt.

If they werent cruising full at higher and higher cruise fares, they wouldnt be able to operate. Higher cash flow is what will get them out of this debt. Pay it off eventually. One of the analyst on carnival said he upgraded it saying he doesnt think it will be necessary to do another secondary to raise money.   ie making enough from cruises. I listened to all the conference call I could. 

 

I'm holding a chunk and think it's only a matter of time before it goes up. The analyst in effect said carnival isnt going bankrupt. I can remember when things were that tight. 

[ninjacat123]

Is it like refinancing a mortgage so you have a lower interest rate?  TIA!

[Stick93]

Anything can go bankrupt but who would want to hold a ship/ships as collateral - especially that many. 

Carnival will get this down. They have no more new ships on order,  raise fairs some more , cut a bit more like everyone is doing and wait things out. 
 

[lostsoulcruiser]

Key statement of this issue is the savings of $120 million annualized.  That's better for the balance sheet, eps and significantly the free cash flow of the company.  

[LouChamp]

Aloha. This is certainly positive news but continues along the highway I have consistently posted about.  The company can be considered too big to fail. The banks are in this and essentially kick the can down the road albeit while retiring old debt and establishing new debt. They can only function without newbuilding for so long as the yards will need to survive by building new ships of course while still finishing those under construction and other cargo ships etc. They can diminish the service and food only so much with cost cutting, portions, quality and increase those prices so everything is and needs to be carefully coordinated. Then of course any world event and/or events can and possibly will affect the delicate balancing act. I certainly wish them the best as I have stakes in all the big companies as well as the hotel and airline industries but do enjoy the artfully worded press releases and filings which I know need to be carefully worded and disclosed but I know the powers that be are not resting as every day requires new innovations to keep the ships sailing and the companies afloat.

[Stick93]

1 hour ago, lostsoulcruiser said:

Key statement of this issue is the savings of $120 million annualized.  That's better for the balance sheet, eps and significantly the free cash flow of the company.  

Yup and with $33 billion to go to pay in down completely this will go about as well as the national debt. 

[Stick93]

1 hour ago, LouChamp said:

Aloha. This is certainly positive news but continues along the highway I have consistently posted about.  The company can be considered too big to fail. The banks are in this and essentially kick the can down the road albeit while retiring old debt and establishing new debt. They can only function without newbuilding for so long as the yards will need to survive by building new ships of course while still finishing those under construction and other cargo ships etc. They can diminish the service and food only so much with cost cutting, portions, quality and increase those prices so everything is and needs to be carefully coordinated. Then of course any world event and/or events can and possibly will affect the delicate balancing act. I certainly wish them the best as I have stakes in all the big companies as well as the hotel and airline industries but do enjoy the artfully worded press releases and filings which I know need to be carefully worded and disclosed but I know the powers that be are not resting as every day requires new innovations to keep the ships sailing and the companies afloat.

Show me stat and I can have a statistic expert interpret it anyway you like -

[LouChamp]

11 minutes ago, Stick93 said:

Show me stat and I can have a statistic expert interpret it anyway you like -

Exactly 

[BlerkOne]

Carnival Corporation & plc to Issue Notices of Redemption for $1.2 Billion of Debt and Announces Pricing of $500 Million 7.00% First-Priority Senior Secured Notes Offering and Upsizing and Pricing of $1.3 Billion Senior Secured First Lien Term Loan B Facility for Other Refinancing

 

https://www.prnewswire.com/news-releases/carnival-corporation--plc-to-issue-notices-of-redemption-for-1-2-billion-of-debt-and-announces-pricing-of-500-million-7-00-first-priority-senior-secured-notes-offering-and-upsizing-and-pricing-of-1-3-billion-senior-secured-fi-301891098.html

[Stick93]

When you’re in the hole for 34 billion - 1.2 billion isn’t really much. But we clap for worse things in life so YOU GO CARNIVAL…YOU HAVE THIS 32.8 Billion more to make good on. 

[jsglow]

This is nothing but great news reflecting the improving financial health of the company.

 

To wit:

1) demonstrated ability to refinance 'unattractive' debt with new 'attractive' debt evidencing improving credit worthiness in the process.

2) accelerated debt retirement in 2023 at a pace not even anticipated as recently as the June quarterly conference call.

 

Carnival Corp is meaningfully ahead of schedule and well on the road toward financial health.  Now new factors can always come into play (like a nasty recession or something) that offer challenges but the trend is outstanding.

 

Oh, and for those that think that the entire $32-$33B is ever being retired, that's not how corporate finance works. Companies large and small generally all have significant debt burdens. Debt is always cheaper than equity and so represents an important component of the right side of the Balance Sheet for any healthy entity. I suspect that Carnival's first goal is to get that number back to pre-pandemic levels thereby paving the way toward new capital expenditures.

Edited August 2, 2023 by jsglow

[jsglow]

On 7/31/2023 at 7:24 PM, ninjacat123 said:

Is it like refinancing a mortgage so you have a lower interest rate?  TIA!

Sort of.  But in this case the lower interest rate has more to do with the market's perception of Carnival's credit risk. For regular folks, refinancing their home mortgage is driven almost exclusively by general market conditions, not their individual credit risk. Either way, the monthly nut goes down and that is good for cash flow.

[jimbo5544]

1 hour ago, jsglow said:

This is nothing but great news reflecting the improving financial health of the company.

 

To wit:

1) demonstrated ability to refinance 'unattractive' debt with new 'attractive' debt evidencing improving credit worthiness in the process.

2) accelerated debt retirement in 2023 at a pace not even anticipated as recently as the June quarterly conference call.

 

Carnival Corp is meaningfully ahead of schedule and well on the road toward financial health.  Now new factors can always come into play (like a nasty recession or something) that offer challenges but the trend is outstanding.

 

Oh, and for those that think that the entire $32-$33B is ever being retired, that's not how corporate finance works. Companies large and small generally all have significant debt burdens. Debt is always cheaper than equity and so represents an important component of the right side of the Balance Sheet for any healthy entity. I suspect that Carnival's first goal is to get that number back to pre-pandemic levels thereby paving the way toward new capital expenditures.

Excellent post!  Thanks for doing it.

[firefly333]

On 8/1/2023 at 6:09 AM, Stick93 said:

Yup and with $33 billion to go to pay in down completely this will go about as well as the national debt. 

Ouch, speaking of ... national debt was downgraded by Fitch yesterday. Causing some selling this morning. 

 

Listened to nclh earnings. Terrible. CNBC mentioned them with a no name airline asking if 3rd qtr bookings are falling and travel demand coming down for 3rd qtr. I monitor rcl prices and see no fall off in demand, prices still rising. I have a couple in my signature demand is thru the roof. Prices doubled and still rising. I think the talking heads were some what wrong about demand. Ncl may not have as much demand but rcl does. I dont see carnival prices dropping either. Demand has to remain high for these companies to charge enough to get debt paid off. 

 

Rcl earnings. Stock went up 10 pts, and pulled ccl and nclh alomg with it. Nclh and ccl just the opposite reaction to their earnings. I've listened to all 3 and watched market reaction. I'll br glad when all 3 are out if debt, of it ever happens.

[Stick93]

1 hour ago, firefly333 said:

Ouch, speaking of ... national debt was downgraded by Fitch yesterday. Causing some selling this morning. 

 

Listened to nclh earnings. Terrible. CNBC mentioned them with a no name airline asking if 3rd qtr bookings are falling and travel demand coming down for 3rd qtr. I monitor rcl prices and see no fall off in demand, prices still rising. I have a couple in my signature demand is thru the roof. Prices doubled and still rising. I think the talking heads were some what wrong about demand. Ncl may not have as much demand but rcl does. I dont see carnival prices dropping either. Demand has to remain high for these companies to charge enough to get debt paid off. 

 

Rcl earnings. Stock went up 10 pts, and pulled ccl and nclh alomg with it. Nclh and ccl just the opposite reaction to their earnings. I've listened to all 3 and watched market reaction. I'll br glad when all 3 are out if debt, of it ever happens.

From stock market aspect Royal seems to be in best position. Has been the strongest and recovered more than the others - But I am no economist. 
 

 

[SwordBlazer Cruising]

This is how corporations work. They are doing a good job of paying down debt. Most companies have debt, look at Amazon. They have reported long term debt at 65 billion.