CafeBruno

Feel free to disagree! Yes I tried to keep a very complex topic simple, since most readers here are not corporate finance experts or CPA’s. I’m a long time partner in a big national CPA firm and I can use a lot more technical jargon to explain why Carnival is in much better financial shape than some are postulating, but I don’t think that would be of interest to most readers. Couple of clarifications – I did not do a “debt to asset assessment”, in fact that’s not really a thing. I did a Debt to Equity ratio, same as Wall Street uses. There’s a huge difference between assets and equity. As the SEC 10Q filing shows, only $7B of CCL’s total debt is secured by actual CCL assets, and $28B is unsecured (uncollateralized). So if CCL can’t make their debt payments, and the lender wants to repossess the assets, they can only repossess $7B of assets (but its unlikely they would do that, they would just renegotiate the terms). The debt holders for the remaining $28B of debt have no collateral, and no recourse except to try and force CCL into bankruptcy. They could do that, but it’s more likely they will just negotiate new terms, like extended maturities. So what if the debt covenants have an acceleration clause? If CCL defaults, and the debt holders demand to accelerate the debt, that will just force a renegotiation of the terms, because no lender wants to foreclose and take possession of collateral assets. Banks and other lenders don’t want to be in the cruise business, they just want terms that CCL can live with to pay off the loans. On the comparison to the airlines – I am not suggesting American and United are in worse financial shape than CCL; this is an indisputable fact. Take a look at American’s latest 10Q – as I said, their assets total $83.8B, and their liabilities total $76.4B, and therefore the difference is negative equity of $8.4B. That’s the definition of “underwater” or an upside down balance sheet – when your liabilities exceed your assets. CCL is not that position, as after the $1B stock offering, they will show assets of $53.9B, liabilities of $44.7B, and positive equity of $9.2B. So its just not factual to say that American or United is in better financial shape than CCL. Finally, I never said CCL would not sell off Seaborne, HAL or anyone else. they could, for any number of legitimate reasons. I am just saying that the data shows CCL is not in nearly as bad of financial shape as some are saying. Again, feel free to disagree, but I will continue to stick to facts and data.

Let me offer a different perspective on this discussion. (1) while Carnival has added to its debt load tremendously since early 2020, their overall debt load is still very reasonable, and in fact proportionately much, much lower compared to major airlines, who were obviously also greatly affected by the pandemic. Carnival definitely does NOT have an upside down balance sheet, as was stated earlier. And (2) as DaveOKC said, its smarter and healthier for Carnival to raise an additional $1B through the stock offering discussed here, rather than a debt offering. Why do I say their total debt load is still reasonable and ok? One way the financial analysts evaluate this is by calculating what’s called the “debt to equity” ratio. It’s total liabilities (all the company’s debts to all creditors) divided by total equity (total capitalization from common stock offerings and from accumulated prior earnings; also equal to total assets minus total liabilities). Carnival’s 5/31/22 financials show total liabilities of $44.7B (of which $35B is loans), and total equity of $8.2B, which will become $9.2B after the $1B stock sale closes, so the debt/equity ratio after the stock sale will be 44.7/9.2 = 4.85/1. Is that good or bad? Well, it’s much worse than it was prior to the pandemic – the ratio was .77/1 in Carnival’s 11/30/19 financials. But its way better than the airlines. Well wait, you may say, its unhealthy to have any debt at all!! How can they ever pay off over $35B of loans!! The answer is, they won’t ever pay it all off – it’s unhealthy for big corporations to do that. They SHOULD carry debt, at a debt/ratio of at least 1:1 to 2:1, or maybe more. This is called “Leverage” – and its how all corporations operate – using other people’s money (debt) to a greater degree than using their own money. So while Carnival will likely pay down some of the $35B debt once they return to profitability, most of it they will just continue to refinance into the future. And as (if) they return to profitability, equity will go up and their debt/equity ratio will go down to a healthier range. Also – only $9.7B of Carnival’s $35B total debt is secured, and the rest is unsecured, meaning if they go Chapter 11, the unsecured creditors are entitled to nothing except what is negotiated, while the secured creditors get the ships and other assets. That means Carnival will have a lot of leverage if it ever gets to bankruptcy. Finally, in comparison to Carnival, the major airlines have much, much higher debt/equity ratios, meaning they are in much worse financial shape than Carnival, yet people don’t seem concerned about the airlines. For example, United Airlines’ 6/30/22 financials show total debts of $66.4B, and equity of $3.96B, for a debt/equity ratio of 16.8 – 3 times that of Carnival’s! And American Airlines is even worse, showing debts at 6/30/22 of $76.4B and equity of negative $8.4B, so the debt/equity ratio is infinite (and infinitely bad!) Yes, American has negative total equity, meaning they are technically insolvent, because their liabilities are $8.4B higher than their assets. Carnival’s total equity is way less than it was pre-pandemic, but at least it’s still positive at $9.2B. Yet, we still fly American. Anyway, all that to say that the gloom and doom about the future of Carnival and HAL is overblown. The numbers simply don’t support the idea that HAL is upside down, a house of cards ready to tumble down, or close to a reorganization/Chapter 11. Should we resist giving HAL any $$? Up to you. I myself have 4 HAL cruises booked, for 60 cruise days, in 2022-2023, and I’m looking forward to each of them. If anyone wants to verify my numbers, you can go to the SEC’s website of public filings – for example search “Carnival 10Q” and it should be the first link.

On our recent Alaska Cruise Tour, we packed my wife's CPAP machine in the suitcase that went with us to each stop, and I hand carried my CPAP, and my backpack, with me on the bus/train. When we left the bus for restroom stops, I just left the CPAP on the bus. No problem, you can carry it with you, no medical form needed for the typical ResMed CPAP bag.

@Gray Lady, so sorry to hear your husband got it. But very glad that you got quick help from Beacon. Hoping you both stay safe and ride it out. Our 5 day quarantine ended last night, and we flew home from Fairbanks this afternoon. I am feeling much better, almost back to 100%. My wife is still having congestion and fatigue but has improved a lot since last week. I'm sure our vax and boosters helped a lot. I do plan to submit our expenses to HAL, as the policy does say that they will reimburse us, as others have helpfully pointed out. Thanks to all for the well wishes!

Thanks for your concern Sumo Citrus! Like I said, I was writing to try and inform others that might be expecting HAL to help them once they test positive. Those that are might not be comfortable changing their own travel arrangements on the fly, like I did. Sorry if I can off as whiny....but it is disappointing to me when HAL makes promises but does not keep them.

Gray Lady, when we self tested positive at the Westmark Hotel in Fairbanks, we immediately reported it to the HAL tour desk at the hotel. They took down our names and room number and told us our Tour Director would be getting hold of us for the next steps (she never did, now 4 days later), and that our tour was over and we could no longer participate in the tour. They then told us to go to the hotel front desk to report it to them also. We did and the front desk gave us 2 letters, 1 from HAL and 1 from the hotel. The HAL letter told us we couldn't continue the tour and that we had to isolate, and said we had to pay for our additional expenses, and then submit to HAL for reimbursement. It also said we could contact Guest Relations, which we tried to but gave up after an hour on hold - I sent them an email instead on Friday, but again no response yet. The hotel letter told us "...we will contact Beacon, and Occupational Health and Safety Service we have contracted with to help manage cases that come up. They will be contacting you periodically to test you and check on you". We got these letters last Thursday, and to date, no one from Beacon or HAL or the hotel has contacted us to do anything. I even spent an hour on the phone last Friday trying to contact every Beacon phone number I could find, and got shuffled around to 3 voice mails, which I left, which again I have not gotten 1 return call. Since our HAL flight was supposed to leave last Saturday, and our 5 day quarantine does not expire until tomorrow, I was able to change our HAL flights myself on delta.com on Saturday morning, from Saturday to Wednesday (for an extra $210, which of course I had to pay). Hope this is helpful to you - let me know if you need more info. And safe travels to you

Double post

Wow Gray Lady, HAL must have just changed the policy to make masks mandatory rather than optional, surely in response to high covid rates on the preceding trip (mine). I wish you safe travels, but I would not assume HAL will take care of you...they sure didn't take care of us. Better to prepare for taking care of yourself in case HAL ignores you like they did us

Thanks, I also saw the policy, and am hoping HAL will honor that and reimburse us for the extra costs. In fact I emailed HAL's Guest Relations at the address on the letter they gave me when we informed them we were positive, but, no response yet. I am not holding my breath on getting a response quickly.

I wanted to let others know about our experience with Covid on our Alaska Cruise Tour. In summary, we enjoyed our trip a lot, but we learned a couple of important lessons that may be of value to others. First, that the land tour Covid protocols were nonexistent, increasing your risk of Covid, and second, if you do catch Covid on the land portion of the tour like us, be prepared to figure things out completely by yourself, with no help from HAL or others. I had my laptop with me and we were able to figure out what to do on our own - how long to quarantine, change our flights, extend our hotel stay, get more tests and medications, etc., so for us it was just an inconvenience, extra expense, and disappointment at not being able to complete the trip as planned. But if you are not computer savvy or expect assistance from HAL or others, you need to know that you might not get any assistance at all and be stuck completely on your own in Fairbanks or Denali. For those interested in the details of our experience: We sailed on the Nieuw Amsterdam, leaving Vancouver June 5, ending in Whittier, where we started our 6 day land portion to Anchorage, Denali, and Fairbanks. On the ship, we had a great time, with great weather in all the ports. We are very risk averse and wore masks constantly and avoided crowds on the ship, which was actually easier to do than on land. On the land portion, there were many more crowded situations, like on the busses and trains, on the 26 Glacier boat tour, the Denali Tundra Wilderness tour, and the other included land excursions. Both on the ship and on the land tour, very few people wore masks, maybe 10% at most. We are double vaxxed and double boosted, and we’ve managed to avoid Covid until now. From my understanding the incubation period for Covid is typically from 2 to 10 days after exposure, but for the most prevalent Omicron variant, it is typically 3 days. So we could possibly have caught it on the ship, but most likely, it was during the land tour, which is logical based on what we experienced – close quarters, no masking, and increasing amounts of coughing as the land tour progressed. My wife started feeling sick on our last night in Denali, on Wednesday last week, but she tested negative. When we got to the hotel in Fairbanks on Thursday, she tested positive, and I immediately contacted the HAL Tour Desk and the hotel front desk and informed them. They gave me a letter from HAL and one from the hotel, advising us that we needed to remain isolated and that we would be contacted by our Tour Director/HAL, and Beacon Health, who would “be contacting you periodically to test you and check on you”. Spoiler alert – no one from HAL or Beacon ever contacted us. I tried contacting Beacon myself on Friday; I called about 6 numbers and got shuffled around and sent to several voicemails. I left voicemails, but no one ever called us back. I also tested positive Friday. Long story short, we figured out that we should quarantine 5 days, so instead of flying out of Fairbanks Saturday the 18th, we’d need to stay in quarantine at the hotel until Wednesday the 22nd. I was able to change our HAL flights myself on Saturday morning (at increased fare), to avoid losing flight credit for our original flight. Some may say, “You knew the risk when you booked the trip, and if you were not comfortable with the risks you shouldn’t have cruised”. I totally agree with that – we completely understood the risks and are fine with them. This was our 4th cruise since October 2020, and we have several more booked that we are looking forward to. It was just our turn to get Covid, despite our precautions. But it is very disappointing to see so many people unmasked, in close quarters, especially while coughing and hacking. I just wish people had more consideration for others and take the small steps of wearing masks around others, especially if they have cold/covid symptoms. And even more disappointing that we got zero assistance from HAL, Beacon, or anyone else. At this point I am hoping HAL will reimburse us for the additional hotel nights, meals, and airfare increase. Time will tell. There’s a lot more to the story, so if anyone has questions, let me know.