Saudi Fund Purchases CCL Stock

[jhannah]

It was disclosed today that a Saudi Arabian fund has purchased 8.2% of Carnival Corporation. While there may be some concern with a foreign entity being the third largest shareholder, it has brought a significant uptick in CCL stock. It's up just over 23% as I make this post. It also indicates that there is confidence in the future of the company. What do you think?

[voljeep]

that this should/will be merged into the Carnival Stock thread where it's been previously posted ??

[npcl]

1 minute ago, jhannah said:

It was disclosed today that a Saudi Arabian fund has purchased 8.2% of Carnival Corporation. While there may be some concern with a foreign entity being the third largest shareholder, it has brought a significant uptick in CCL stock. It's up just over 23% as I make this post. It also indicates that there is confidence in the future of the company. What do you think?

We now know where most of the 500 million of stock that CCL sold last week.  Considering that this represents the majority of that sale and that CCL had trouble getting buyers (increased bond sale to 4 billion, but dropped equity from over 1 billion to 500 million due to lack of interest in the stock offering), I would have preferred to see the stock sale going to multiple buyers, indicating a more general view, than most of it going to 1 buyer.

 

If you had seen purchases going to more large investment firms, there would be more chance that it might be followed by more cash if things get tight.  The Saudi Arabian Fund has a history for taking positions, but not following up when the companies need more money later on.  

[paradiselivin1]

On a lighter note...I guess we'll be doing a lot of desert cruising....

[travelhound]

1 hour ago, jhannah said:

It was disclosed today that a Saudi Arabian fund has purchased 8.2% of Carnival Corporation. While there may be some concern with a foreign entity being the third largest shareholder, it has brought a significant uptick in CCL stock. It's up just over 23% as I make this post. It also indicates that there is confidence in the future of the company. What do you think?

Yup, this is somewhat encouraging.  Clearly they believe Carnival is in a good position to survive this crisis.  I hope so, my family really likes the Princess brand and we hope to be able to sail with them again.

[rkacruiser]

I think it is an encouraging sign as to the financial health of CCL.  

 

Knowing nothing about the Saudi fund that made this investment, given the collapse in the price of oil which is important to the government of Saudi Arabia, I believe, I am surprised that they would make such an investment given the current state of the leisure industry.  

Edited April 7, 2020 by rkacruiser

[npcl]

1 hour ago, rkacruiser said:

I think it is an encouraging sign as to the financial health of CCL.  

 

Knowing nothing about the Saudi fund that made this investment, given the collapse in the price of oil which is important to the government of Saudi Arabia, I believe, I am surprised that they would make such an investment given the current state of the leisure industry.  

Saudi Arabia Sovereign Wealth Fund has about 320 billion in assets

 

Some of their major holdings include

 

2 billion Tesla

1 Billion Lucid Motors (Tesla competitor)

45 billion Softbanks Technology Focused Fund (who brought us the Weworks fiasco)

3.5 billion Uber

20 Billion Blackstone Infrastructure Fund

 

What is interesting is that on Friday everyone new that CCL had sold 62.5 million shares for 500 million, after trying to sell 1.25 billion worth.  Now today when news comes out that most of the 500 million worth (about 350 million) went to 1 buyer the Saudi Arabia Sovereign wealth fund, where it doesn't even make one of their major holdings, everyone considers it to be great news. 

 

On the other hand I consider that they only sold 500 million out of the 1.25 billion that they tried to sell and most of that went to 1 buyer is not exactly a wide demonstration of confidence in the future of CCL. Would be better if you had a couple of equity investment firms, known for long terms investments taking an interest.

 

Of course the value of CCL is low enough that the Saudi Sovereign wealth fund could always take CCL private and turn the ships into private yachts for extended family so they don't need to take over floors in London hotels in the summer.😄 or create the Saudi Arabia nation cruise line 😉

 

Seriously this is a relatively small purchase for the fund.  Would be interesting to see if they also picked up any of the convertible bonds.  Far more shares at play there. (125 million shares if the convertible is all converted which would dilute the Saudi shares as well as everyone else).

Edited April 7, 2020 by npcl

[RedIguana]

16 hours ago, npcl said:

What is interesting is that on Friday everyone new that CCL had sold 62.5 million shares for 500 million, after trying to sell 1.25 billion worth.

 

22 hours ago, npcl said:

We now know where most of the 500 million of stock that CCL sold last week.  Considering that this represents the majority of that sale and that CCL had trouble getting buyers (increased bond sale to 4 billion, but dropped equity from over 1 billion to 500 million due to lack of interest in the stock offering), I would have preferred to see the stock sale going to multiple buyers, indicating a more general view, than most of it going to 1 buyer.

My understanding was they dropped the amount of equity (stock) being offered from 1.25 or 1.5 billion to 500 million and increased the bond sale amount due to the huge interest in purchasing the bond issue. Bond issue was originally 3 billion at 12.5% coupon, had over 17 billion in inquiries. So they upped the bond issue to 4 billion at 12%, and sold less equities. I saw it as an opportunity to pick up 100 share for OBC (dividends will be canceled for a while) at 8.01 a share. Grabbed another 100 shares a few hours later at 7.92. Will sell those at some point:).

[npcl]

27 minutes ago, RedIguana said:

 

My understanding was they dropped the amount of equity (stock) being offered from 1.25 or 1.5 billion to 500 million and increased the bond sale amount due to the huge interest in purchasing the bond issue. Bond issue was originally 3 billion at 12.5% coupon, had over 17 billion in inquiries. So they upped the bond issue to 4 billion at 12%, and sold less equities. I saw it as an opportunity to pick up 100 share for OBC (dividends will be canceled for a while) at 8.01 a share. Grabbed another 100 shares a few hours later at 7.92. Will sell those at some point:).

I would put it more that they took more bond money, because they could not get interest in the stock sale.

 

If you disagree with that, than ask yourself why they did not sell anymore bond since there was so much interest?

 

The reason why is because the more debt they take on at such a high  interest rate (4 billion means 480 million per year in increased interest rates) the closer they come to violate covenants on existing debt. 

 

From the recent 10Q filing they need to maintain en minimum ratio of 3:1 of EBITDA to Consolidated Net Interest Charges.

 

With future revenue for the rest of the year in doubt they are limited in the amount of interest they can be paying.

 

At February 29, 2020, we were in compliance with all of our debt covenants. After considering the effect of COVID-19 on our consolidated EBITDA, the actions we have taken and the other options available to us, we expect to remain in compliance with our current minimum debt service coverage ratio in certain of our debt instruments that requires a minimum of 3:1 ratio of EBITDA to Consolidated Net Interest Charges

[bluesea321]

6 minutes ago, npcl said:

I would put it more that they took more bond money, because they could not get interest in the stock sale. If you disagree with that, than ask yourself why they did not sell anymore bond since there was so much interest? The reason why is because the more debt they take on at such a high  interest rate (4 billion means 480 million per year in increased interest rates) the closer they come to violate covenants on existing debt. From the recent 10Q filing they need to maintain en minimum ratio of 3:1 of EBITDA to Consolidated Net Interest Charges.  With future revenue for the rest of the year in doubt they are limited in the amount of interest they can be paying.

 

But they apparently floated rates in the high teens and still no takers....

 

"Before the equity offering, Goldman Sachs, JPMorgan Chase and Bank of America had been working to put together a debt deal for Carnival that would offer some investors a potential return in the high teens, according to two people familiar with the discussions. Bankers pitched the deal to hedge funds and private equity investors, some of whom passed on it because of concerns about the company’s long-term viability."

 

https://www.nytimes.com/2020/04/07/business/coronavirus-cruise-industry-carnival.html

Edited April 7, 2020 by bluesea321

[npcl]

9 minutes ago, bluesea321 said:

 

But they apparently floated rates in the high teens and still no takers....

 

"Before the equity offering, Goldman Sachs, JPMorgan Chase and Bank of America had been working to put together a debt deal for Carnival that would offer some investors a potential return in the high teens, according to two people familiar with the discussions. Bankers pitched the deal to hedge funds and private equity investors, some of whom passed on it because of concerns about the company’s long-term viability."

 

https://www.nytimes.com/2020/04/07/business/coronavirus-cruise-industry-carnival.html

It did not say no takers it said "some of whom passed"

 

They floated the rates to check interest, they then ended up at 11.5% with a slight discount to end at 12% so there was plenty of interest even though some hedge funds passed.  However, the deal ended up being oversubscribed, even though the equity offering response was poor. 

 

 

[hobbyfarmer2]

CCL traded over 195M shares on Mon, Apr 6, up almost 18%.  I make that about $2B that changed hands.  That is a lot of trading.

[Gracie115]

It would be nice if this helped facilitate the refunds to thousands of cruise reservations that have been in limbo for weeks now....

[travelhound]

Jon Najarian, from CNBC, said today that there was an unusually high number of calls bought on CCL, indicating a significant bullish bias for Carnival.  Probably an institutional investment firm.

Edited April 9, 2020 by travelhound

[npcl]

On 4/7/2020 at 12:40 PM, bluesea321 said:

 

But they apparently floated rates in the high teens and still no takers....

 

"Before the equity offering, Goldman Sachs, JPMorgan Chase and Bank of America had been working to put together a debt deal for Carnival that would offer some investors a potential return in the high teens, according to two people familiar with the discussions. Bankers pitched the deal to hedge funds and private equity investors, some of whom passed on it because of concerns about the company’s long-term viability."

 

https://www.nytimes.com/2020/04/07/business/coronavirus-cruise-industry-carnival.html

Error

Edited April 9, 2020 by npcl

[Mackenzie1]

30 minutes ago, travelhound said:

Jon Najarian, from CNBC, said today that there was an unusually high number of calls bought on CCL, indicating a significant bullish bias for Carnival.  Probably an institutional investment firm.

Very interesting. Thanks. 

[npcl]

If you like technical investing the 50% fibonacci  retracement point is about $13 dollar a share. The last couple of drops and bounces have followed the Fibonacci retracements nicely. If it follows it should hit resistance around that level.  Will see if there is sufficient strength to carry the stock through that level.

 

CCL is certainly a stock one can make money in doing short term trades.  I would not count on it being higher 2 month out though.

[Just_Westy]

51 minutes ago, npcl said:

If you like technical investing the 50% fibonacci  retracement point is about $13 dollar a share. The last couple of drops and bounces have followed the Fibonacci retracements nicely. If it follows it should hit resistance around that level.  Will see if there is sufficient strength to carry the stock through that level.

 

CCL is certainly a stock one can make money in doing short term trades.  I would not count on it being higher 2 month out though.

 

I personally can't see any cruise ships sailing within 6 months and probably much longer given the current Pandemic.  There will no doubt be class action lawsuits against some companies and most ports would be gunshy regarding cruise ships until a vaccine is widely available.

 

The recent bump is stock prices should be viewed with caution then IMHO.

[travelhound]

12 hours ago, Mackenzie1 said:

Very interesting. Thanks. 

Yup, it will be interesting to see if this is really the smart money as Jon Najarian suggested.  BTW, the calls that were bought were Leaps, meaning over a year, so this is a longterm bullish investment.

Edited April 9, 2020 by travelhound

[cruzsnooze]

I saw today that Carnival Gift Cards at 10% off were for sale today on AARP.  That might help improve their cash flow and keep the stock going. 

[Mackenzie1]

33 minutes ago, travelhound said:

Yup, it will be interesting to see if this is really the smart money as Jon Najarian suggested.  BTW, the calls that were bought were Leaps, meaning over a year, so this is a longterm bullish investment.

Wow, that’s even better. Even though the Saudi investment was not a large part of their portfolio, I still think it’s important, and makes Princess’ long term existence more probable than before. 

[travelhound]

38 minutes ago, CarelessAndConfused said:

Leaps seem to be the way to go on a stock like Carnival if you want to own it at all.  Why pay the full stock price when "show and tell" will occur before the leap options expire?  I'm not sure I buy the notion that it is any specific overly bullish sentiment that one or a few institutionals are buying.  Sounds like a hedge fund playing high risk/high reward game for a tiny part of their portfolio.

It's definitely only one or two major institutions.  This was on the CNBC TV show Options Action.  Jon Najarian's investing style is to follow the big smart money bets.  That said, it's still a bet, but hopefully an educated bet.

Edited April 9, 2020 by travelhound

[travelhound]

5 hours ago, Mackenzie1 said:

Wow, that’s even better. Even though the Saudi investment was not a large part of their portfolio, I still think it’s important, and makes Princess’ long term existence more probable than before. 

The Saudi's actually bought the stock, as opposed to longterm calls, but that was also an encouraging development.

[Globehoppers]

Pure speculation of a very small amount of money by the Saudis.  Junk bond sales with interest in the teens...  

 

CCL is not a viable equity stock for the long term.