HAL. As an Investment?

[LocoLoco1]

If HAL was a cyclical Copper Mining or Railroad perhaps, what would the NewYork/London $MoneyBoys$ be thinking?  Methinks, ‘disaster’. I distinctly recall reading HAL’s latest financial report stating they had reserves til Mid-2021. I have $8,800+ USD in FCC’s, so this is no trivial matter to me. What say y’all?. 

[Gail & Marty sailing away]

MIAMI, Feb. 10, 2021 /PRNewswire/ -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) (the "Company") today announced that Carnival Corporation (the "Corporation") has priced the private offerings of $3.5 billion aggregate principal amount of 5.75% senior unsecured notes due 2027 (the "Senior Unsecured Notes").  The aggregate principal amount of Senior Unsecured Notes to be issued was increased to $3.5 billion.  The offering of the Senior Unsecured Notes is expected to close on February 16, 2021, subject to customary closing conditions

[CruiserBruce]

Do a search around the board. Their most recent statement for Carnival Corp (parent of HAL, and what you should be looking at) was last month. They have cash reserves until end of 2021, and the possibility of raising more cash after that.

[rodndonna]

 

Disclosure: My investment is limited to the obligatory minimum 100 shares of CCL  (for stockholder OBC benefit) and one prepaid HAL cruise (to get prepay 10% discount). (maybe $3.5KUS)

 

CCL is  rated solid neutral by the 'experts.

 

My gut says it will survive, and my financial advisor did not laugh at me last month when we asked him to buy us the 100 CCL shares  - so that's something!

 

That being said. I am wavering on booking any further cruises beyond the one booked now even though I see some great deals and it's killing me not to.

 

[KirkNC]

well CCL debt is rated as junk and according to this article getting junkier.

 

https://www.marketwatch.com/story/carnival-credit-rating-in-danger-of-falling-deeper-into-junk-territory-at-moodys-2021-02-10?siteid=yhoof2&yptr=yahoo

[KirkNC]

23 minutes ago, Gail & Marty sailing away said:

MIAMI, Feb. 10, 2021 /PRNewswire/ -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) (the "Company") today announced that Carnival Corporation (the "Corporation") has priced the private offerings of $3.5 billion aggregate principal amount of 5.75% senior unsecured notes due 2027 (the "Senior Unsecured Notes").  The aggregate principal amount of Senior Unsecured Notes to be issued was increased to $3.5 billion.  The offering of the Senior Unsecured Notes is expected to close on February 16, 2021, subject to customary closing conditions

Much of this, $1.9 billion, will be used to pay off existing debt that matures in 2021.

[Mary229]

I have not explored it in depth and you might want to check but is your $8800 covered by your credit card, not the travel insurance but instead the undelivered services clause.  If so, it isn't a bad investment itself.  The gift cards with the 10% bonus are even a better investment if they are covered by credit card. 

 

At this point the whole market is frothy and I only continue my automated periodic investing with no further speculative bets.

[Indianadaytripper]

The 100 share program is very popular especially good for frequent cruisers. Unfortunately like the 4% dividend can be extinguished rather quickly in bad times. I don’t think that will happen because of the program popularity 

[HappyInVan]

2 hours ago, Mary229 said:

I have not explored it in depth and you might want to check but is your $8800 covered by your credit card, not the travel insurance but instead the undelivered services clause.  

 

Last I heard, credit card companies won't refund deposits converted into FCC? If so, OP is on his own.

 

 

[Hlitner]

Although we still own 100 shares of CCL (have had them for decades) we have already gotten a very good return on that investment and are not too concerned about any potential loss.  That being said, there is no way we would invest in CCL at the current time.  The problem is their Balance Sheet which is now laden with long term debt obligations.  In addition, part of the financing package they arranged last year includes some very heavy convertible debt (bond obligations that can later be converted to stock at a very favorable price).  So, even if you assume that CCL manages to recover from this dreadful COVID situation, there would be the likelihood that the holders of those convertible bonds would exercise their option (converting to stock) thus further watering down the value of existing shares.

 

Bottom line is that at the moment CCL and the other publicly traded cruise lines stocks are not on our "buy" list.

 

Hank

[iancal]

No thanks.

[Mary229]

14 minutes ago, HappyInVan said:

 

Last I heard, credit card companies won't refund deposits converted into FCC? If so, OP is on his own.

 

 

I don't know.  If it were me I would ask and get an answer in writing!

[rodndonna]

16 minutes ago, HappyInVan said:

 

Last I heard, credit card companies won't refund deposits converted into FCC? If so, OP is on his own.

 

 

 

In my limited somewhat similar experience this was the case, but likely depends on your card terms.

 

We had flights with Interjet which when Covid hit and flights were being cancelled, were converted to future voucher credits (held through Expedia). Interjet has since bellied-up, and we seem to have no recourse. We tried Credit Card reversal but were past the 120 days so was not eligible. We were told insurance would not cover us as we had accepted the flight voucher (which was now more than 120 days later useless).

 

[KirkNC]

21 minutes ago, Hlitner said:

Although we still own 100 shares of CCL (have had them for decades) we have already gotten a very good return on that investment and are not too concerned about any potential loss.  That being said, there is no way we would invest in CCL at the current time.  The problem is their Balance Sheet which is now laden with long term debt obligations.  In addition, part of the financing package they arranged last year includes some very heavy convertible debt (bond obligations that can later be converted to stock at a very favorable price).  So, even if you assume that CCL manages to recover from this dreadful COVID situation, there would be the likelihood that the holders of those convertible bonds would exercise their option (converting to stock) thus further watering down the value of existing shares.

 

Bottom line is that at the moment CCL and the other publicly traded cruise lines stocks are not on our "buy" list.

 

Hank

CCL has gone from $11.5 billion in debt in 2019 to $26.0 billion in debt today (that’s before their current offering hits the books).  Assuming an average cost of 5% (which is low as much of the debt is above 10%), they need an additional $725 million in revenue just to service the additional debt 😳😳😳.  Where is that money coming from?

[Mary229]

8 minutes ago, rodndonna said:

 

In my limited somewhat similar experience this was the case, but likely depends on your card terms.

 

We had flights with Interjet which when Covid hit and flights were being cancelled, were converted to future voucher credits (held through Expedia). Interjet has since bellied-up, and we seem to have no recourse. We tried Credit Card reversal but were past the 120 days so was not eligible. We were told insurance would not cover us as we had accepted the flight voucher (which was now more than 120 days later useless).

 

Thanks for sharing your experience. 

[Hlitner]

12 minutes ago, KirkNC said:

CCL has gone from $11.5 billion in debt in 2019 to $26.0 billion in debt today (that’s before their current offering hits the books).  Assuming an average cost of 5% (which is low as much of the debt is above 10%), they need an additional $725 million in revenue just to service the additional debt 😳😳😳.  Where is that money coming from?

Great question for which there seem to be a lack of answers.  As I mentioned, some of that debt has a convertible feature which basically could turn some that Long Term Debt (on the Balance Sheet) into Common Stock (equity if you accept that premise).  But this results in a much larger number of outstanding common stock shares which ultimately dilutes the value of all the shares (but pricing in the market is not always based on value).  I do agree with Mr. Donald's (and his Board) strategy of simply doing whatever they much do to keep CCL afloat (good pun).  They really have no choice other then immediate bankruptcy.   Will time and future growth get them out of this huge debt hole?  My crystal ball was shattered years ago.

 

Hank

[iancal]

CCL debt load has more than doubled AND my understanding is that they also diluted the share value by issuing more common stock.

 

Unless there is a change, the time to buy (and sell) has past.   Some  investors picked CCL up at $8.50-$10 and dumped it a month or so later at $17.  Very nice gain.

 

What is interesting to me is those cruise lines that expanded or started up by buying ships from the majors.   Even with mods, those firms should have very strong balance sheets when cruising re-starts.   Much less debt to service and assets at fire sale acquisition cost.   Those  savings will go right to the bottom line. 

 

Plus, they have the time to develop first rate customer marketing and sales web sites.  Something HAL seems to have been unable to accomplish

Edited February 11, 2021 by iancal

[KirkNC]

I do agree that CCL had no other options other then raising money as they did via equity and debt.  At those points in time, long term was irrelevant if they could not survive the short term.    

[KirkNC]

3 minutes ago, iancal said:

CCL debt load has more than doubled AND my understanding is that they also diluted the share value.

 

Unless there is a change, the time to buy (and sell) has past.   Some  investors picked CCL up at $8.50-$10 and dumped it a month or so later at $17.  Very nice gain.

At the end of 2019 CCL had 692 million shares outstanding, today they have 932 million shares outstanding.  This is an increase of 240 million shares or 34%.  This means that CCL needs to generate 34% more in net earnings to have the same earnings per share and ultimately a similar stock market value as pre-pandemic.  Then you have to also cover the additional $725 million in additional debt costs.  Again, where does this money come from?  At the end of the day, CCL can’t generate enough new revenue or reduce operating expenses enough to cover this nut.  They will certainly try to do both but ultimately the result will be a stock valuation that is significantly below pre-pandemic levels.

[iancal]

7 minutes ago, KirkNC said:

At the end of 2019 CCL had 692 million shares outstanding, today they have 932 million shares outstanding.  This is an increase of 240 million shares or 34%.  This means that CCL needs to generate 34% more in net earnings to have the same earnings per share and ultimately a similar stock market value as pre-pandemic.  Then you have to also cover the additional $725 million in additional debt costs.  Again, where does this money come from?  At the end of the day, CCL can’t generate enough new revenue or reduce operating expenses enough to cover this nut.  They will certainly try to do both but ultimately the result will be a stock valuation that is significantly below pre-pandemic levels.

Agree.  The numbers tell the story. 

 

Which is why I believe that more changes will occur prior to start up.  

 

It is not pretty.  You can only put so much lipstick on a pig before it starts to smear and rub off.  At the end of the day it is still a pig.

Edited February 11, 2021 by iancal

[Lido - Lanai]

2 hours ago, KirkNC said:

Where is that money coming from?

The same could be said about the off the charts stimulus package about to be passed...... no worries.. just a bigger negative number! 🙄

[kangforpres]

The Fed (Federal Reserve Bank of the US) bought a CCL bond last year, they also bought corporate debt from Walmart and many other for profit companies. I'm not sure who is going to buy the debt CCL has to unload by February 16. That's just 5 days away.

 

-Paul

[kangforpres]

https://nymag.com/intelligencer/2020/04/the-fed-helped-carnival-but-in-a-way-that-makes-sense.html

 

The Fed made it easier for Carnival to find debt financing, it wasn't a direct bailout. Overall the Fed has pumped trillions of dollars into wall st. since the pandemic began, the markets are at all time highs again today.

[Hlitner]

I will toss another monkey wrench into this discussion.  Many (we have no way of knowing the real number) cruise customers were lured into accepting generous Future Cruise Credits (FCCs) in lieu of refunds from their cancelled voyages.   While these FCC deals looked lucrative to many, a few of us did immediately sound warnings and suggested "take the refunds."  So now there are huge amounts of outstanding FCCs (in accounting terms these are "accounts payable" and a liability to the cruise lines).  If the cruise lines are forced into bankruptcy these FCCs may well become worthless (or perhaps worth pennies on the dollar).  In a perverse way the cruise lines have managed to use their own customers to provide them with interest free debt financing.  And no, the credit card companies have no obligation to help out with FCCs that go bad.  When folks voluntarily gave up refunds for more generous FCCs they made their own bed.

 

Hank

[Mary229]

4 minutes ago, Hlitner said:

Many (we have no way of knowing the real number) cruise customers were lured into accepting generous Future Cruise Credits

I think we know.  We all have different balance sheets and different risk-reward profiles.  I venture to guess that most people on this HAL board have spent their lives managing their finances well clearing understanding the risks involved