Carnival Stock Below $10

[Username0123]

21 minutes ago, pc_load_letter said:

I totally respect your choice to not be jabbed. But there are no masks any longer. But yes, for unjabbed there is still pre-cruise testing.

It's just a SELF-ADMINISTERED antigen test.  Easy-peasy.  Not the PITA PCRs that have scheduling (and other) issues.

[ontheweb]

5 hours ago, BlerkOne said:

They probably got their stock advice from internet cruise boards.

You don't really believe that!

[ontheweb]

14 hours ago, bucfan2 said:

The scary truth is….they’ve been taking it all in. 

Yes, of course they look at both the positive and the negative in the report. I was alluding to they don't look with rose colored glasses at the few possible positives as some in here do.

[tidecat]

9 hours ago, Inveterate Cruiser said:

I never got a good sense of why the loss was so much larger than expected. Interest and depreciation expenses can be forecasted so that's unlikely the reason. I suspect it was the spike in oil prices and food inflation in June-Aug 2022 which means those should abate as the year goes by and in 2023. Unfortunately, I think Carnival also needs to learn from RCL's playbook - cut out free lunches at Cucina and Jiji, cut out lobster and steak at the MDR, raise drink package prices, sell far more specialty dining...... 

Fuel expense was 3.5 times higher in Q3 2022 than in Q3 2021. The fuel expense for this past quarter was the equivalent of about five  months' fuel expense in 2019.

 

Food is running at least 10% higher than 2019 when adjusting for occupancy levels.

[At Sea At Peace]

14 hours ago, BermudaBound2014 said:

Why not just file Chapter 11, wipe out the debt and emerge clean? 

 

Well, that is easier said than done.  Cruise line debt is pretty uniquely tiered and stratified, vertically and horizontally.  Like a 'web.

 

At the corporate level there are priority levels of secured (some by specific assets, some by all assets, which is a conundrum) and unsecured, some specific ship or groups of ships, some specific islands and port projects, etc.

 

So, filing the Petition, to start out, Equity is generally fully jettisoned.  There really isn't much left to assert Equity has any value when stripping the assets for the debtholders.

 

Then, it's a big dog-eats-little dog Creditor Committee fight with the Debtors legal and financial consultants (they can run up almost a billion in fees quicker than going down the Dragons Breath zip line).  The big dogs know what secures each of the debt issuances; i.e., the prioritization.

 

There also are some hidden assets that pop up during or after emergence.  In some cases, if handled correctly, some abandonments of subsidiary (lines) may quality for Net Operating Loss carryforwards.  The big dogs know this all too well also.  Regular Net Operating Losses, in the tens of billions for the cruise lines, are generally only preserved if a certain percentage of Equity (shareholders) control the resulting emerged entity.  But that doesn't mean there aren't other ways to generate such as noted above.

 

The Creditors "on the top of the security totem pole" will get paid first and the most.  Less secured and unsecured creditors will get "hosed" in that order.

 

Unless a group of creditors align to proffer to the court to arrange to finance forward to keep "floating," the valuations of the assets will sink very fast.

 

IN THE MIDDLE of all this, $4-$5 BILLION of Customer Deposits.  Unsecured.  Uncertain of the regulatory rights to refund status based upon the jurisdictions of the court and the countries of the Claimants.  Claw back attempts by financial intermediaries (credit card companies and bank, travel agent agreements, etc.) on behalf of customers are unpredictable at best.

 

It will be very, very messy.

 

I will be shocked (although not much) if management, from the CEO to the CFO, and the Board (Governance) can allow the filing of the upcoming 10Q WITHOUT a GOING CONCERN warning; which is that it is unlikely that it can meet its current (12-months from "release date" of filing) obligations with existing and planned resources.  The AUDITORS will have to agree with such determination for the year end audited annual report and financial statements.

 

 

Edited October 1, 2022 by At Sea At Peace

[mondello]

Newly minted CCL stockholder here. I took the plunge at $7.56 for 100 shares. Missed the dip early on in Covid when it last bottomed out. Shares may pay for themselves if I can get the $100 OBC more than half a dozen times.

[BermudaBound2014]

@At Sea At Peace As always, thanks for sharing your thoughts.  If not Chapter 11, what do you suspect?

 

@mondello I understand buying shares (at this rate) for OBC, especially if you are going to be sailing in the immediate future. Just know that shareholder benefits are voted on yearly. Currently, CCL has extended shareholder benefits until July 31, 2023. I can't remember when they vote, but I think it's spring. Someone here should know. 

[JT1962]

1 hour ago, At Sea At Peace said:

 

I will be shocked (although not much) if management, from the CEO to the CFO, and the Board (Governance) can allow the filing of the upcoming 10Q WITHOUT a GOING CONCERN warning; which is that it is unlikely that it can meet its current (12-months from "release date" of filing) obligations with existing and planned resources.  The AUDITORS will have to agree with such determination for the year end audited annual report and financial statements.

 

 

I agree. The truth is always in the regulatory filings. The PR and Marketing departments always put a positive spin on things and are rarely, if ever, held liable for misstatements. The CEO, CFO & Auditors can be held criminally and civilly liable if they don’t disclose the full facts. Most aren’t willing to go to jail by glossing over the real story.

Edited October 1, 2022 by JT1962

[cruisingguy007]

1 hour ago, JT1962 said:

I agree. The truth is always in the regulatory filings. The PR and Marketing departments always put a positive spin on things and are rarely, if ever, held liable for misstatements. The CEO, CFO & Auditors can be held criminally and civilly liable if they don’t disclose the full facts. Most aren’t willing to go to jail by glossing over the real story.

 

That's how it's supposed to work but too many are in bed together and there is so much money to be made that the pressure to "get out of the way" from the top on down is too great. After Arthur Anderson (who subsequently had their conviction overturned) and Lehman Brothers, and the development of the "too big to fail" ideology, there is even less incentive to worry. Simpy pay a fine, no one goes to jail, that's only for small time crooks, well except Bernie Madoff but that was only because of who he took from and their ability to enact revenge, yet most folks don't know who David G. Friehling is or that Ernst & Young was eventually found liable and fined 20.3 million. No one goes to jail (except Bernie). Crime certainly pays in the white collar world, meanwhile, some other schmuck is doing 20 years for drugs that the government brought in to fund the CIA, what a world!  😁   

 

https://en.wikipedia.org/wiki/Accounting_scandals      

Edited October 1, 2022 by cruisingguy007

[BlerkOne]

4 hours ago, At Sea At Peace said:

 

 

 

IN THE MIDDLE of all this, $4-$5 BILLION of Customer Deposits.  Unsecured.  Uncertain of the regulatory rights to refund status based upon the jurisdictions of the court and the countries of the Claimants.  Claw back attempts by financial intermediaries (credit card companies and bank, travel agent agreements, etc.) on behalf of customers are unpredictable at best.

 

 

 

 

Most customers have nothing to worry about - the credit card issuers will be on the hook to reimburse the customers.

[tidecat]

5 hours ago, At Sea At Peace said:

i will be shocked (although not much) if management, from the CEO to the CFO, and the Board (Governance) can allow the filing of the upcoming 10Q WITHOUT a GOING CONCERN warning; which is that it is unlikely that it can meet its current (12-months from "release date" of filing) obligations with existing and planned resources.  The AUDITORS will have to agree with such determination for the year end audited annual report and financial statements.

 

 

It's not necessarily the next 12 months you have to worry about as far as whether Carnival is a going concern. But if Carnival misses earnings by a country mile again in Q4, and doesn't start to turn a profit in Q1 of 2023, then this becomes a reasonable possibility.

[Calnev1]

5 hours ago, At Sea At Peace said:

 

 

 

IN THE MIDDLE of all this, $4-$5 BILLION of Customer Deposits.  Unsecured.  Uncertain of the regulatory rights to refund status based upon the jurisdictions of the court and the countries of the Claimants.  Claw back attempts by financial intermediaries (credit card companies and bank, travel agent agreements, etc.) on behalf of customers are unpredictable at best.

 

 

 

This category likely includes those of us who have made deposits, or prepaid cruise fare, on various future cruises.   I wonder if someone who is good at this sort of thing can speculate as to 1) when, at current burn rates, Carnival Corporation might run out of $$$, and 2) an associated date range when a bankruptcy filing becomes more likely.  This info might help us (well, me . . . ) limit how far out in time we will book a future cruise!  🙂

Edited October 1, 2022 by Calnev1

[ray98]

Carnival probably still has lots of FCC's to fill now that pretty much 40% of their customer base is now free to cruise again.  So while they are touting 'high booking rates' in reality these are free cruises where the money was spent a long time ago.  

[mondello]

5 hours ago, BermudaBound2014 said:

 

@mondello I understand buying shares (at this rate) for OBC, especially if you are going to be sailing in the immediate future. Just know that shareholder benefits are voted on yearly. Currently, CCL has extended shareholder benefits until July 31, 2023. I can't remember when they vote, but I think it's spring. Someone here should know. 

Yeah, there is always inherent risk in investing but, I couldn’t resist taking the plunge as long as Carnival doesn’t do a belly flop. Lot of upside long term.

[IntrepidFromDC]

On 9/30/2022 at 11:34 AM, BlerkOne said:

Obviously the gamblers aren't losing enough. Time to cut back on the free cabins.

Hey leave us alone! It's bad enough we get labeled degenerates!!  😁 🏴‍☠️

[IntrepidFromDC]

22 hours ago, BlerkOne said:

Nah. Gamblers are fickle and change with the wind, if not more often. Besides, real gamblers stick to land based casinos. They can't just walk next door to a different casino at sea.

Wait a minute.  Now I'm not even a "real" gambler???  This is going too far!!!  😁 🏴‍☠️

[At Sea At Peace]

2 hours ago, BlerkOne said:

Most customers have nothing to worry about - the credit card issuers will be on the hook to reimburse the customers.

 

If you could cite an article, credit card policy or historical court decision, it is tough for me to agree with this.  I do know there are 'some' agreements regarding some of the deposits, but it likely does not cover this massive amount.

 

The jurisdictional court, in a hypothetical filing, would have this issue up front and center.  The odds of the Debtor and Creditor's Committee leaning towards allowing the these Customer Deposits to be retained and a 'go forward basis, are only increased if the eventual 'debtholders that win the emerging entity' and want to preserve some level of Customer satisfaction.

 

CCL does not have the cash to pay these amounts (neither do the other two in the big three).  Likely, they could not draw on any unexpired lines of credit to do so either.

 

Back to the credit card issuers, by brand or originating bank, they'll make their best efforts to unwind what they can, but they certainly aren't issuing refunds in cash or into accounts of their customers.

[At Sea At Peace]

2 hours ago, tidecat said:

It's not necessarily the next 12 months you have to worry about as far as whether Carnival is a going concern. But if Carnival misses earnings by a country mile again in Q4, and doesn't start to turn a profit in Q1 of 2023, then this becomes a reasonable possibility.

 

Sorry, I was being very technical with SEC and Generally Accepting Accounting Principles regulations and professional standards.  The Going Concern period to determine and assert by Management that it can continue to pay its future obligations is for a 1-year period, from the date of the release of the financial statements.

 

At year end, Management, and the Board as Governance, has to further contend with the Independent Auditors on their determination and assertion.

 

Here's a look at MSC, a subsidiary with a cash-laden parent shipping sugar daddy, in their annual report and with the Auditor's assessing the Issues, Factors and Analysis of the Going Concern issue.

 

Search (CTRL F for "Going Concern") and you will see the issues and conclusions.

 

https://www.msccruises.com/en-gl/Assets/A-R-2021.pdf

 

CCL, RCL and NCLH haven't done this level of disclosure of such to date.

 

So, while I agree the quarters ahead are critical, and they are expected to continue to expect less than stellar bookings, rates and costs, I agree that they could experience an event or a culmination of events that accelerate its consideration of a reorganization.

[mondello]

41 minutes ago, IntrepidFromDC said:

Hey leave us alone! It's bad enough we get labeled degenerates!!  😁 🏴‍☠️

Yeah, I broke my 3 cruise winning streak on our B2B this summer and they gave me a free cabin : Celebration 8 day 12/19. They even comped us Steakhouse selections and drinks at dinner. Guess I rated a little higher than normal on Valor.

[BermudaBound2014]

3 hours ago, BlerkOne said:

Most customers have nothing to worry about - the credit card issuers will be on the hook to reimburse the customers.

 

Since the pandemic, many credit cards have added language specifically exempting them in the event the cruise lines files. There are other issues too (example, date you put down deposit). The Crystal forum is filled with stories from passengers who were unable to recap their money when Crystal filed for bankruptcy. 

 

For example: Chase Sapphire card has specific language exempting them in the event the cruise lines goes bankrupt. 

 

https://thepointsguy.com/news/travel-insurance-bankruptcy-guide/

[mz-s]

4 hours ago, BlerkOne said:

Most customers have nothing to worry about - the credit card issuers will be on the hook to reimburse the customers.

 

Citation needed

[BlerkOne]

2 hours ago, At Sea At Peace said:

 

If you could cite an article, credit card policy or historical court decision, it is tough for me to agree with this.  I do know there are 'some' agreements regarding some of the deposits, but it likely does not cover this massive amount.

 

 

I quote the bible

https://www.cruisecritic.com/articles.cfm?ID=5323

 

 

[Illbcruzn4life]

20 hours ago, Inveterate Cruiser said:

 

I disagree. Carnival will be the first to go down. 

The bigger they are the harder they fall

[Inveterate Cruiser]

4 hours ago, tidecat said:

It's not necessarily the next 12 months you have to worry about as far as whether Carnival is a going concern. But if Carnival misses earnings by a country mile again in Q4, and doesn't start to turn a profit in Q1 of 2023, then this becomes a reasonable possibility.

 

I agree that the next 2 quarters are pretty critical. Oct-Dec 2022 should be pretty good (cruising pent-up demand) but there will probably be some tail-off in revenues starting 2023...... if they don't show lower losses their stock will continue to get hit and they will find it even more difficult to raise equity in order to refinance their debt...... 

[Inveterate Cruiser]

1 minute ago, Illbcruzn4life said:

The bigger they are the harder they fall

 

I'm only saying that CCL will be the first to go under (if they do) because CCL has the worst balance sheet of the 3.......