Carnival to issue $1.25 billion in unsecured bonds to institutions

[cruisingguy007]

5 hours ago, lostsoulcruiser said:

In connection with the offering of the Senior Priority Notes, the Company and its subsidiaries will contribute 12 unencumbered vessels to the Issuer, with each of these vessels continuing to be operated under one of the Company's, Carnival plc's or one of their subsidiaries' brands.

 

Which vessels?

 

Sounds like the last 12 that weren't already leveraged somehow. Makes sense to get as much as you can against them now, out ahead of the other companies, as I'm sure being the first to the table will yield better results. Worst case scenario is "here are the keys, come get it"; that and if the dominoes really start to fall and there are glut of ships headed to the braking scrapyards, the price will surely fall. Remember during the pandemic rates fell as low as $90 a ton. Who else will operate these ships? Seems like a smart move, all things considered, buys a bit of breathing room and a short-term reprieve to continue to scramble.       

[BlerkOne]

Just now, cruisingguy007 said:

 

Sounds like the last 12 that weren't already leveraged somehow. Makes sense to get as much as you can against them now, out ahead of the other companies, as I'm sure being the first to the table will yield better results. Worst case scenario is "here are the keys, come get it"; that and if the dominoes really start to fall and there are glut of ships headed to the braking scrapyards, the price will surely fall. Remember during the pandemic rates fell as low as $90 a ton. Who else will operate these ships? Seems like a smart move, all things considered, buys a bit of breathing room and a short-term reprieve to continue to scramble.       

The vessels are not pledged as collateral is just one brilliant move.

 

The debt is issued by a foreign subsidiary and won't be registered in the US. Another brilliant move.

[cruisingguy007]

4 minutes ago, BlerkOne said:

The vessels are not pledged as collateral is just one brilliant move.

 

The debt is issued by a foreign subsidiary and won't be registered in the US. Another brilliant move.

 

According this article they are pledged as part of the deal. 

"As part of the bond deal, Carnival’s parent company has transferred to a subsidiary 12 vessels, most of which became operational in the past two years and have a combined value of $8.2bn, which will issue the bond with the ships as collateral."

 

https://www.ft.com/content/bb89b17f-aac9-45cb-865c-5995a7594d9c

 

Is this not correct? 

[BlerkOne]

Just now, cruisingguy007 said:

 

According this article they are pledged as part of the deal. 

"As part of the bond deal, Carnival’s parent company has transferred to a subsidiary 12 vessels, most of which became operational in the past two years and have a combined value of $8.2bn, which will issue the bond with the ships as collateral."

 

https://www.ft.com/content/bb89b17f-aac9-45cb-865c-5995a7594d9c

 

Is this not correct? 

It is not correct per Carnival:

 

The Senior Priority Notes will be unsecured and will be fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the Company, Carnival plc and certain of the Company's and Carnival plc's subsidiaries that guarantee substantially all of the Company's other indebtedness. The offering of the Senior Priority Notes is expected to close on October 25, 2022 , subject to customary closing conditions.

 

 

[cruisingguy007]

27 minutes ago, BlerkOne said:

It is not correct per Carnival:

 

The Senior Priority Notes will be unsecured and will be fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the Company, Carnival plc and certain of the Company's and Carnival plc's subsidiaries that guarantee substantially all of the Company's other indebtedness. The offering of the Senior Priority Notes is expected to close on October 25, 2022 , subject to customary closing conditions.

 

 

 

Semantics, those ships are collateral or a lease with option to buy back, either way, the ships are on the line. 

 

"In connection with the offering of the Senior Priority Notes, the Company and its subsidiaries will contribute 12 unencumbered vessels to the Issuer, with each of these vessels continuing to be operated under one of the Company's, Carnival plc's or one of their subsidiaries' brands."

Edited October 19, 2022 by cruisingguy007

[Purvis1231]

10 hours ago, cruisingguy007 said:

 

Interesting read here, 51% according to this evaluation:

 

https://www.macroaxis.com/invest/ratio/CCL/Probability-Of-Bankruptcy

2% is not significantly different. I either case it is not looking good. We may have Royal Carnival soon.

[lostsoulcruiser]

I wonder if we will ever hear which vessels are involved and who is the actual owner.  To make this type of loan, some entity is very bullish on the future of cruising.  Carnival on its way to being an asset light company between this and previous transactions.

[ray98]

What a bizarre world we live in that when a company borrows $1.25B to pay interest on existing debt that some try to spin it into a positive.  In reality, this is the last tactic a company in distress has at its disposal before investor money dries up.   This is likely the last kick of the can, at some point the risk for investors is too high. 

[asalligo]

I want Carnival to weather this storm, I really do, but they just don't seem to be making smart decisions. They keep cutting experience when they should be working hard to maximize revenue while providing an experience that brings new cruisers back. FTTF is a perfect example. This costs them almost nothing to provide, it is a pure profit maker. Boarding is almost back to normal, so start FTTF back up. I hate to say it, but they could even up the price further and still sell it out every time they offer it. Another good profit maker is sweetening the deal for suites while raising the cost a bit, provide extra points for suite bookings. They just have options for additional revenue they are not exploiting. 

 

[ray98]

1 hour ago, asalligo said:

I want Carnival to weather this storm, I really do, but they just don't seem to be making smart decisions. They keep cutting experience when they should be working hard to maximize revenue while providing an experience that brings new cruisers back. FTTF is a perfect example. This costs them almost nothing to provide, it is a pure profit maker. Boarding is almost back to normal, so start FTTF back up. I hate to say it, but they could even up the price further and still sell it out every time they offer it. Another good profit maker is sweetening the deal for suites while raising the cost a bit, provide extra points for suite bookings. They just have options for additional revenue they are not exploiting. 

Issue is they haven't even restarted it for Diamond & Platinum where the early room access started.

[LocoLoco1]

Extreme Duress. That’s the situation. Furthermore, what is an older vessel such as HAL’s VOLENDAM actually $worth$ right now Oct, 2022 ? I am printing BoardingPasses for a V’dam TransAtlantic today. I will report back on the size of the Cashews and overall onboard experience sometime in Nov. 

[quattrohead]

WILD RUMOUR IN MY HEAD.....the 12 ships have been pledged to MSC

 

Sorry best I could do for spoiler alert !!!

[BermudaBound2014]

2 hours ago, Purvis1231 said:

2% is not significantly different. I either case it is not looking good. We may have Royal Carnival soon.

 

Not going to happen. Just last month Royal offered 2 billion in notes to refinance debt due in 2023 and guaranteed those notes with Celebrity Cruises. It's a sh*t show everywhere. 

[BlerkOne]

7 hours ago, cruisingguy007 said:

 

Semantics, those ships are collateral or a lease with option to buy back, either way, the ships are on the line. 

 

"In connection with the offering of the Senior Priority Notes, the Company and its subsidiaries will contribute 12 unencumbered vessels to the Issuer, with each of these vessels continuing to be operated under one of the Company's, Carnival plc's or one of their subsidiaries' brands."

 

Spin all you like, the ships are not collateral. The institutions buying the bonds do not have any rights to them. If Carnival defaults, they can get in line with others who are owed any monies.

[BlerkOne]

Just now, BermudaBound2014 said:

 

Not going to happen. Just last month Royal offered 2 billion in notes to refinance debt due in 2023 and guaranteed those notes with Celebrity Cruises. It's a sh*t show everywhere. 

RCL will get worse before it gets better.

[bucfan2]

6 minutes ago, BlerkOne said:

RCL will get worse before it gets better.

Wow...really going out on a limb on that one.  It's all gonna get worse before it gets better.  Enjoy today.

Edited October 19, 2022 by bucfan2

[BlerkOne]

Just now, bucfan2 said:

Wow...really going out on a limb on that one.  It's all gonna get worse before it gets better.  Enjoy today.

I enjoy every day. It's all good.

[Earthworm Jim]

19 minutes ago, fyree39 said:

I lost money when Crystal Cruises went under, so I'm gun-shy. I have a B2B on the Mardi Gras for 2024 and I'm wondering if I should cancel. I'll lose money due to the cancellation period, but wouldn't lose the whole shebang if they do go under. I'm remaining positive, though, for the other cruises I have booked and paid-for.

 

Another factor is how a possible bankruptcy goes. Would they be going out of business, or just restructuring?

[Earthworm Jim]

10 hours ago, BlerkOne said:

Carnival ships are sailing again, aren't they? A new ship is about to start sailing. Hell yes the worst is behind them.

 

While that statement is accurate, I don't know how reassuring it is. While having no ships sailing was definitely worse, an already struggling cruise line heading into a recession is bad too. But the Covid part is looking up, at least for the moment.

[BermudaBound2014]

19 minutes ago, Earthworm Jim said:

 

While that statement is accurate, I don't know how reassuring it is. While having no ships sailing was definitely worse, an already struggling cruise line heading into a recession is bad too. But the Covid part is looking up, at least for the moment.

 

I agree, covid is looking up.

 

Sadly, several other substantial obstacles have sprang into the picture since the shut down. Public perception, Fuel prices, Inflation, and the most looming......... servicing the tremendous DEBT! 

 

It looks to me like, even if CCL returns to 2019 profitability (which is unlikely anytime soon, see above), they still may not clear enough to make interest only payments, let alone anything left over. Here is a post I made a few months ago. All three cruise lines have more debt now. 

 

[BlerkOne]

58 minutes ago, Earthworm Jim said:

 

While that statement is accurate, I don't know how reassuring it is. While having no ships sailing was definitely worse, an already struggling cruise line heading into a recession is bad too. But the Covid part is looking up, at least for the moment.

Fleeting moment...

[buckeyefrank]

11 hours ago, BlerkOne said:

The vessels are not pledged as collateral is just one brilliant move.

 

The debt is issued by a foreign subsidiary and won't be registered in the US. Another brilliant move.

While the vessels aren't technically pledged as collateral, effectively they are.  If the holding company declares bankruptcy, the bond holders have priority and will be paid first.  I have no idea how many other debtors are in the holding company, but the new bonds have first priority.  It's semantics...   If they were pledged and don't make the payment,.... forced to sell..... if they're not pledged and don't make the payment..... forced to sell.  Pledged or not, if Carnival isn't able to meet their payment requirements, they will be in some deep trouble.

[ray98]

1 hour ago, Earthworm Jim said:

 

Another factor is how a possible bankruptcy goes. Would they be going out of business, or just restructuring?

I believe Carnival has enough assets to restructure if it comes to that..

[cruisingguy007]

2 hours ago, BlerkOne said:

 

Spin all you like, the ships are not collateral. The institutions buying the bonds do not have any rights to them. If Carnival defaults, they can get in line with others who are owed any monies.

 

No spin, it's in plain English. Why would they even mention it if were a collateral free unsecured loan? It makes no sense. Just because they will continue to be operated by Carnival and it's subsidiaries does not mean they remain unencumbered, you can bet they are encumbered now. It actually sounds more like a disguised leasing arrangement than a unsecured loan.     

 

"will contribute 12 unencumbered vessels to the Issuer"

[tidecat]

1 hour ago, BermudaBound2014 said:

 

I agree, covid is looking up.

 

Sadly, several other substantial obstacles have sprang into the picture since the shut down. Public perception, Fuel prices, Inflation, and the most looming......... servicing the tremendous DEBT! 

 

It looks to me like, even if CCL returns to 2019 profitability (which is unlikely anytime soon, see above), they still may not clear enough to make interest only payments, let alone anything left over. Here is a post I made a few months ago. All three cruise lines have more debt now. 

 

Operating income is not the same as cash flow. Carnival's depreciation and amortization burden is substantial - around $2 Billion annually. That is an expense that reduces net income, but the cash associated with that was spent years ago.

 

On the flip side, Carnival still has some investment spending that will occur on new/refurbished ships in FY 2023. As those ships come online they will increase to the depreciation burden, but they won't require additional outlays.

 

That said, Carnival still has work to do to be able to pay down its debt. Even a net income of $3 Billion with $2 Billion of depreciation added back to that ($5 Billion in cash) may not be enough to cover the debt burdens in 2024 and 2025. That level of performance would likely only barely get them through Fiscal 2023.