CCL High Debt /what is Your Opinion

[Mary229]

7 minutes ago, HappyInVan said:

There's been plenty of bounces. The fundamentals have not changed. Interest rates still going up. And, CCL has to fund $1b in debt payments + interest every quarter for several years. 

 

Anyone have data for HAL? That's what I'm interested in.

I do not understand the focus on rising rates by serendipity they locked in whiles rates were low.  I am pretty sure they do not have a floating rate.  

[Guest ldtr]

17 minutes ago, HappyInVan said:

There's been plenty of bounces. The fundamentals have not changed. Interest rates still going up. And, CCL has to fund $1b in debt payments + interest every quarter for several years. 

First the debt is not tied to US interest rates. It is tied to Libor and corresponding EU rates. Which is considerably lower. The EU and UK have been less inclined to raise rates.

 

Second a lot of the debt is still related to loans from ship building countries and pretty good rates.

 

Third they are showing that they are attacking the highest interest short term loans first

 

Fourth. The numbers from 2019 indicate that they can handle that level of payment with half going to interest and half going  to principal. Based upon this quarters results. Occupancy is getting back to pre covid levels. Expenses are up, but revenues are also up and will be increasing faster as they raise prices.

 

Fifth They have indicated that they have several billion in cash that gives them flexibility in how they attack the debt.

 

For the next 3 years CCL still has substantial Capex spend as they finish up the existing ship orders. Debt level will go up 1 to 2 billion per year for those 3 years. because the Capex will be higher than free cash flow. But that debt will be at lower rates long term related to ship construction. They will be working on the short term high interest rate debt in the mean time. 

 

The other thing to watch will be if the stock price gets high enough to get arbitrage to kick in on the convertible debt and you start seeing that debt get converted 

Edited June 26, 2023 by ldtr

[Guest ldtr]

5 minutes ago, Mary229 said:

I do not understand the focus on rising rates by serendipity they locked in whiles rates were low.  I am pretty sure they do not have a floating rate.  

They do have a fair amount usually Libor +1 up to Libor + 3. But all tied to Libor or EU equivalent. Nothing tied to Prime. Libor is running about 5% these days.

[HappyInVan]

2 hours ago, ldtr said:

For the next 3 years CCL still has substantial Capex spend as they finish up the existing ship orders. Debt level will go up 1 to 2 billion per year for those 3 years. because the Capex will be higher than free cash flow. But that debt will be at lower rates long term related to ship construction. They will be working on the short term high interest rate debt in the mean time. 

 

 

Thanks for your opinion. Here's The CCL financial statement...

 

https://www.carnivalcorp.com/static-files/89f2ab1a-ac65-47a7-8ed3-0656a39f0a71

 

“Full Year 2023 ... Interest expense, net of capitalized interest and interest income (in billions = $1.95 billion” (Page 5)

 

They're hoping that for the full year, their Net Loss would be “$(250) to $(100)” at >100% occupancy. We've heard that before!

 

BTW, For 2024, they forecast “Total Principal payments on outstanding debt $2.4 billion”.

 

Hope this helps.

 

BTW, wonder if HAL can manage to do 107% occupancy for the entire year???

 

Edited June 27, 2023 by HappyInVan

[Guest ldtr]

1 hour ago, HappyInVan said:

 

Thanks for your opinion. Here's The CCL financial statement...

 

https://www.carnivalcorp.com/static-files/89f2ab1a-ac65-47a7-8ed3-0656a39f0a71

 

“Full Year 2023 ... Interest expense, net of capitalized interest and interest income (in billions = $1.95 billion” (Page 5)

 

They're hoping that for the full year, their Net Loss would be “$(250) to $(100)” at >100% occupancy. We've heard that before!

 

BTW, For 2024, they forecast “Total Principal payments on outstanding debt $2.4 billion”.

 

Hope this helps.

 

BTW, wonder if HAL can manage to do 107% occupancy for the entire year???

 

 

 

The restart is a process.  Considering where they started last year they are making significant progress and are pretty much back on track.  Some here doubted the forecast for occupancy for this quarter.  Now they are extremely close to 100% (at 98%) and are expecting to be at 107% next quarter.  A quarter where they already know the amount of bookings already in place and paid for at the final payment date.  So as with this quarter should be pretty accurate.

 

By the way we are talking about all of CCL brands not just HAL.

 

But lets see customer deposits at a record 7.2 billion a level not even reached in 2019.

 

Lets see they currently have over 7 billion in liquidity so they can certainly handle the outstanding principal payments 

 

Keep in mind that the 100 to 250 million in total profit loss includes about 2 billion in depreciation so that means that they will about 1.75 to 1.9 billion  in cash from operations.

 

Keep in mind that with the loss of 650 million in the first quarter with 91% occupancy and the loss of 395 million (better than the anticipated loss for this quarter between 425 and 525) this quarter at 98% occupancy that they will have a profit of of 800 to 950 million during the last 2 quarters.  Resulting in the full year projected loss of 100-250 million.

 

Then with the return to full occupancy in Q3 of 107% it would expect that the goal of basically getting back to a return to pre covid occupancy has been accomplished and the anticipated fare increases will start getting phased in.  That would lead to the expectation of a net profit of approximately 2 billion in FY 24 without a fare increase, just continuing the expected 23 and 24 level of business and profit.  Take into account the depreciation in the P&L calculation and the amount of available cash generated in 2024 should be about 4 billion.

 

Now they did say some increased expenses in Q2 due to timing of some events including dry dock expenses.  Will be interesting to see how the ppd revenue and expenses come out once the 10Q is available.  There also is Capex in 2023 -2025 that will result in some more debt, but with favorable terms.

 

So almost 2 billion in cash generated this year, at least 4 billion generated next year,  with 7 billion in liquidity they have plenty of tools to continue the process they have already started.  The 4 billion would certainly take care of the interest in Principal due in 2024 considering that they have already started to pay down that principal, without even tapping into their available liquidity very much and assuming that they do not refinance some of the debt.

Edited June 27, 2023 by ldtr

[Haljo1935]

Already seeing increased fares on HAL; no percentages to post, but published rates for let 2024 into 2025 are higher than we saw this year and last year.

[Guest ldtr]

1 minute ago, Haljo1935 said:

Already seeing increased fares on HAL; no percentages to post, but published rates for let 2024 into 2025 are higher than we saw this year and last year.

Those rates will gradually work their way into financials, since many cruises are booked over a year in advance, we will not see the full impact of these increases until the start of 2025.  Though we will see an increasing impact of them from quarter to quarter in 2024.  Not much for the rest of 2023.

[HappyInVan]

1 hour ago, ldtr said:

 

 

The restart is a process.  Considering where they started last year they are making significant progress and are pretty much back on track.  Some here doubted the forecast for occupancy for this quarter.  Now they are extremely close to 100% (at 98%) and are expecting to be at 107% next quarter... 

 

Here's a reality check. 2019 CP! 2.3% and Prime 4.75%. Today, CPI 4% and Prime 8.25%. Fed not finished yet.

 

CCL management might want to take a victory lap. But, the stock market is still cautious. After all, every company wants to be at 100%. But, will the pax have the money to pay full fares plus increased onboard spending. My guess is that as fares rise, pax will cut back on extra spending. That is, total spending unchanged.

 

https://news.yahoo.com/carnival-forecasts-smaller-loss-strong-133048288.html?fr=sycsrp_catchall

 

 

BTW, I did not say that HAL was doomed even before covid. I said that HAL was in a quality descend. At some point, it will spiral. The quality-conscious people are the first to go; "Why am I still here?" As the value-focus people leave, HAL will be in dire straits. "Where's the value?"

 

Ultimately, pax may return to Carnival, NCL and RCL because of the fun factor. But, will there still be $$$ for HAL. What will CCL do if HAL underperforms?

 

 

Edited June 27, 2023 by HappyInVan

[HappyInVan]

58 minutes ago, Haljo1935 said:

Already seeing increased fares on HAL; no percentages to post, but published rates for let 2024 into 2025 are higher than we saw this year and last year.

 

2025 is a long way off. Let's return to this conversation in a year's time.

 

BTW, CCL forecast "Total Principal payments on outstanding debt $4.5b" in 2025. Fortunately, CCL will have no new-build expenditures for 2026.

Edited June 27, 2023 by HappyInVan

[Guest ldtr]

37 minutes ago, HappyInVan said:

 

Here's a reality check. 2019 CP! 2.3% and Prime 4.75%. Today, CPI 4% and Prime 8.25%. Fed not finished yet.

 

CCL management might want to take a victory lap. But, the stock market is still cautious. After all, every company wants to be at 100%. But, will the pax have the money to pay full fares plus increased onboard spending. My guess is that as fares rise, pax will cut back on extra spending. That is, total spending unchanged.

 

https://news.yahoo.com/carnival-forecasts-smaller-loss-strong-133048288.html?fr=sycsrp_catchall

 

 

BTW, I did not say that HAL was doomed even before covid. I said that HAL was in a quality descend. At some point, it will spiral. The quality-conscious people are the first to go; "Why am I still here?" As the value-focus people leave, HAL will be in dire straits. "Where's the value?"

 

Ultimately, pax may return to Carnival, NCL and RCL because of the fun factor. But, will there still be $$$ for HAL. What will CCL do if HAL underperforms?

 

 

You talked about HAL was not making money under CCL.  You talked about when it would be sold. You talked about it losing customers.  All well before Covid.  

 

Reality Check none of CCL loans are tied to Prime.

 

The stock market is still cautious because the stock market operates of corporate profits and the growth of those profits.  CCL will not show much in the way of paper profits for years, even though they will be spinnig off billions in cash each year.  Enough to more than pay for the debt.  Though it will take work and using a number of tools.  Another reason is because cruise lines are a capital intensive, low margin business that historically had limited pricing power.   Their growth of profits are mainly tied tied to growth of capacity.  Something that is going to pretty limited for the next 5 years.

 

So basically the cash flow is there, but it will go for debt reduction, not profits, not dividends and for the next 5 years or so little capacity expandsion.

Edited June 27, 2023 by ldtr

[Guest ldtr]

36 minutes ago, HappyInVan said:

 

2025 is a long way off. Let's return to this conversation in a year's time.

 

BTW, CCL forecast "Total Principal payments on outstanding debt $4.5b" in 2025. Fortunately, CCL will have no new-build expenditures for 2026.

Some debt, the higher interests will be paid off, some will be extended, some will be refinanced.  Pretty normal business practices.  Key is cash flow and it is pretty clear that with the liquidity and the expected cash flow there is plenty to handle the debt going forward.  The covertable will probably end up getting converted, though that would result in a bit more dilution.

 

This is basically the job of a good CFO deciding what and when to refinance, what level of liquidity to keep on hand, what to pay when.  A lot of options for a company with the cash flow that CCL is starting to generate, even though its debt level is large. 

 

A lot easier than my last company, a biotech startup, that went from no products to 4 approved products.  A bit more interesting when getting funding with no approved products and a lot of research.

Edited June 27, 2023 by ldtr

[Guest ldtr]

Since so much has been made of the current prime interest rate I thought I would post the current expectations for Libor for the next 3 years.  It is currently at 5.5%.  It is expected to rise to 6.1% by the end of the year.  Before it is expected to start dropping.  By the end of 2024 it is expected to be down around 3.5% so if CCL does refinance in the future interest rates should actually be lower when  such actions would be necessary.  While their adjustable rates will go up through the end of the year, it will then start dropped and should be 1.5% lower by the end of 2024 and over 2% lower by the end of 2025.  As with all forecasts it may not come true, but at this stage it is less likely that CCL interest will rise significantly and  more likely that it will drop significantly.

 

Table. LIBOR Forecast By Month.
Year    Mo    Min,%    Max,%    Rate,%    Mo.Ch    Tot.Ch
2023    Jun    5.188    5.850    5.519    +0.002    +0.002
2023    Jul    5.190    5.852    5.521    +0.002    +0.004
2023    Aug    5.399    6.089    5.744    +0.223    +0.227
2023    Sep    5.513    6.217    5.865    +0.121    +0.348
2023    Oct    5.759    6.495    6.127    +0.262    +0.610
2023    Nov    5.665    6.389    6.027    -0.100    +0.510
2023    Dec    5.638    6.358    5.998    -0.029    +0.481
2024    Jan    5.625    6.343    5.984    -0.014    +0.467
2024    Feb    5.424    6.116    5.770    -0.214    +0.253
2024    Mar    5.153    5.811    5.482    -0.288    -0.035
2024    Apr    4.896    5.520    5.208    -0.274    -0.309
2024    May    4.651    5.245    4.948    -0.260    -0.569
2024    Jun    4.419    4.983    4.701    -0.247    -0.816
2024    Jul    4.198    4.734    4.466    -0.235    -1.051
2024    Aug    3.988    4.498    4.243    -0.223    -1.274
2024    Sep    3.789    4.273    4.031    -0.212    -1.486
2024    Oct    3.599    4.059    3.829    -0.202    -1.688
2024    Nov    3.420    3.856    3.638    -0.191    -1.879
2024    Dec    3.249    3.663    3.456    -0.182    -2.061
2025    Jan    3.086    3.480    3.283    -0.173    -2.234
2025    Feb    2.932    3.306    3.119    -0.164    -2.398
2025    Mar    2.908    3.280    3.094    -0.025    -2.423
2025    Apr    2.781    3.135    2.958    -0.136    -2.559
2025    May    2.758    3.110    2.934    -0.024    -2.583
2025    Jun    2.620    2.954    2.787    -0.147    -2.730

 

Edited June 27, 2023 by ldtr

[HappyInVan]

😄

[Ride-The-Waves]

Its all "smoke and mirrors."  Projections beyond lunch tomorrow, which is "strategic planning" for most companies, is fantasy.  A CCL ship could hit an iceberg tonight and the company could literally sink,  Spent a career in the intelligence business where forecasting/projections of future events based on best data provides good points for discussion but nothing substantial.  See Russia today after the Prigohzin failed coup.  Cruising's high "occupancy rates" are also a fantasy and not reality.  Rather, wistful dreaming on the part of management.  Today's extremely high prices are not sustainable - its a "bounce" of pent-up desire by people with money to burn.  That usually ends in a crash.  Until things "normalize" and prices return to some norm, cruise lines will be flaunting their success using whatever fantasies they can while still heading for that proverbial iceberg of poor planning and poor service.

[taxmantoo]

This thread is reminding me more and more every day of the reason my wife and I prefer a table for two!  😉  We never over analyze situations over which we have no control !

[mcrcruiser]

21 minutes ago, Ride-The-Waves said:

Its all "smoke and mirrors."  Projections beyond lunch tomorrow, which is "strategic planning" for most companies, is fantasy.  A CCL ship could hit an iceberg tonight and the company could literally sink,  Spent a career in the intelligence business where forecasting/projections of future events based on best data provides good points for discussion but nothing substantial.  See Russia today after the Prigohzin failed coup.  Cruising's high "occupancy rates" are also a fantasy and not reality.  Rather, wistful dreaming on the part of management.  Today's extremely high prices are not sustainable - its a "bounce" of pent-up desire by people with money to burn.  That usually ends in a crash.  Until things "normalize" and prices return to some norm, cruise lines will be flaunting their success using whatever fantasies they can while still heading for that proverbial iceberg of poor planning and poor service.

Any price under $16  per share is a steal imo

[BermudaBound2014]

 

@Ride-The-Waves  Yep. Fantasy Island but the spin is impressive.

 

Bottom line for those yawning but still reading this post: 

 

In spite of 98% occupancy and positive FCF, CCL lost 400 Million dollars this quarter and were forced to reduce their cash reserves by 1 Billion in order to pay their bills (variable interest debt). 

 

 

[mcrcruiser]

8 hours ago, ldtr said:

Since so much has been made of the current prime interest rate I thought I would post the current expectations for Libor for the next 3 years.  It is currently at 5.5%.  It is expected to rise to 6.1% by the end of the year.  Before it is expected to start dropping.  By the end of 2024 it is expected to be down around 3.5% so if CCL does refinance in the future interest rates should actually be lower when  such actions would be necessary.  While their adjustable rates will go up through the end of the year, it will then start dropped and should be 1.5% lower by the end of 2024 and over 2% lower by the end of 2025.  As with all forecasts it may not come true, but at this stage it is less likely that CCL interest will rise significantly and  more likely that it will drop significantly.

 

Table. LIBOR Forecast By Month.
Year    Mo    Min,%    Max,%    Rate,%    Mo.Ch    Tot.Ch
2023    Jun    5.188    5.850    5.519    +0.002    +0.002
2023    Jul    5.190    5.852    5.521    +0.002    +0.004
2023    Aug    5.399    6.089    5.744    +0.223    +0.227
2023    Sep    5.513    6.217    5.865    +0.121    +0.348
2023    Oct    5.759    6.495    6.127    +0.262    +0.610
2023    Nov    5.665    6.389    6.027    -0.100    +0.510
2023    Dec    5.638    6.358    5.998    -0.029    +0.481
2024    Jan    5.625    6.343    5.984    -0.014    +0.467
2024    Feb    5.424    6.116    5.770    -0.214    +0.253
2024    Mar    5.153    5.811    5.482    -0.288    -0.035
2024    Apr    4.896    5.520    5.208    -0.274    -0.309
2024    May    4.651    5.245    4.948    -0.260    -0.569
2024    Jun    4.419    4.983    4.701    -0.247    -0.816
2024    Jul    4.198    4.734    4.466    -0.235    -1.051
2024    Aug    3.988    4.498    4.243    -0.223    -1.274
2024    Sep    3.789    4.273    4.031    -0.212    -1.486
2024    Oct    3.599    4.059    3.829    -0.202    -1.688
2024    Nov    3.420    3.856    3.638    -0.191    -1.879
2024    Dec    3.249    3.663    3.456    -0.182    -2.061
2025    Jan    3.086    3.480    3.283    -0.173    -2.234
2025    Feb    2.932    3.306    3.119    -0.164    -2.398
2025    Mar    2.908    3.280    3.094    -0.025    -2.423
2025    Apr    2.781    3.135    2.958    -0.136    -2.559
2025    May    2.758    3.110    2.934    -0.024    -2.583
2025    Jun    2.620    2.954    2.787    -0.147    -2.730

 

Excellent point about the interest curve which will be heading down .This stock os making us some serious profits 

[mcrcruiser]

2 minutes ago, BermudaBound2014 said:

 

@Ride-The-Waves  Yep. Fantasy Island but the spin is impressive.

 

Bottom line for those yawning but still reading this post: 

 

In spite of 98% occupancy and positive FCF, CCL lost 400 Million dollars this quarter and were forced to reduce their cash reserves by 1 Billion in order to pay their bills (variable interest debt). 

 

 

Buy on the rumor & sell on the news

[mcrcruiser]

Any one who charts would see CCL stock  a huge buying opportunity

[HappyInVan]

Here's the Q2 (ending May 31) announcement. Got to admit that I don't like the number of 'adjusted' and non-GAAAP interpretations.

 

https://www.carnivalcorp.com/financial-information/quarterly-and-semiannual-reports

 

Back to old-fashion basics. On Page 11 (as of May 31, 2023), Cash is just $4.7b versus customer deposits $6.9. The reality is that Current Assets is just $6.8b versus Current Liability of $11.2b. Note that long term assets include $1.75b in goodwill and intangibles. The only way to realize this is to sell assets at a book profit.

 

Long Term Debt (May 31) is unchanged from November at $31.9b versus Shareholder equity of just $5.8b (down from 6 months prior of $7b).

 

Conclusion: CCL is dead in the water if there is another stoppage or slow-down.

 

There's a big improvement in cash flow. The biggest source of funds has been the $2b increase in pax deposits from November.

 

Cash from operations (Page 13 Six Months to May 31) was positive $1.5b versus capital expenditure $1.8b. Yes, CCL has to pay for new-builds and ship maintenance, as well as interest and debt repayment. Big numbers (Page 6) - $3.3b 2023 and $4.1b 2024.

 

Conclusion: CCL has stopped much of the leakage, but the CCL is still deeply water logged.

 

On operational metrics (Page 14 Q2), Gross margin per diems (per PCD) was just $38 versus $50 in 2019. Lots of work here to raise revenues and control costs.

 

All this on the basis of a huge increase (Page 12) in Passenger Cruise Day (6 months period) 42m vs 19m. As you world expect, there has been a major recovery as the pandemic ended. But, most of the good news has been realized.

 

With occupancy at 95% (First Half 2023), CCL has to battle its competitors to gain the last few %. IMHO, HAL won't gain that last few % by raising fares and cutting costs.

 

As I have pointed out, most pax have a limited amount to spend. So, higher fares = lower onboard spending. With a recession looming at the end of 2023, the future is murky.

[Guest ldtr]

3 hours ago, BermudaBound2014 said:

 

@Ride-The-Waves  Yep. Fantasy Island but the spin is impressive.

 

Bottom line for those yawning but still reading this post: 

 

In spite of 98% occupancy and positive FCF, CCL lost 400 Million dollars this quarter and were forced to reduce their cash reserves by 1 Billion in order to pay their bills (variable interest debt). 

 

 

 

[cruisemom42]

2 hours ago, HappyInVan said:

With occupancy at 95% (First Half 2023), CCL has to battle its competitors to gain the last few %. IMHO, HAL won't gain that last few % by raising fares and cutting costs.

 

When I see that this number of 95% occupancy reflects the entire CCL fleet, I am left wondering where HAL stands. Clearly some lines must be below 95% if that is the average. 

 

Given that HAL attracts fewer children than most lines, I can't imagine it is as easy for them to reach past 100% occupancy (which assumes more than 2 people in a cabin) regularly.

 

I wonder if that plays into CCL corporate decisions as to which lines get more promotion, resources, etc.?

[Guest ldtr]

They posted a loss but the loss is over 100 million less than their depreciation, so they were actually cash flow positive to the tune of $120 million.  This cash flow is after paying of interest. They were actually better than their forecast.

 

Next quarter they are projecting 107% occupancy.  Note this is a quarter that they already have final occupancy numbers on for most of the first month, and the entire rest of the quarter in within the 90 day final payment date so those number should be good.

 

That is a quarter for which they are projecting a profit. Based upon their losses for the first two quarters and their projected loss of 100 to 250 million for the entire year means that they are expecting a profit over all of last quarters of 800 to 950 million after interest payments and depreciation.  Which considering the amount of depreciation will give them around 3 billion in total cash from operations in the year.

 

They have over seven billion in liquidity and retired 1 billion of their highest interest rate debt.

 

Seems you are running out of negative news.

[BermudaBound2014]

7 minutes ago, ldtr said:

They posted a loss but the loss is over 100 million less than their depreciation, so they were actually cash flow positive to the tune of $120 million.  This cash flow is after paying of interest. They were actually better than their forecast.

 

Next quarter they are projecting 107% occupancy.  Note this is a quarter that they already have final occupancy numbers on for most of the first month, and the entire rest of the quarter in within the 90 day final payment date so those number should be good.

 

That is a quarter for which they are projecting a profit. Based upon their losses for the first two quarters and their projected loss of 100 to 250 million for the entire year means that they are expecting a profit over all of last quarters of 800 to 950 million after interest payments and depreciation.  Which considering the amount of depreciation will give them around 3 billion in total cash from operations in the year.

 

They have over seven billion in liquidity and retired 1 billion of their highest interest rate debt.

 

Seems you are running out of negative news.

 

You just keep crunching those numbers until they confess exactly what you want them to say.

 

They had over 8 Billion last quarter. They have 7 Billion this quarter. They had to spend their savings to to pay the variable interest debt. 

 

Still waiting to see how they are going to reduce the debt this year by your estimated 4 Billion (not 8 Billion as you first claimed) without dipping into their savings. This should be good. 

Edited June 27, 2023 by BermudaBound2014