The company borrowed more than the US$1.25 billion it had initially planned to raise. The new debt was discounted/priced with a coupon of 10.375%, offering a yield to investors of 10.75%. That was markedly below the 11.5% yield bankers had marketed to credit investors on Tuesday morning, October 18, with Carnival citing “strong investor demand” for the bonds.
As part of the bond deal, the parent company Carnival Corporation (the world’s largest cruise shipowner) has transferred 12 ships, most of which became operational in the past 2 years and have a combined value of US$8.2 billion, to a subsidiary which ultimately issued the bond, using the vessels as collateral.
Its share price is down 62% this year to just above US$8 but rallied more than 11% on Tuesday after the bond was announced.
The structure of the bond, maturing in 2028, puts the lenders “at the front of the line” for any claim on the twelve ships in the event that CCL is unable to meet payments.
Carnival Corporation had to contend with a ballooning debt pile, totaling ~$35 billion as of early September 2022, in the wake of the crisis. Meanwhile, recovery in bookings has lagged. Last month, the company reported a net loss of US$770 million for its fiscal 2022-Q3.