Cruise operator Carnival seeks $6.25 billion to fight against the coronavirus shock wave

The world’s largest leisure travel company, Carnival Corporation & PLC announced its capital raising program of worth $6.25 billion after facing heavy business loss due to the coronavirus outbreak within its cruise, which led to the death of several passengers while hundreds of them got infected by the epidemic.

In a press release dated 2 April 2020, Carnival PLC unleashed its plans to raise $500 million in equities through the public offering of its 62,500,000 shares at a price of $8.00 per share. Whereas, on the debt side, the company announced to raise $4 billion through first-priority senior secured notes due 2023 and $1.75 billion through senior convertible notes due 2023. The company further informed that Goldman Sachs & Co LLC, Bank of America Securities, and J.P. Morgan will be as acting as joint book-running managers in this capital raising program.

As per the media report, the COVID-19 impact on cruises could be more significant than other sectors. The outbreak of coronavirus epidemic has smashed the travel and tourism industry, possibly bringing all the cruise holidays to a halt for long time. There still are several Carnival cruises stuck at sea and are unable to depart passengers to port due to many coronavirus fatalities. The subsidiary of the company, Princess Cruise Lines is reportedly stuck in Australia, and the Ruby Princess is standing near Sydney with over 1,000 crew and travellers. These cruises are widely blamed for carrying coronavirus to Australia.

A cruise ship run by Holland America, Zaandam, is presently trapped at sea of South America and finding a way to reach port, after knowing about eight people who are found positive on a medical checkup for the novel coronavirus. And nearly 200 more travelers on board are showing flu-like symptoms. Till today, the four old aged people on board have already died, but Holland America has not provided any reason for their demise.

According to cruise line trade association, the operations of over 50 cruise has been cancelled in March 2020 from United States ports for at least one month due to this “unfortunate situation” of the coronavirus epidemic.

Carnival has suffered significant loss in the form of expenses incurred to send the passengers back, sanitising ships and helping the stranded crew. As per the company information, it is being sued by passengers who were travelling in the Grand princess ship and were detained off California for five days in the previous months due to increasing novel coronavirus cases.

Carnival PLC stated that it has never faced a complete interruption of cruising operations, but now the future looks unpredictable. The coronavirus crisis has also affected the industry’s employment and accounting practices, globally. The United States of America’s President Donald Trump already said a bailout of Carnival PLC would be challenging because the corporation is incorporated in Panama, instead of America.

Overview of the Company

Carnival Corporation & Plc (LON:CCL) is a leading leisure travel company in the globe. It is well known to provide memorable vacations at an incomparable value to the travellers. The company’s portfolio includes Princess Cruises, Carnival Cruise Line, Costa Cruises, AIDA Cruises, Holland America Line, Seabourn, P&O Cruises of Australia, P&O Cruises of the United Kingdom and Cunard. The company has more than 150,000 staffs throughout the 150 countries. The company is dually listed on New York Security Exchange (NYSE) and London Stock Exchange (LSE) and is the only company in the world which is included in both the FTSE 100 and the S&P 500 indices.

CCL Recent Developments amid COVID-19

On 31st March 2020, the company released an update regarding liquidity, management’s plans and updates to 2019 annual report on form 10-k.

• Carnival announced the suspension of its dividend payments in order to strengthen its liquidity position and comply with some restrictions.
• Due to the spread of novel coronavirus outbreak and the new developments surrounding the international pandemic, Carnival group is facing material adverse effects on all aspects of operations in the company.
• Earlier, a total of 16 cruise ships were planned to be supplied until the year 2025 to the company, including four ships expected to be delivered in the fiscal year 2020. But the company presently believes that ships delivery could be delayed due to the impact of novel coronavirus.
• As a result of COVID-19, in March 2020, S&P Global and Moody’s downgraded senior unsecured debt ratings and long-term issuer rating.
• As per the company information, rise in fuel costs, modification in the types of fuel consumed and availability of fuel supply may negatively affect company’s scheduled travel plan and expenses.

Share price Performance- CCL

On 02 April 2020, Carnival Plc’s stock was trading at a price of GBX 620.80 per share, down by 20.31% or GBX 158.20 on LON as at 2:50 PM GMT. The bearish sentiment in the day-trading session of CCL seems to reflect the impact of change in company’s equities raising program. Earlier, Carnival announced an equity raising of $1.25 billion, but today the company issued the revised offer, reducing the total public offering to $500 million.

As a result, CCL’s stock has made a new 52-week low today, 2 April 2020, at GBX 581.20. Whereas, the one year high of the company’s stock price was recorded on 02 May 2019 at GBX 4,175.0.

The market capitalisation of the company stands at GBP 4.89 billion with the free float and outstanding shares of 157.16 million and 684.55 million, respectively. At the time of writing, the stock’s yearly dividend yield was reported to be at 20.40 per cent, whereas the yearly dividend was reported at GBX 158.91 per share.

Disclaimer

The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.