Carnival and Cruise Industry Scramble to Survive

Since the beginning of the year, the company’s share price has plummeted more than 80 percent, though on Monday it rose sharply — to $10.21 a share — after Saudi Arabia’s state investment fund said it had acquired a stake in the company. And last week, Carnival, which has already drawn on bank credit lines, began an effort to raise $6 billion by selling stock, bonds and other securities. It was selling some of those bonds with a suggested 12.5 percent interest payment to investors, a strikingly high figure.

In an interview, Carnival’s chief executive, Arnold Donald, said the sale would generate enough cash for the company to survive without revenue for the rest of the year and into 2021. He added that Carnival hoped to take advantage of stimulus programs in other countries where it operates, like Germany, Britain and Australia.

“If you run out of cash, you lose the company, and we can’t live with that,” Mr. Donald said. “So we want to make sure we’re prepared for an extreme case.”

Last week, a voluntary one-month suspension of cruise travel became much longer, with some companies canceling voyages scheduled for October and November. Mr. Donald acknowledged that it was a precarious moment. The high interest rate on the debt deal “is absolutely going to be a challenge to us,” he said.

“It’s not fun to be floating equity at the share price it is,” he added. “It’s very disappointing.”

Before the equity offering, Goldman Sachs, JPMorgan Chase and Bank of America had been working to put together a debt deal for Carnival that would offer some investors a potential return in the high teens, according to two people familiar with the discussions. Bankers pitched the deal to hedge funds and private equity investors, some of whom passed on it because of concerns about the company’s long-term viability.

Article source: https://www.nytimes.com/2020/04/07/business/coronavirus-cruise-industry-carnival.html