Banking

Carnival sees share price tumble after unveiling plans to raise $1bn

Carnival shares tumble after cruise group unveils plans to raise $1bn to make debt payments and for ‘general corporate purposes’

  •  Carnival Corp plans to raise $1bn with convertible senior notes
  • The cruise group saw its share price fall over 13% earlier this morning  

Cruise group Carnival Corp has seen its share price fall sharply after revealing it plans to raise $1billion with convertible senior notes. 

It told investors on Wednesday the proceeds of the offering would be used to ‘make principal payments on debt and for general corporate purposes’. 

The convertible notes, which form part of the group’s refinancing plan, will pay interest on 1 June and 1 December of each year, beginning on 1 June 2023, at a rate of 5.75 per cent per year. 

Share impact: Carnival saw its share price fall sharply on Wednesday 

Carnival shares were down 14.46 per cent or 122.00p to 721.80p this afternoon, having fallen over 50 per cent in the past year. 

The convertible notes will mature on 1 December 2027, unless earlier repurchased, redeemed or converted.

The group said: ‘The Company intends to grant the initial purchasers of the Convertible Notes an option to purchase, for settlement during a 13-day period beginning on, and including, the first day on which the Convertible Notes are issued, up to an additional $150million aggregate principal amount of Convertible Notes.’

The convertible notes are being offered only to people ‘reasonably believed to be qualified institutional buyers’, in reliance on Rule 144A under the Securities Act of 1933.

In September, Carnival forecast a loss in the fourth quarter after it reported results for the third quarter that fell well short of forecasts, as higher fuel prices and cheaper fares offset an increase in bookings.

High inflation has hit many cruise operators that have been running at a loss since the pandemic took hold in 2020. 

They have been hampered by Covid-19 lockdowns, bans on cruises, safety issues and labour shortages. That said, travel is bouncing back as people look to go on holiday amid the axing of pandemic-driven restrictions. 

Share slump: Carnival has seen its share price fall sharply over the last 12 months

Share slump: Carnival has seen its share price fall sharply over the last 12 months 

In September, Carnival’s boss, Josh Weinstein, said: ‘Since announcing the relaxation of our protocols last month, we have seen a meaningful improvement in booking volumes and are now running considerably ahead of strong 2019 levels.

‘The company said revenue increased by nearly 80 per cent in the third quarter of 2022 compared to second quarter 2022 but revenue per passenger cruise day for the third quarter of 2022 decreased compared to a strong pre-pandemic 2019.’

The cruise operator said it expects eight of its nine brands to have their entire fleet serving passengers by the end of the fourth quarter of this year. The company said it also expects pricing to increase in 2023.

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