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Why Royal Caribbean Stock Rose 6.5% on Friday

By Joe Tenebruso – May 15, 2020 at 6:16PM

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A recent capital raise could help the cruise operator survive the coronavirus pandemic.

What happened

Shares of Royal Caribbean Cruises (RCL 2.45%) climbed more than 6% on May 15, following news of the company's debt offering earlier in the week.

So what 

Royal Caribbean raised $3.32 billion in senior secured notes on May 13. The much-needed cash comes at a steep cost. Royal Caribbean will pay a 10.875% interest rate on $1 billion in debt due on June 1, 2023 and 11.5% on $2.32 billion in debt due on June 1, 2025. The notes will be secured in part by 28 of Royal Caribbean's cruise ships. 

The cruise-line operator intends to use the proceeds to repay its $2.35 billion senior secured term loan, as well as general corporate purposes.

A cruise ship sailing in the ocean with the sun shining behind it.

Royal Caribbean's $3.3 billion debt sale could keep it sailing well into the future. Image source: Getty Images.

Now what

Despite the high interest costs, investors appear to be breathing a sigh of relief that Royal Caribbean was able to raise more than $3 billion in fresh capital. With its ships docked due to the coronavirus-related sailing restrictions, Royal Caribbean is bleeding cash.

Investors are hoping that this debt offering will give the beleaguered company a chance to survive long enough to resume normal sailing operations and perhaps see the end to the COVID-19 crisis.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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