What happened

Shares of Carnival (CCL 2.49%) fell as much as 4.3% on Thursday before finally closing the day down 2.6%. If you want to know why, look to Royal Caribbean (RCL 1.38%).

Collage showing a cruise ship, a man in a face mask and a microbe

Image source: Getty Images.

So what

All three of the major cruise line stocks suffered declines on Thursday, including Norwegian Cruise Line Holdings (NCLH 0.62%), too. But the catalyst most likely to have started this ball rolling downhill was an announcement from Royal Caribbean that it has decided to sell $1 billion worth of senior unsecured notes due in 2026, at a 5.5% interest rate.  

Royal Caribbean explained that it is taking on this new debt primarily to roll over older, higher-cost debt. It plans to redeem up to 40% of 11.500% senior secured notes due in 2025, and refinance other future debt maturities.

After 18 long months of watching cruise line after cruise line issue debt to raise funds to survive a long global shutdown, you can't blame investors for being nervous about the prospect of a new round of debt issuances.

Now what

The U.S. yesterday clocked more than 135,000 new coronavirus cases, and the delta variant of COVID-19 still seems to be spreading like a weed. The potential that the Centers for Disease Control and Prevention will reinstate a cruise ban in the midst of a fourth wave of coronavirus cannot be discounted. And the first clue that this ban might be in the cards could be a wave of new debt issuances by the cruise lines, as they prepare to weather another storm.

Where Royal Caribbean is leading on debt issuance Thursday, Carnival could follow.