The mood wasn't festive around Carnival (CCL -4.99%) (CUK -5.11%) stock on Thursday. The company, which struggled mightily during the worst period of the pandemic, saw its share price fall by almost 2%. Investors weren't overjoyed about a fresh debt offering announced by Carnival, and a bearish new note from an analyst didn't help, either.
After market hours on Wednesday, Carnival announced that it is floating a private offering of $1 billion worth of senior unsecured notes. These notes bear an annual interest rate of 10.5%. They mature on June 1, 2030, although they will be callable starting on the same date in 2025. The interest is payable semiannually on June 1 and Dec. 1.
Carnival says it plans to use the net proceeds of the issue to make scheduled principal payments on debt during fiscal 2023 and for general corporate purposes.
The company elaborated that the latter might include "making repayments of its indebtedness; the financing or refinancing of a portion of the purchase price, rental payments, costs and expenses related to certain of its current and future property, plant and equipment (including leased assets and vessels) and their maintenance, repair, replacement and improvements; as well as any other payments related to its vessels' ready-for-sea costs."
The smaller wave battering Carnival Thursday was a price cut enacted by Truist Securities analyst C. Patrick Scholes. He has lowered his level to $15 per share, from the previous $17.
His reasons behind the move weren't readily apparent, but it's reflective of the concern many investors have about cruise stocks these days.
Although the broader tourism industry is set for a rebound from the pandemic, cruise operators such as Carnival are burdened with piles of debt they amassed to stay in business while their ships languished at the dock. Thursday's announcement by the company is a reminder that it's still navigating through stormy financial weather.