Carnival Corp. (NYSE: CCL) stock sank lower on Thursday after the company announced the pricing of its secondary offering. This comes after the company has been frantically pursuing debt offerings to stay afloat.
This industry has been one of the most battered in the stock market lately. The coronavirus pandemic effectively has cratered cruise brands. While the S&P 500 and Dow Jones industrial average have pulled back over 20% year to date, cruise stocks have dropped at least 75%.
The cruise line operator announced that it priced its 62.5 million shares of common stock at $8 apiece, with an overallotment option for an additional 9.375 million shares. The aggregate amount of shares of common stock to be issued in the offering was decreased to approximately $500 million from the previously announced $1.25 billion.
The underwriters for the secondary offering are Merrill Lynch, Goldman Sachs and JPMorgan.
It’s worth noting that the offering price is just barely above the stock’s 52-week low of $7.90. This was a low that had not seen since the early 1990s. In a sense, Carnival is putting in a price floor of 62.5 million shares for its stock at $8.
Separately, Carnival said that it has priced its previously announced private offerings to eligible purchasers of $4 billion aggregate principal amount of 11.500% first-priority senior secured notes due 2023 and $1.75 billion aggregate principal amount of 5.75% senior convertible notes due 2023.
The aggregate principal amount of the senior secured notes to be issued was increased to $4 billion from the previously announced $3 billion. The net proceeds from the offering of senior secured notes will be deposited into a segregated escrow account, pending the releases in accordance with certain collateral perfection thresholds.
At the same time, management has said that it is reducing capital expenditures and operating expenses. As a result, Carnival has suspended its dividend and the repurchase of its common stock.
Look out for other cruise line stocks to make similar moves. Norwegian Cruise Line (NYSE: NCLH) and Royal Caribbean Cruises Ltd. (NYSE: RCL) are already facing lawsuits, and without a steady stream of revenue, they will have to raise cash eventually.
Carnival granted the initial purchasers of the convertible notes an option to purchase on or before April 18, 2020, up to an additional $262.5 million aggregate principal amount of convertible notes.
Carnival stock traded down about 6% to $8.28 on Thursday, in a 52-week range of $7.90 to $56.04. The consensus price target is $36.91.
24/7 Wall St.Sponsored: Attention Savvy Investors: Speak to 3 Financial Experts – FREE
Ever wanted an extra set of eyes on an investment you’re considering? Now you can speak with up to 3 financial experts in your area for FREE. By simply
clicking here you can begin to match with financial professionals who can help guide you through the financial decisions you’re making. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
