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Carnival Cruise Update Doesn't Stop the Bleeding

On September 30, the U.S. Centers for Disease Control and Prevention (CDC) extended for another month its no-sail order for cruise ships. The current date for lifting the ban is October 31. The CDC had proposed extending the order through mid-February, but the Trump administration blocked the longer extension after Florida’s tourism industry made clear its strong opposition to the four-and-a-half month ban.

Over the past month, shares of Carnival Corp. & PLC (NYSE: CCL) had seen its share price plunge nearly 26%, before recovering about half the loss as of Wednesday’s close. The company issued a business update on Thursday morning that is weighing on shares again, however.

Carnival has restarted sailing on two ships of its Costa Cruises line and plans to begin sailing on its AIDA line. The company said the first cruises will sail with fewer passengers and enforce enhanced health protocols. Other of Carnival’s brands are expected to return to service “over time” but the company did not specify what that meant.

In addition to restarting cruise operations, Carnival announced that it expects to dispose of 18 ships by the end of this year. In July, the company announced that its plans called for the disposition of 13 ships.

In July, Carnival also tempered its plans for new ship deliveries, saying it planned to take delivery of five of the nine originally scheduled to join its fleet by the end of 2021. That estimate is unchanged, and only two of four ships planned for delivery this year will be delayed. Scheduled deliveries by the end of 2022 have been cut from 13 to 11.

Carnival’s monthly average cash burn rate for the second half of this year continues to be forecast at approximately $650 million. In the third quarter, the company expects a monthly cash burn of $770 million, while that figure drops to $530 million in the fourth quarter. The difference likely is due to expected sailings to and from the United States in November.

Liquidity as of August 31 was $8.2 billion. Since March, Carnival has raised $12.5 billion in a number of transactions, including a secondary stock offering of 99.2 million shares and an authorized at-the-market offering of up to $1 billion. As of October 2, the at-the-market offering has provided net proceeds of $352 million.

Loan principal maturities totaling $1 billion are due in the fourth quarter of this year, with $500 million due in the first quarter of 2021. In the final three quarters of 2021, debt maturities totaling $1.1 billion are due.

Carnival shares traded down about 3% Thursday morning, at $15.53 in a 52-week range of $7.80 to $51.94. The consensus price target on the stock is $16.65.