Carnival Raises Bond Offering, Lowers Interest Rate

Carnival Cruise secured a massive rescue financing package on Wednesday to help the embattled cruise-ship operator navigate choppy waters in the months ahead. 

3 April 2020 | HYCM – The cruise line company, Carnival Cruise, is setting its coupon on its bond sale at 12%. It is also increasing the size of the bond sale to $4 billion. So, this means that if people are ever able to cruise again and Carnival Cruise can weather this financial storm then some investors are in for a good return on their investment.

Carnival Cruises to weather the storm, via Bloomberg

Obviously, the high level of yield offered in the coupon is an indication that the company is distressed, but the bond is still labeled as an investment grade. According to Bloomberg, a BBB bond with a 12% yield is the stuff of legend.

Apparently, there is a Russian 12.75% investment-grade bond from 1998, but they are generally a rare thing. If Carnival can make it through this crisis, and being able to raise $4 billion is a sign it has a fair chance, then they may also be able to snap up some of the smaller struggling firms and expand themselves through the difficulty.

Now Carnival cruises might not survive with a BBB grade status, but they may still be here for another day.

What bargains are to be had in the current crisis?

What opportunities are you seeing out there that could pay the long term investor well? Oil at $20 a barrel was pretty tempting to hold until next year (especially after yesterday’s news that Saudi and Russia were ready to discuss production cuts again).  Or how about scaling into the equity markets over the next few months? Perhaps there are some good corporate bonds that you have your eyes on? What opportunities can you see?


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