Carnival Selling $2.4 Billion Bond to Buy Back Costly Debt

By Paula Seligson (Bloomberg) —

Carnival Corp. is selling $2.4 billion of new junk bonds to refinance debt the cruise ship company took on last year, when it was forced to pay high interest rates amid doubts about its ability to weather the pandemic.

Pricing discussions on the new debt are in the 4%-4.25% range and reflect the strong demand for high-yield bonds as investors hunt for bigger returns. That would slash borrowing costs for Carnival because the proceeds will fund an offer to buy back about half of the 11.5% coupon debt the company issued in April 2020.

An investor call was held earlier Wednesday and the seven-year secured notes are expected to price later in the day, according to people familiar with the matter who asked not to be named discussing a private transaction.

Carnival’s stock rose more than 9% Wednesday to $23.25 as of 1:40 p.m. in New York. The existing 11.5% notes last traded at 113.875 cents on the dollar last Thursday, according to Trace bond pricing data.

Holders of about $2.4 billion of the $4 billion 11.5% notes accepted the tender offer by the early deadline of July 19, after the company offered to buy back as much as $2 billion of the securities, the company said in a statement on Monday.

Investors who accepted the early deadline and agreed to a change in the contract for the existing notes will receive 114.25 cents on the dollar. Holders that say yes by the final deadline of August 2 will receive 112.5 cents.(Updates second paragraph with official price talk, and fourth paragraph with the stock price.)

© 2021 Bloomberg L.P.

Unlock Exclusive Insights Today!

Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.

Sign Up