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The 'Wonder of the Seas' cruise ship of the company Royal Caribbean, the world’s largest cruise ship, is docked at a port in Malaga, Spain, April 30, 2022. REUTERS/Jon Nazca
By Janet Freund (Bloomberg) —
Shares of Royal Caribbean Cruises Ltd. are down 10% Monday after the company launched a private offering for as much as $900 million in senior convertible notes to be used to buy back existing debt.
News of the offering sent peers Carnival Corp. and Norwegian Cruise Line Holding Ltd. lower as well. Last week, Carnival closed on an underwritten public stock offering that raised $1 billion to be used for a variety of purposes, including addressing 2023 debt maturities.
The cruise industry has been battered by Covid-related travel halts and restrictions since the pandemic began making headlines in early 2020. The US Centers for Disease Control and Prevention lifted its Covid-19 program for cruise ships as of July 18, sparking a multiday rally for cruise operators.
But Carnival’s stock offering, announced July 21, put a quick end to that optimism. And Royal Caribbean’s convertible offering is causing more pain. It had previously raised about $2.2 billion in a pair of equity offerings during the Covid era.
Of course, Royal Caribbean doesn’t have much of a choice. The company is “in most urgent need” of additional equity if it can’t raise debt, Alex Brignall of Redburn told clients after Carnival’s stock offering announcement. He has a neutral rating on the stock.
Royal Caribbean said in a statement that proceeds are intended to be used to repurchase some of its 2.875% convertible senior notes due Nov. 15, 2023, and 4.25% convertible senior notes due June 15, 2023. Replacing some near-term convertible bonds with new longer-term ones will be “non-dilutive to shareholders,” Chief Financial Officer Naftali Holtz said in the statement.
© 2022 Bloomberg L.P.
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