Shares of Carnival Corporation (NYSE: CCL) shot up more than 20% on Monday after it was revealed that Saudi Arabia’s public investment fund has taken a more than 8% stake in the world’s largest cruise ship operator.
A stock filing issued by Carnival on Monday showed The Public Investment Fund purchased 43,508,895 shares of Carnival Corporation common stock representing 8.2% of Carnival’s outstanding shares as of March 25, 2020. The Public Investment Fund is the sovereign wealth fund of the Kingdom of Saudi Arabia.
Carnival’s stock closed Monday up a little more than 20% at $10.21 following the announcement.
SEC Filing
An SEC filing last Friday described dire straits for Carnival Corporation, which has suspended global sailings for the first time in company history amid the COVID-19 pandemic. Shares of CCL stock have fallen more than 80% since the beginning of the year.
The sudden drop in business has forced Carnival to take extreme measures to shore up its liquidity, including fully drawing down an existing $3 billion revolving credit facility as well as reducing capital expenditures and operating expenses, suspending dividend payments, and pursuing additional financing.
Although the company says it believes it has enough liquidity to satisfy its obligations and remain in compliance with all debt covenants for a period of twelve months, the company warned that it may be required to seek waivers from the lenders which could lead to increases costs and interest.
“There can be no assurance that we would be able to obtain waivers in a timely manner, or on acceptable terms at all. If we were not able to obtain waivers or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contract payables. As a result, the failure to obtain waivers would have a material adverse effect on us.”
Although the cruise industry employs hundreds of thousands of people in the United States, relief for the cruise lines was not included in the United States’ historic $2.2 trillion coronavirus bill because they are registered outside the United States in countries like Panama, Liberia, the Bahamas, and Switzerland, and do not pay U.S. federal income taxes.