Cruise operator Carnival Corporation (NYSE:CCL) announced the private offering of $1 billion in convertible senior unsecured notes due 2027 yesterday. Following the news, shares plunged 13.7% in after-hours trading.
The convertible notes are issued to refinance the company’s 2024 maturities. The net proceeds will be used to repay debt and for general corporate purposes.
The company said that “The redemption price will equal 100% of the principal amount of the Convertible Notes being redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.”
Notably, Carnival may not redeem the convertible notes before December 5, 2025, barring any changes in tax laws. Further, the company intends to grant the initial buyers of the notes an option to buy additional convertible notes of $150 million.
Is CCL a Good Stock to Buy?
Now may not be a good time to buy CCL stock. Cruise operators suffered a major setback during the pandemic, crunching their liquidity positions. Carnival has had to rely on additional equity and debt financing measures to manage its day-to-day operations. Carnival’s debt-to-assets ratio remains at an all-time high of around 84%. Year to date, CCL stock has lost 47.9%.
Having said that, the demand for cruise travel is picking up steadily. Short-term visibility for Carnival remains weak until the company can efficiently manage its finances. Analysts, too, have a Hold consensus rating on Carnival Corp. stock. This is based on five Buys, four Holds, and three Sell ratings. On TipRanks, the average Carnival Corp price target of $11.29 implies 1.2% upside potential to current levels.
