Carnival Corp. refinancing would pre-pay $1.2b of highest cost debt

The company commenced marketing a new senior secured first lien term loan B facility with an original principal amount of $1b due 2027. In conjunction, it may raise $500m of other secured debt maturing in 2029.

Carnival intends to use the proceeds of these refinancings to repay a portion of its existing first-priority senior secured term loan facility maturing in 2025.

$120m annualized interest savings

Following the transactions, Carnival plans to redeem all of its 10.5% second-priority senior secured notes due 2026 and 10.125% second-priority senior secured notes due 2026, saving more than $120m in interest expense on an annualized basis. The $1.2b of redemptions is conditioned on the refinancing transactions closing.

Carnival expects to use cash on hand to finance the redemptions.

Reflects cash flow confidence

'Given the confidence we have in our business and its cash flow generation, we plan to retire $1.2 billion of our highest cost debt,' CFO David Bernstein said. 'In connection with this retirement, we plan to extend some of the lowest cost public debt in our portfolio. This is yet another step forward in our deleveraging journey, building on the $1.4 billion we already early retired this year.'

Reduces debt balance to under $32b

With this debt repayment, Carnival now expects its year-end debt balance to be less than $32b, down from the Nov. 30, 2023 debt balance of less than $33b provided in June guidance.

The news closely follows Royal Caribbean Group's strong second quarter results and bullish outlook.