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Carnival on the recession menace and why it raised debt at 10.5%

Bookings, occupancy, revenues and ships in service are rising at Carnival Corp. & plc, but what if there's a slowdown?

Anne Kalosh, Editor, Seatrade Cruise News & Senior Associate Editor, Seatrade Cruise Review

June 24, 2022

2 Min Read
Credit: Seatrade Cruise News

Will Carnival be able to hold the line on pricing so there's not such a steep recovery on the other side of a recession? And why the recent $1bn debt raise at double-digit interest?

Pricing strength a priority

Carnival has been managing through the various COVID-variant impacts, the Ukraine war and capacity hikes, President and CEO Arnold Donald said on Friday's earnings call in response to investor concerns, and is doing what it can to keep pricing strong going foward.

'We think that's the right move right now,' Donald told analysts. '... We're doing everything we can to maintain pricing strength.'

Cruising has been 'recession-resilient historically,' he continued. 'And, this time, if there was a recession, there's pent-up demand' — because people haven't been able to travel in the last couple years — which wasn't the case during past slowdowns.

'Not every recession is the same'

'Not every recession is the same,' added CFO David Bernstein. 'We are currently in a very strong labor market. If people have jobs and they feel comfortable in their jobs, they're likely to need a vacation ... So I think we will do very well in a recessionary environment.'

Donald said low unemployment and high savings rates bode well for the time-being.

About that $1bn at 10.5%

As to why Carnival in May raised $1bn by selling 10.5% notes, Bernstein recounted Carnival was looking to refinance $3bn of 2020 maturities over time. Forecasting a rising interest rate environment, the company moved forward. 

'It was a difficult day in the market, and nobody could have predicted what happened in the overall market,' Bernstein said, adding that despite the backdrop, Carnival was able to raise the $1bn 'and we feel very good about that.'

Today's interest rates are higher than in May.

'We're in a good position. We feel good about what we did, and we'll to refinance the other $2 billion in the months ahead,' Bernstein continued. 'We've done a great job of managing the whole portfolio and this is just one minor piece of the whole porfolio.'

4.5% average overall

Despite the added 10.5%, the average interest rate of Carnival's overall debt portfolio is 4.5%.

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Carnival Corp. & plc

About the Author

Anne Kalosh

Editor, Seatrade Cruise News & Senior Associate Editor, Seatrade Cruise Review

Anne Kalosh covers global stories, reporting both breaking and in-depth news on cruising's significant people, places, ships and trends. A sought-after expert on cruising, she has moderated conferences around the world, including the high-profile State of the Industry panel at Seatrade Cruise Global. She created and led the acclaimed itinerary-planning case study for Seatrade's cruise master classes held at Cambridge and Oxford universities. She has been the cruise columnist for AFAR.com, and her freelance stories have appeared in a wide range of publications, from The New York Times to The Miami Herald.

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