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Carnival Corp.'s liquidity needs? About $1bn/month: William Blair

Carnival Corp. headquarters.jpg
Offering new shares and notes, Carnival Corp. management believes it has enough liquidity available through the end of fiscal 2020
Carnival Corp. & plc estimates liquidity requirements of roughly $1bn per month, according to a William Blair note.

The brokerage broke down the needs as Carnival Corp. acted to boost liquidity by an additional $6.45bn from notes and share offerings announced Tuesday. Combined with roughly $1.1bn from CCL's suspended dividend program, William Blair analyst Sharon Zackfia said, company management believes it has enough liquidity available through the end of fiscal 2020.

$1m per ship monthly lay-up costs

The $1bn per month liquidity requirements include $200m to $300m in ongoing operating costs associated with the majority of the company's ships in prolonged lay-up. The cost is about $1m per ship per month versus warm ship lay-up costs of $2m to $3m per ship per month.

Refunds to date

Other costs include refunds of deposits ($4.7bn as of the end of February, with 45% of customers in the first half of March choosing future cruise credits instead of refunds), debt maturities ($1.5bn maturing by November) and interest, capital improvements and new ship growth not covered by export credit facilities.

Partly offset by lower expenses/capex

All this, Zackfia said, is partly offset by curtailed operating and marketing expenses and about $1bn in lower 2020 capital expenditures than originally planned.

Given the additional debt and share count, William Blair revised its 2020 estimate for CCL to a loss of 40 cents per share and its 2021 EPS estimate to a profit of $1.91. With the stock down more than 70% on concerns about industry viability in the wake of the coronavirus impact, the brokerage affirmed its 'market perform' (hold) rating.

'While we expect consumers will be generally eager to return to normalcy once coronavirus concerns abate, we believe the cruise industry is likely to have a much slower recovery given the amount of negative media coverage around coronavirus outbreaks and ships without ports,' Zackfia said.

CCL closed up, at $13.17, on Tuesday. Shares have traded in the range of $7.90 to $56.04 in the last 52 weeks.

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