Carnival – parent to P&O Cruises, Princess Cruises, Cunard and Holland America Line (HAL) – said Covid-19 had, and was continuing to have, a materially adverse impact on its operations and thus finances.
This, it said in a trading update issued on Tuesday (31 March), was limiting its ability to source the cash necessary to meet shortfalls arising from its inability to operate due to the infection.
“The spread of novel coronavirus and the recent developments surrounding the global pandemic are having material negative impacts on all aspects of our business,” said the firm.
Challenges to date have included Princess ship Diamond Princess being quarantined off the coast of Japan, it becoming an early and high profile outbreak of the coronavirus, and the ongoing spread of the virus onboard HAL ship Zaandam, which has so far been denied permission to dock by several countries.
Carnival is privately offering up an additional $3 billion in shares and $1.75 billion in senior convertible notes, or bonds. Separately, Carnival has also made an underwritten public offering of $1.25 billion shares of common stock, while underwriters will be given the opportunity to purchase up to $187.5 in additional shares.
The firm said it would use cash generated by the common stock offering “for general corporate purposes”.
In a filing to the US Securities and Exchange Commission, Carnival revealed it still had about 6,000 passengers at sea owing to coronavirus, who may not now disembark until the end of April. It also admitted its current “pause” in its global cruise operations would likely be extended, although no date has yet been placed on this with its various lines working to their own timetables.
“We currently estimate the substantial majority of our fleet will be in prolonged ship layup,” said the corporation.
Besides the fresh $6 billion it is seeking, Carnival last month “fully drew down” an existing $3 billion credit facility, and stressed it has a further $2.8 billion across four “committed credit export facilities” to fund originally planned ship deliveries in 2020 and another US $5.9 billion for deliveries planned for 2021 and beyond.
Carnival said it could not provide assurances the assumptions used to estimate its cash requirements were necessarily correct having “never previously experienced a complete cessation of cruising operations”, but said it believed the measures set out to date would be sufficient to cover its cash needs over the next eight months to the end of its 2019/20 financial year on 30 November.
These include ongoing ship and administrative operating costs; cash refunds of customer deposits; debt maturities and interest, expected capital improvements, and new ship growth capital not addressed by committed export credit facilities. Carnival said the total cost of these operations would run to approximately $1 billion per month.
Carnival added it had so far identified approximately $1 billion it could cut form its proposed capital expenditure for 2020.
