Abu Dhabi, UAETuesday 24 November 2020

Cruise liner Carnival's shares buoyant after Saudi's PIF takes 8.2% stake

Investment is worth $369.4m at last week's closing price

The cruise ship Carnival Spirit docked at Port Kembla in Wollongong, Australia, last week. The cruise ship operator has tapped capital markets for $6bn of new bonds and is planning to issue new shares to provide it with funding during a shutdown period due to the coronavirus outbreak. EPA
The cruise ship Carnival Spirit docked at Port Kembla in Wollongong, Australia, last week. The cruise ship operator has tapped capital markets for $6bn of new bonds and is planning to issue new shares to provide it with funding during a shutdown period due to the coronavirus outbreak. EPA

Shares in US cruise liner operator Carnival Corporation jumped after Saudi Arabia’s Public Investment Fund said it acquired an 8.2 per cent stake in the company.

Carnival surged 23 per cent to $10.44 by 8.10pm UAE time on Monday after the fund said in a filing that it holds 43.5 million shares of the cruise company. As of last week’s close, the stake was worth $369.4 million (Dh1.34 billion).

The fund is getting a bargain-bin price for Carnival, as shares in the world's biggest cruise company have fallen 81 per cent this year given the unprecedented risks faced by the industry.

The Public Investment Fund has invested abroad previously, including stakes in Uber Technologies, Tesla and SoftBank Group's Vision Fund. But it isn’t generally known for making distressed investments.

Now, it owns a slice of the dominant cruise operator, with a fleet of more than 100 ships and no customers to sail on them – at least for now.

Carnival’s operations came to an almost complete stop last month after a series of coronavirus outbreaks at sea. Carnival’s Diamond Princess had more than 700 coronavirus cases, the biggest outbreak outside of mainland China for a time.

Rival operators Royal Caribbean Cruises and Norwegian Cruise Line Holdings have also shut down.

The cruise industry was left out of the US government's $2.2 trillion stimulus bill, which excluded non-US businesses. Although it is headquartered in Miami, Carnival is technically incorporated in Panama – an arrangement that allows it to avoid US income taxes and minimum-wage requirements.

Competitors are also domiciled outside the US.

Since the halt of operations, Carnival has raised $6.25bn to help meet expenses, but it is paying a steep price. Some $4bn in bonds were priced with an 11.5 per cent coupon last week. The shares were acquired before a planned stock offering by Carnival, so the percentage holding will change.

In an interview Wednesday, chief executive Arnold Donald said Carnival may turn to major shipbuilding nations such as Italy or Germany for lower-cost loans.

“Yes, those are definitely potential sources,” he said. “And there are others.”

Updated: April 6, 2020 08:44 PM

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