Carnival Corp, the world's largest cruise operator, said it has raised US$6.25 billion by issuing new debt and equity on Wednesday, borrowing at a high cost to weather the economic storm of the coronavirus pandemic.
Despite having its cruise ships idled to comply with coronavirus travel restrictions, the company was able to attract enough investors that its capital raising was oversubscribed several times over, albeit at a steep price, sources reported.
Carnival priced US$4 billion in bonds maturing in 2023 - upsized from the US$3 billion originally planned - with a yield at par value of 11.5%, it said in a statement.
By comparison, Carnival paid a 1% yield in October, when it borrowed 600 million euros (US$657.7 million) in the European debt market. Moreover, Carnival had to use its ships as collateral to attract bond investors on Wednesday.
The company also raised US$1.75 billion in convertible notes with a 5.75% coupon, it added.
Beyond the bond issues, Carnival also issued new stock to raise US$500 million, less than the US$1.25 billion it was targeting. The issue was priced at US$8 per share, the company said.
Carnival shares had tumbled 33.2% on Wednesday on the capital raising news, ending at US$8.80.
The funds are expected to be enough to cover Carnival's existing financial obligations for the next 12 months, the company said.
While Carnival is deemed investment grade by rating agencies, demand for the deal came largely from investors in junk-rated debt given the imperiled state of the cruise industry, the sources said.
U.S. companies raised a record US$109.1 billion through investment-grade bond sales last week, days after Yum Brands Inc reopened the U.S. market for junk-rated issues after its longest lull since the 2008 financial crisis.
Shares in Carnival have fallen more than 80% this year.