Cruise operator Carnival suspends dividend, expects FY loss
By Michele Maatouk
Date: Tuesday 31 Mar 2020
(Sharecast News) - Cruise operator Carnival said on Tuesday that it is suspending its dividend payments and the repurchase of its common stock as it looks to weather the coronavirus pandemic, and warned it expects to make a full-year loss.
The company will also cut back on capital expenditure and operating expenses and pursue additional financing.
"Based on these actions and assumptions regarding the impact of Covid-19, we have concluded that we will be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months prior to giving effect to any additional financing, which may occur," it said.
Carnival said the ongoing effects of the outbreak on its operations and global bookings have had, and will continue to have, "a material negative impact" on its financial results and liquidity. This may continue well beyond the containment of the outbreak, it added.
"We have never previously experienced a complete cessation of our cruising operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our brands and future prospects is uncertain," it said, adding that the scale and duration of the pandemic is uncertain.
While it cannot estimate the impact on its business "with reasonable certainty", Carnival expects a net loss on both a US GAAP and adjusted basis for the fiscal year ending 30 November 2020.
Carnival also noted that it has received and will likely continue to receive lawsuits from passengers aboard the Grand Princess voyage in February 2020. It may also receive additional lawsuits stemming from Covid-19.
"We cannot predict the quantum or outcome of any such proceedings and the impact that they will have on our financial results, but any such impact may be material," the company said.
Also on Tuesday, the beleaguered cruise operator said it has begun an underwritten public offering of $1.25bn of shares of common stock. It intends to grant the underwriters an option to purchase up to $187.5m of additional shares and will use the net proceeds from the offering for general corporate purposes.
Carnival has also begun private offerings of $3bn shares of senior secured notes due in 2023 and $1.75 billion in senior convertible notes, also due in 2023.
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