Carnival Cruise falls on plan to sell $500 million of stock

Carnival (CCL) slipped on Monday after the cruise ship operator said it may sell up to $ 500 million (U.S.) of shares.

The company, and the cruise industry, continues to struggle under the weight of the COVID-19 pandemic.

Shares of the Miami company at last check were down 6.5 per cent to $ 26.31.

Cruise-line operators Royal Caribbean (RCL) and Norwegian Cruise Line Holdings (NCLH) were also lower.

Carnival said in a Securities and Exchange Commission filing that it would use the funds to purchase ordinary shares of Carnival Plc, trading in the U.K., and for general purposes.

“Carnival Corp. intends to sell the shares in the offering only when the ordinary shares of Carnival Plc are trading in a U.K. market at a discount” to Carnival Corp. common shares. “As a result, Carnival Corp. and Carnival plc would derive an economic benefit from the offering and the use of proceeds therefrom,” the SEC filing said.

“COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations,” the company said.

As a result of the COVID-19 outbreak, Carnival said, “we may be out of compliance with one or more maintenance covenants in certain of our debt facilities, with the next testing date of Nov. 30, 2022.”

Cruise operators began sailing from U.S. ports last week with mostly vaccinated passengers and crew.

The cruise operator has raised more than $ 2.5 billion by selling its shares over the past year as travel restrictions due to the pandemic brought its business to a standstill, according to Reuters.

“The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, reputation, litigation, cash flows, liquidity, and stock price,” the filing said.

Carnival said last week that it was seeking to return all 91 of its ships to the water by next spring. Earlier this month, the cruise line operator confirmed plans to restart passenger voyages next month.

Last month, Carnival said it planned to resume cruises to Alaska in July and Truist Securities raised its price target on the stock.

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