Carnival Soars After Saudi Sovereign-Wealth Fund Discloses Stake
April 06 2020 - 3:52PM
Dow Jones News
By Dave Sebastian
Carnival Corp. shares rose 24% after Saudi Arabia's
sovereign-wealth fund disclosed an 8.2% stake in the world's
largest cruise operator on Monday.
The Public Investment Fund's purchase of 43.51 million shares
came as the coronavirus pandemic has put the company's sailings to
a halt. The fund has invested in Uber Technologies Inc., Tesla
Inc., Penske Media Corp. and Lucid Motors Inc., according to
FactSet.
The stock rise is the company's largest percentage increase on
record, according to Dow Jones Market Data. Carnival's stock has
fallen about 79% so far this year.
Carnival and other cruise lines have sought to preserve
liquidity as revenue dries up. Separately on Monday, Carnival said
it has closed its offering of 71.88 million shares of common stock
at $8 each. It also closed its offering of $1.95 billion in 5.75%
senior convertible notes due in 2023. Carnival said it expects to
close its $4 billion offering of 11.5% first-priority senior
secured notes due in 2023 on Wednesday.
The Saudi fund's 8.2% stake reflects the company's number of
shares outstanding on March 25 and doesn't include the latest
capital raise, the fund said in a securities filing.
The Saudis' investment in Carnival represents a fraction of the
fund's overall portfolio, and it could stand to gain when the
cruise industry recovers, Instinet LLC analyst Harry Curtis said.
The fund manages about $320 billion in assets, according to the
Sovereign Wealth Fund Institute.
"The risk-reward is appealing because the next eight months, the
industry has an opportunity to gradually recover from this crisis,"
Mr. Curtis said. "And their investment is being made at such a low
level that they feel like the bad news is reflected in the
stock."
Carnival Cruise Line said last week that it is further canceling
some of its sailings through the end of the year, making it the
first major cruise line to do so because of the global health
crisis.
The company said last week that it expects most of its ships to
be idled for a prolonged period. If 80% of its fleet were to be put
in a prolonged layup, the company could reduce its monthly cash
burn by about $100 million to $150 million, allowing it to survive
as long as 15 months without revenue, UBS Securities LLC analyst
Robin Farley said in a note to clients.
The cruise industry was among the first to take a public hit
from the virus, along with airlines and hotels, as vacationers
canceled plans, local governments halted tourism and passengers on
board fell ill, leading to entire vessels full of passengers being
quarantined.
Cruise companies were also e xcluded from the roughly $2
trillion coronavirus stimulus package, despite being one of the
hard-hit industries President Trump has pledged to help. A
spokeswoman for the Cruise Lines International Association, a trade
group, said last month that the industry wasn't seeking a bailout
in the first place.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
April 06, 2020 15:37 ET (19:37 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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