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Tue 7 Apr 2020 07:49 AM

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Shares in cruise firm Carnival surge after Saudi Arabia fund discloses 8.2% stake

The Saudis are getting a bargain-bin price for Carnival - it's down 81% this year - as the cruise industry faces unprecedented risk

Shares in cruise firm Carnival surge after Saudi Arabia fund discloses 8.2% stake

Carnival’s operations came to an almost complete stop last month after a series of coronavirus outbreaks at sea.

Image: Carnival

Carnival Corp. shares jumped after Saudi Arabia’s Public Investment Fund said it acquired an 8.2% stake in the world’s biggest cruise operator.

Carnival surged as much as 18% to $10.04 Monday in New York 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.

The Saudis are getting a bargain-bin price for Carnival - it’s down 81% this year - as the cruise industry faces unprecedented risks. The Public Investment Fund has invested abroad previously, including stakes in Uber Technologies Inc., Tesla Inc. and SoftBank Group Corp.’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 Ltd. and Norwegian Cruise Line Holdings Ltd. have also shut down.

The cruise industry was left out of the $2.2 trillion US 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.

Raising Funds

Since the halt of operations, Carnival has raised $6.25 billion to help meet expenses, but it’s paying a steep price. Some $4 billion in bonds were priced with an 11.5% 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 officer 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.”

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