Sometimes a little knowledge is just confusing, but a recent flurry of unusual, financing-related press releases from Carnival Corp caught our attention and got us wondering about the implications....

April 16: Carnival Corp Debt Holders Send a Shot Across the Bow

The story began a few weeks ago some of Carnival Corp's debenture holders exercised their option to convert debentures (a form of debt) into shares. It was weird because it was a miniscule amount, just $117k out of $595 million held through 2021.

I suspect that was a "shot across the bow", a way for investors to tell Carnival Corp that old interest rates (set in a time when we weren't worried about inflation) are no longer sufficient.

April 25: Carnival Increases Interest Payments

To enhance the attractiveness of their debentures due in 2033, Carnival offered an additional 0.5% interest payment per annum for the next 18 months, plus an additional repurchase option at the end of that period.

April 30: $470 million of Debt is Cashed In

Even following the increase in interest payments, a bit more than half of the debenture holders exercised their option for immediate repurchase.

My interpretation: Carnival Corp knows exactly what they're doing. Presumably they would rather hold off on $500M of capital expenditure than pay out more in interest. Which suggests Carnival Corp is not prioritizing fleet growth.

Slower fleet growth makes sense given the high cost of European shipbuilding, but could give less price-sensitive RCL, NCL and MSC a chance to make a louder splash.

Of course, this tightening of credit does make me wonder if highly-leveraged RCL and private equity funded NCL might soon have to make modifications of their own!

Disclaimer: Do NOT apply my musings to your portfolio. If I had insider information, I couldn't use it, much less print it.