Why Carnival Corporation Stock Dropped Today
Shares of Carnival Corporation (NYSE: CCL) fell 2.7% through 10:35 a.m. EDT trading Tuesday after the cruise company announced, after close of trading yesterday, that it has closed on a "previously announced incremental first-priority senior secured term loan facility in an aggregate principal amount of $2.3 billion."
Investors are presumably reacting to the reminder that Carnival Corporation carries a lot of debt -- nearly $25 billion more than it has cash on hand -- and now seems to be taking on $2.3 billion more. In fact, though, this is not really the case.
As Carnival explained yesterday, the entire proceeds of its new loan will be used to redeem a batch of "11.500% First-Priority Senior Secured Notes due 2023." So what is really happening here is that Carnival is rolling over old, high-interest debt and taking on new, low-interest debt to replace it.
Source Fool.com
