Why Carnival Stock Dived 13% Today
Shares of Carnival (NYSE: CCL) struck an iceberg on Wednesday and are sinking fast -- down 13.7% as of 11:40 a.m. EST after the cruise operator announced that it will issue $1 billion worth of new debt as it tries to roll over older, higher-interest debt taken on to get it through the pandemic.
As Carnival explained Tuesday night, its new debt (technically, convertible senior notes) will pay holders 5.75% annual interest and come due on Dec. 1, 2027. The company will float at least $1 billion worth of these notes, but potentially as much as $1.15 billion if underwriters exercise their overallotment options.
Carnival says it will use the proceeds from this debt offering to pay off principal on existing debt (i.e., roll over the old debt), as well as for general corporate purposes. In theory, this should mean that Carnival will be paying off notes that carry higher interest rates, with money from new notes that cost it less in interest.
Source Fool.com
