Carnival chipping down debt, expects $31 billion balance by year-end

By Devika Patel

Knoxville, Tenn., Oct. 2 – Carnival Corp. & plc has paid down $4 billion of debt since the peak of its debt levels in early 2023 and expects to end the year with under $31 billion of debt.

In the third quarter, Carnival secured a $1.3 billion senior secured first-lien term loan B facility due 2027 and completed a $500 million private offering of first-priority senior secured notes due 2029 to repay its existing dollar-denominated first-priority secured term loan facility maturing in 2025 and called $1.2 billion of its highest cost debt.

In addition, the company prepaid an additional $1.1 billion of debt with maturities from 2024 through 2027.

“We have been actively managing down our debt and reducing interest expense,” president and chief executive officer Josh Weinstein said on the company’s third quarter ended Aug. 31 earnings conference call on Sept. 29.

“With improving performance, positive cash flow and $5.7 billion of liquidity, we anticipate ending the year with debt just under $31 billion.

“This debt reduction happened without issuing incremental equity.

“That said, we recognize we still have a ways to go to reach investment-grade leverage metrics in 2026,” Weinstein said.

“We are accelerating our debt repayment efforts and aggressively managing down our interest expense,” chief accounting officer and chief financial officer David Bernstein said on the call.

“In just six months, we reduced our debt balance by over 10% or nearly $4 billion of the peak from the first quarter 2023,” Bernstein said.

The company conducted a refinancing of its maturities, which left 80% of the debt fixed with an average interest rate of about 5˝%, and plans further debt paydowns until it achieves an investment-grade credit rating.

“Our third quarter successful refinancing was priced at the lowest interest rate given to any cruise company in almost two years,” Bernstein said.

“This refinancing, which stretched out maturities, along with our optimism about our future and the return of customer deposit reserves, gave us the confidence to accelerate our debt repayment.

“Our maturity towers have been well managed through 2025 with just $2 billion of debt maturities next year and only $2.2 billion in 2025.

“In addition, because of our actions, our debt portfolio is 80% fixed and our average interest rate is approximately 5˝% and, looking forward, I expect substantial increases in adjusted free cash flow in 2024 and beyond through durable revenue growth to drive down our debt balance on our path back to investment grade,” Bernstein said.

Adjusted EBITDA was $2.22 billion, which exceeded the June guidance range of $2.05 billion to $2.15 billion.

Third quarter revenues hit an all-time high of $6.9 billion.

Adjusted free cash flow was $1.1 billion for the third quarter.

Cash and cash equivalents were $2,842,000,000 as of Aug. 31, 2023, compared to $4,029,000,000 as of Nov. 30, 2022.

Long-term debt was $29,516,000,000 as of Aug. 31, 2023, compared to $31,953,000,000 as of Nov. 30, 2022.

Current portion of long-term debt was $153 million as of Aug. 31, 2023, compared to $146 million as of Nov. 30, 2022.

Carnival Corp. is a Miami-based unit of London-based cruise operator Carnival plc.

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