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The $ 24bn change that makes Carnival flow


The same day Moody lowered Carnival Corporation’s debt and the World Health Organization announced that Covid-19 was a global epidemic, and David Bernstein, a shipping company’s chief financial officer, was on Broadway theater in New York to watch a play about the fall agreement behemoth.

The March 11 performance of the Lehman Brothers Trilogy was finalized in 2020 at the Nederlander Theater. Later that week, the coronavirus crisis forced the region to close as the global economy reached its worst recession since Lehman collapsed at the end of the 2008 financial crisis.

Over 2,000 miles from the California coast, 3,500 passengers were forced to board Grand Princess, a Carnival ship that had contracted the virus and was unable to board. This was the beginning of a great storm that would ruin the ship’s hull.

The Grand Princess submarine passes under the Golden Gate Bridge in San Francisco, California in March 2020 © Josh Edelson / AFP via Getty

Bernstein, 62, had traveled to New York City to meet her new-born granddaughter weeks earlier. He tried to buy a face mask to return to Miami, but pharmacies were sold. Upon arrival at La Guardia airport on March 14, the incurable had been abandoned.

“It was a lot of fun.” he said. “I realize from the journey back home how the world has changed so dramatically.”

In March 2021, Carnival spent more than $ 7bn. The group invested $ 10.2bn in the 2020 financial year with a 73% decline in revenue. Demonstrating a lack of funding, Carnival’s credit rating has been slashed at A minus, the highest earning rate, to B, a show involving high-risk companies.

Carnival faced these challenges mainly due to its ability to raise $ 23.6bn from creditors and depositors within 12 months, making it one of the largest stock markets in the US.

Credit chart ($ bn) showing the amount of Carnival debt

His story highlights the recovery that has brought debt from the global epidemic, aided by a banking history that has favored large corporations to gain access to major markets. It is a sign of last year’s borrowing, as companies are now struggling with more debt.

“It’s incredible,” said Pete Trombetta, an expert at Moody’s travel management company. “Without market access [Carnival] could not get here. ”

Problems speak

Bernstein had already begun negotiating a crisis with investors from JPMorgan, Goldman Sachs and Bank of America to save Carnival from the financial crisis that erupted at the end of January.

Numbers were rising and governments were taking action to stop the spread, negotiations began very quickly. In March, the company’s mortgage debt rose from $ 1bn to about $ 6bn. Bernstein was “preparing for the worst”, he said.

There was no answer on the table. In addition to talking to banks and assessing public debt, Bernstein spoke to “the best business organizations in the United States” about potential financing. He looked at small loans that sell and sell money directly to those who sell their money.

It was not an unusual part of the CFO of a money-making company, which is used for many financial matters. “In March, I had a lot of training on any of the tools we got at the time,” Bernstein said.

He is said to sleep only three or four hours a night, waking up at 4 a.m. in the morning to talk to European retailers as the demand for money began to plummet.

A group of financiers comprising Elliott Management Corporation and Apollo Global Management recorded billions of dollars in debt at a rate of about 15%, according to people familiar with the agreements. Sixth Street also hit banks in March with a list of companies that could consider their finances, eventually donating $ 1.5bn to Carnival which could be converted to the equivalent of sitting behind a public partnership, secured on the big stairs. Details of possible packages were first reported by the Wall Street Journal.

But on April 1, the company simply turned to public markets, selling $ 4bn sales contract, with the help of its 86 instruments, along with a flexible and quantitative note – added to assist lenders.

Annual income chart ($ bn) showing Coronavirus threw Carnival coins

The results were very different. Calling and emails between the banking chiefs, financiers and Bernstein rushed to the wire, said people familiar with the deal. “Elections were held at 11, 12, 1 a.m. the same day before the construction of a decent house,” Bernstein said.

As a result of Carnival’s departure for secret payments it has become less expensive, said Bernstein, aided by the outrage sought by corporate vendors. Carnival won a 11.5% coupon on a three-year protected trade agreement, a dividend linked to some of the world’s most vulnerable companies.

The Carnival treaty was a momentous occasion, not only for the travel industry but also for a united United States because it showed that corporate markets remain open even for companies severely affected by the Covid-19 crisis.

A line chart ($) showing Carnival has begun to recover from the epidemic

Investors, investors and analysts say that this would not have been possible without the Federal Reserve, which on March 23 made an unprecedented move to start buying stock options in some way that has calmed down difficult markets.

People familiar with the secret trade say the nature of the talks has changed since the Fed’s announcement.

Bernstein said he thought Carnival would have been able to handle the situation even if he had not been interested in the central bank, but “to this day, I have no way of judging what would have happened if the Fed had not done what it did”.

Earning money was a viable option, giving the company enough money to last until the end of the year, according to comparisons from S&P Global Ratings. Be aware of changing keywords in the retail sector and various agencies, partly for the company to earn money in the future.

Passengers leave the Diamond Princess submarine
Passengers depart from the Diamond Princess submarine two weeks after the coronavirus turn away from the port of Yokohama, Japan © Igor Belyayev / TASS via Getty

The company raised $ 2.8bn in the business market in June, followed by a $ 1.3bn fine in July and another $ 900m bond in August. The corporate financial system is constantly on the move, but “it is clear that the public sector is in place and that this is the best solution,” said Bernstein.

“From the lender, if you have already borrowed [a company] “You will not be able to register for bankruptcy,” said John McClain, a history manager at Diamond Hill Capital Management, noting that Carnival is now too big to fail in the credit market. “You will lend them more money until they return to normal.”

Earn money for Carnival

‘Game changer’ vaccine

Bernstein had just come out of the shower on the morning of November 9 when she received news that Pfizer and BioNTech were developed a coronavirus vaccine that was found to be 90 percent effective. “I was so excited. I realized he was a game changer, ”said Bernstein.

Corporate corporations had already begun assembling in the summer. He jumped at the chance to vaccinate. Carnival market price rose from $ 13.71 at the end of October to $ 21.66 by the end of 2020. The end was near.

“It wasn’t about survival. I knew we were going to survive. But what would we look like?” Said Bernstein, adding that the vaccine significantly reduced the potential for corporate change.

But the company that exists today still looks very different from what it was in early 2020. Carnival has $ 11.5bn of cash on its paper after completing a $ 3.5bn contract in February, enough to continue next year despite earning zero money. They are still closed to negotiations with the authorities for permission to reopen the U.S. airline, their lucrative market.

It also defends itself against possible cheap charges brought to the US by more than 100 people who allegedly contracted coronavirus when they boarded a Carnival ship in February and March last year.

Even once the money comes back, a large portion of Carnival’s money will have to go to support its huge pile of debt. Carnival paid interest rates in excess of $ 1.2bn last year, up from just $ 200m in 2019.

“There are a lot of risks here,” says Trombetta’s Moody, adding that rising interest rates “disrupt” Carnival’s thinking.

Bernstein says he is already in the process of increasing Carnival’s debt growth by raising new funds and reducing the club’s interest rates. He also hopes to regain a good reputation in the company.

“This will take a few years before we can get our money back to the pre-Covid location,” he said. “Our goal is to get back to the same level.”


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