Carnival Corporation (CCL-3.3%), Royal Caribbean Cruises (RCL-1.5%), and Norwegian Cruise Line Holdings (NCLH-1.6%) trade down as Carnival refinances $2.3B in debt that was due 2023. The move was a reminder that the cruise companies carry a lot of debt - close to $25B more than cash at Carnival. Royal Caribbean and Norwegian are also in a tight place with $16.5B and $9.5B of net debt, respectively.
Rolling over the debt means that Carnival will still be paying a premium on capital, but much less than beforehand. Carnival will now pay 3.25% plus the LIBOR rate or about 4%, nearly a third less than the 11.5% the company was paying previously. The cruise line expects to save $135M in interest annually from the redemption.
Investors could also be responding to gloomy reports pointing to possibly higher fuel prices. Delta Air Lines (DAL-1.5%) said last week that fuel costs would determine whether the carrier was profitable, leading some traders to short other fuel-dependent stocks like cruise liners.