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Carnival Sells $2.4 Billion Bond to Buy Back Costly Debt

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(Bloomberg) -- Carnival Corp. sold $2.4 billion of new junk bonds Wednesday to refinance debt the cruise ship company took on last year, when it was forced to pay high interest rates amid doubts about its ability to weather the pandemic.

The company sold the seven-year secured notes with a coupon of 4%, in the low range of pricing discussions, and reflects the strong demand for high-yield bonds as investors hunt for bigger returns. That will slash borrowing costs for Carnival because the proceeds will fund an offer to buy back about half of the 11.5% coupon debt the company issued in April 2020.

Read more: Carnival Said to Prep Bond Sale to Buy Back Debt

Carnival’s stock closed more than 9% up on Wednesday at $23.19. The existing 11.5% notes last traded at 113.875 cents on the dollar last Thursday, according to Trace bond pricing data.

Holders of about $2.4 billion of the $4 billion 11.5% notes accepted the tender offer by the early deadline of July 19, after the company offered to buy back as much as $2 billion of the securities, the company said in a statement on Monday.

Investors who accepted the early deadline and agreed to a change in the contract for the existing notes will receive 114.25 cents on the dollar. Holders that say yes by the final deadline of August 2 will receive 112.5 cents.

(Updates throughout with final pricing information.)

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