Carnival Sells $2.4 Billion Bond to Buy Back Expensive Debt

(Bloomberg) — Carnival Corp. sells $2.4 billion in new junk bonds 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.

Price discussions on the new debt are between 4% and 4.25% and reflect strong demand for high yield bonds as investors hunt for higher yields. That would lower Carnival’s borrowing costs, as 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 bond sales should be prepared to buy back debt

There was an investor call earlier Wednesday and the seven-year secured bonds are expected to be priced later in the day, according to people familiar with the matter who asked not to be named when discussing a private transaction.

Carnival’s stock rose more than 9% to $23.25 as of 1:40 p.m. in New York on Wednesday. Existing 11.5% notes last traded at 113,875 cents on the dollar last Thursday, according to Trace bond price data.

Holders of about $2.4 billion of the $4 billion 11.5% bond accepted the takeover offer by the early July 19 deadline, 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 contract change for the existing notes will receive 114.25 cents on the dollar. Holders who say yes before the August 2 deadline will receive 112.5 cents.

(Updates the second paragraph with official price talk and the fourth paragraph with the stock price.)

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