Shares in US-based cruise operator Carnival (CCL) sank 7.5% to 720p after it announced an $8 per share equity raise as part of a $6.25bn fundraising package.
Hit hard by the coronavirus outbreak, with some of its ships making headlines around the world after being stranded at sea, Carnival is hoping to raise much-needed cash as it needs around $1bn a month to cover its costs.
Most of the money is set to come from $4bn worth of bonds issued with a whopping 11.5% interest rate, while it is also issuing $1.75bn of convertible bonds.
EQUITY RAISE SLASHED TO $500M
The dual-listed company had hoped to raise $1.25bn by issuing new shares, but has had to lower its target to just $500m.
The $8 per share price is also a far cry from the $51 level the New York-listed shares traded at in January, suggesting investors are only prepared to accept a bargain price for the level of risk involved.
Carnival's London-listed shares have fallen 80% from £36.48 at the start of the year.
AJ Bell investment director Russ Mould said the downsized equity raise, plus the 11.5% coupon on the bonds, show how desperate Carnival is at the moment.
'DEMAND FOR CRUISES HAS EVAPORATED'
He said, ‘Under normal circumstances, you wouldn’t expect one of the largest leisure companies in the world to issue debt at such high interest rates, but it goes to show how desperate Carnival now is.
‘Demand for its cruises has evaporated because so many countries around the world are on lockdown and the headlines have been dominated in recent weeks about people stuck on cruise ships with coronavirus, creating fear about this form of leisure.
‘Investors brave enough to back the fundraising might think they are getting a bargain, yet Carnival is ploughing through cash at a high rate.
‘The prospectus for the fundraising says it needs $1bn a month to cover operating costs, cash refunds of customer deposits, servicing debt and some other factors.
‘That implies it needs life to return to normal by autumn otherwise it could be asking investors for even more money.’