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RCL Stock


heidikay
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Posted (edited)

Q:  What do Bank of America, Susquehanna, CFRA, Morgan Stanley and Deutsche Bank all have in common?

 

A:  After reviewing 2q financials and listening to conference call all cut their price target on RCL today.  B of A is the lowest at $35.

Edited by Baron Barracuda
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7 minutes ago, Biker19 said:

^ and yet, the stock is up a bit more, when usually downgrades like that tank the stock.

 

Cruise stocks rarely make sense. 

 

Bought back in at $35, the booked OBC has me covered down to $15

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19 minutes ago, Baron Barracuda said:

Q:  What do Bank of America, Susquehanna, CFRA, Morgan Stanley and Deutsche Bank all have in common?

 

A:  After reviewing 2q financials and listening to conference call all cut their price target on RCL today.  B of A is the lowest at $35.

 

It's up to $38 as of now - went up since yesterday - Carnival and NCL are down. 

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44 minutes ago, Baron Barracuda said:

Q:  What do Bank of America, Susquehanna, CFRA, Morgan Stanley and Deutsche Bank all have in common?

 

A:  After reviewing 2q financials and listening to conference call all cut their price target on RCL today.  B of A is the lowest at $35.

Perhaps those investment banks had higher price targets hoping to be part of an underwriting group for a Royal equity issue and all the very large underwriting fees that go along with an equity issue. Now that Royal said no to a new equity issue in the near future ....... 😉

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RCL kept to their word and didn't issue new common stock (yet) but they just offered up 900 million in Bonds lol... stock should react to this tidbit

 

 

Royal Caribbean Group said Monday it has commenced a private offering of $900 million of senior convertible bonds that mature in 2025. The company said it would grant the initial purchasers an option to purchase up to $135 million more in convertible bonds. "The purpose of the offering is to replace some of the existing near-term maturities of convertible bonds with new longer-term convertible bonds in a manner which is non-dilutive to shareholders as described below," said Naftali Holtz, Chief
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45 minutes ago, BermudaBound2014 said:

RCL kept to their word and didn't issue new common stock (yet) but they just offered up 900 million in Bonds lol... stock should react to this tidbit

 

 

Royal Caribbean Group said Monday it has commenced a private offering of $900 million of senior convertible bonds that mature in 2025. The company said it would grant the initial purchasers an option to purchase up to $135 million more in convertible bonds. "The purpose of the offering is to replace some of the existing near-term maturities of convertible bonds with new longer-term convertible bonds in a manner which is non-dilutive to shareholders as described below," said Naftali Holtz, Chief

It looks like these are quasi private placement convertible bonds to replace some current issues of convertible bonds, a 2.875% convertible senior notes due November 15, 2023 and 4.25% convertible senior notes due June 15, 2023. i.e. non dilutive and my guess at a high interest rate and better conversion price for the purchasers. Sadly, they will only be sold to Institutional buyers and will not be registered for public purchases if anyone was interested.  

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1 minute ago, Biker19 said:

Down 10+%.

 

10% So far. I picked up some shorts last week when it topped $38 anticipating they would need to raise cash. I never thought it would be this soon. I figured they would wait until after NCL released. Now NCL has delayed their release until August 9th which is rarely a good sign. 

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Took quick look but didn't see conversion price on 2 7/8% and 4 1/4% bonds of '23 they plan to repurchase but at time they were issued in June '20 stock traded around $60.  Can only assume new converts will carry higher interest rate and lower conversion price.  They claim issuance is non-dilutive but each $1 of new bond will likely be convertible into more RCL shares than $1 of old bond.

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Here's how it all shook out today. All three cruise lines were down more than the DOW. NCL and CCL at about 1.5%. Of course, with today's press release, RCL took the biggest hit and ended the day down 7.6%. 

 

image.thumb.png.92200c705ded0a3f04b970dc4086fa8d.png

Edited by BermudaBound2014
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On 8/1/2022 at 1:36 PM, Baron Barracuda said:

Took quick look but didn't see conversion price on 2 7/8% and 4 1/4% bonds of '23 they plan to repurchase but at time they were issued in June '20 stock traded around $60.  Can only assume new converts will carry higher interest rate and lower conversion price.  They claim issuance is non-dilutive but each $1 of new bond will likely be convertible into more RCL shares than $1 of old bond.

I think they can get away with saying theses bonds are not dilutive because technically they can choose to pay the holder in cash rather than the stock. Of course, will they have the cash if and when the holders elect to convert is a whole other discussion!

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On 7/29/2022 at 6:33 PM, BermudaBound2014 said:

Stock is up because people are reading the headlines and not the 10Q. Here is the 10Q if anyone is interested. https://www.rclinvestor.com/financial-info/sec-filings/

 

 

@At Sea At Peace what's your interpretation? You've been quiet and I miss you 🙂 

 

Oh we're just busy with lake (NH) and ocean (FLL) with many of the family (after the Covid 2-year interruptions) while school is out for the GKs.  A lot of work, a lot fun.

 

On 8/1/2022 at 1:36 PM, Baron Barracuda said:

They claim issuance is non-dilutive but each $1 of new bond will likely be convertible into more RCL shares than $1 of old bond.

 

They play word salads.  It's like acceptable schizophasia to protect against SEC actions based on complaints.  A literal parsing of every aspect of their PRs (the SEC filing original, not the pumpers and the like) is required.

 

There are, in fact, certain strategies to assert "non-dilutive" convertible debt.  A good article with a recent example.

 

https://www.amttraining.com/knowledgebank/financing/zero-dilution-convertible-bonds-an-elegant-illustration-of-imperfect-market-pricing/

 

I don't know if, or how, such is really the case with RCL.

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17 hours ago, DirtyDawg said:

I think they can get away with saying theses bonds are not dilutive because technically they can choose to pay the holder in cash rather than the stock. Of course, will they have the cash if and when the holders elect to convert is a whole other discussion!

 

Well, had a bit of time to look at the 8K and parse the word salad.  🙄

 

You are correct in the "technically regard," that they can say "net neutral to outstanding shares and share equivalents after taking into account our ability to settle any remaining outstanding notes with cash."

 

The cash is at $50.11 per share, a 40% premium to the 8/1 PPS.

 

Also, with regard to "share equivalents," the current fully diluted share equivalents would include the potential shares under the current convertible debt that is being replaced by the new convertible debt.

 

Again, word salads.

 

Little mention of the interest rate MATH ~ $25,000,000 per year in added interest.

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52 minutes ago, At Sea At Peace said:

 

Well, had a bit of time to look at the 8K and parse the word salad.  🙄

Personally I prefer Shrimp or Lobster salad to word salad!

 

52 minutes ago, At Sea At Peace said:

 

You are correct in the "technically regard," that they can say "net neutral to outstanding shares and share equivalents after taking into account our ability to settle any remaining outstanding notes with cash."

 

The cash is at $50.11 per share, a 40% premium to the 8/1 PPS.

 

Also, with regard to "share equivalents," the current fully diluted share equivalents would include the potential shares under the current convertible debt that is being replaced by the new convertible debt.

 

Again, word salads.

 

Little mention of the interest rate MATH ~ $25,000,000 per year in added interest.

Thanks for looking at the 8K. You hit the nail on the head; bottom line these replacement converts are costing lots of extra cash to service. I'll have to look and see how much other debt is maturing this year. That would cost RCL even more in increased interest costs. 

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The $1B in new notes maturing in 2025 carry 6% rate and are convertible around $50.  The bonds they are buying back, the 2 7/8% and 4 1/4% notes of '23 are convertible at $80 and $72 respectively.  

 

Lot to pay for two extra years of liquidity.  

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On 8/3/2022 at 1:35 PM, BermudaBound2014 said:

Sorry gang, I shorted more today. I see no reason why this is trading up. 

 

Well, my take is the mid-terms approach will spur all kinds of "good news." 

 

I expect the CDC to scale back Covid restrictions for quarantining (if no symptoms), spacing footage, school and work protocols, etc. (I also expect interest rates to be moved indirectly downward by the FED and gas/oil the same until November).  It's a team effort.  😲

 

All such will help the cruise line stocks in the perception of "traders."  There are no fundamental reasons to feel good about such after November and a return to an unfettered market; however, there is a lot of play (volatility) between now and then.

 

😉

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When I look at how much people are willing to spend on cruises and the extras, I don’t have any concern about the future of our RCL or NCL stock. I purchased more in the recent dips and will sit and wait this out as I have many times over the decades. 

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2 hours ago, AlohaLivin said:

When I look at how much people are willing to spend on cruises and the extras, I don’t have any concern about the future of our RCL or NCL stock. I purchased more in the recent dips and will sit and wait this out as I have many times over the decades. 

 

Long is usually a reasonable proposition.

 

I'm simply concerned that we've had a once in a century pandemic (i.e., over the decades, there has been no such similar event) and the debt versus equity has turned topsy-turvy; debt up $12B and equity down $8B.

 

That debt needs to be serviced.  They, the distressed debt holders (junk bond status), are vultures IMO.

 

image.jpeg.f00c990ea1e5b5e328386a913eafefb3.jpeg

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1 minute ago, At Sea At Peace said:

 

Long is usually a reasonable proposition.

 

I'm simply concerned that we've had a once in a century pandemic (i.e., over the decades, there has been no such similar event) and the debt versus equity has turned topsy-turvy; debt up $12B and equity down $8B.

 

That debt needs to be serviced.  They, the distressed debt holders (junk bond status), are vultures IMO.

 


In my view, investing is sometimes a science and sometimes an art. Our increased cruise line investments  have been more the latter. The last time I did that I purchased Square during the initial offering period since I used in my private health practice and loved it - thankfully that was a wonderful investment.  At age 62 now we moved 2 years ago to a more conservative portfolio, but I have some funds that I continue to use for “gut” purchases, Time will tell. 

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On 8/4/2022 at 5:58 PM, AlohaLivin said:


In my view, investing is sometimes a science and sometimes an art. Our increased cruise line investments  have been more the latter. The last time I did that I purchased Square during the initial offering period since I used in my private health practice and loved it - thankfully that was a wonderful investment.  At age 62 now we moved 2 years ago to a more conservative portfolio, but I have some funds that I continue to use for “gut” purchases, Time will tell. 

 

Yep, good thoughts.

 

There is something interesting about the RCL recent $1.15B ($900M+$150M), first being the $150M optional additional amount (green shoe) was tendered.

 

So, it makes sense to look at the debt structures and players.  Morgan Stanley and Bank of America executed the current deal.  They, along with RCL, refinanced 60% or so of two outstanding issuances that were due in 2023.  That % prevents certain tendering rules and also allows the institutional investors (primarily hedge funds) to essentially roll over the hedges.

 

Question ~ why couldn't NCL and CCL do this, especially CCL that just directly diluted equity with new shares?

 

Analysts Answer ~ Per the IFR article ~ Morgan Stanley has agreed to backstop the sale of $3.15B of new debt in 2023.  That will allow RCL to wait for better bond market conditions, i.e., rates.

 

https://www.ifre.com/story/3466616/cruise-control-royal-caribbean-navigates-choppy-cb-markets-hnc8dkg5xr

 

So, it appears that RCL has a life preserver available from Morgan Stanley through 2023, at least in regards to handling expected maturities of long-term debt.

 

 

 

 

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