Where does HAL stand in the Carnival Corporation queue for a potential restructure?

[Destiny0315]

With all the talk on here about Carnival's current financial woes, where do you think HAL stands amongst the nine products that it owns? Who would be expendable in a keep or kill decision?

Edited October 3, 2022 by Destiny0315

[vicd1969]

Maybe top 4 - I suspect the European subsidiaries Aida and Costa would have more willing buyers. Cunard could also be on the selling block to someone looking for prestige points, not necessarily short-term financial returns. Another possibility is Princess and HAL shedding older ships and then merging into one entity.

[mwj]

As Seabourn is managed through HAL, and Seabourn is up for sale https://www.cruisehive.com/carnival-in-talks-on-possible-sale-of-seabourn-brand/72702,

is HAL also part of the 'deal'?

[Florida_gal_50]

You'd think for some posters on this board that hal will be belly up before sundown.  No need to restructure.

Edited October 3, 2022 by Florida_gal_50

[Destiny0315]

Sorry if it wasn't clear for some in the topic line. I was talking about Carnival's potential need for restructuring of its products and not Holland America.

[The-Inside-Cabin]

If you want to dig into the weeds, read the transcript from their earnings call -  One thing I picked up is the term "opaque channels" which is when they want to discount the price but only to select groups so they protect "price integrity"  

 

Here is a question about the number of brands under CCL - He mentions HAL, Princess and Costa, but I can't tell if this is something good they are doing or if they are singled out to get better?

 

https://www.fool.com/earnings/call-transcripts/2022/09/30/carnival-ccl-q3-2022-earnings-call-transcript/

 

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Yes. Hey, guys. Good morning. And, Josh, welcome to your first call as CEO.

I guess, my question, we seem to be hearing a much different tone from some of your peers in terms of how the EBITDA or cash flow recovery is playing out versus what you guys just reported in the third quarter and your outlook for the fourth quarter. So, I guess, is it fair to assume that your Carnival Princess, your domestic brands, are doing very, very well right now, but it's your non-U.S. brands that are struggling at this point, and that's the issue right now versus your peers? And then, Josh, does that make you think a little bit differently about your portfolio ships, meaning do you still need 9 brands at this point?

Josh Weinstein

Yes. Hey, Steve. Thanks for the welcome. So I think you asked a couple of things.

Let me see if I can hit them all. So first of all, I can't speak to our peers. I won't speak to our peers. I'll speak to us.

The momentum is continuing, which is really promising, as you heard from my prepared remarks, as well as David's. Particularly over the last six weeks, things have ramped up incredibly strong, and the book of business is good. With respect to how we're looking at the brands, obviously, Carnival in the Caribbean has done a great job. They are Americas' cruise line, and it showed through loud and clear as we've been going through this past year.

But I wouldn't look at this as a North American versus European question. All of our brands are in varying points with respect to their pricing and their occupancy and how those play out, and they're responding to their target audience in their source markets and trying to optimize as best as they can. As you heard in my prepared remarks, and I think what we've talked about already before, is we can do better. I have high expectations for all of our brands to make significant improvement on the revenue side.

And some of it's blocking and tackling. Some of it is really pushing the envelope in certain areas. And I actually feel pretty confident so far. I've managed to hit three brands in that type of setting.

It's been Costa, Holland America and Princess. And the activities that are underway are significant. And I really -- I don't think it's appropriate in this forum to get into any specifics, but we are tracking hundreds of things, some big, some small, that are going to ultimately lead to significant improvement.

[The-Inside-Cabin]

Another analyst - 

https://seekingalpha.com/article/4544340-carnival-q3-earnings-disappoints-investors

 

We can conclude that the operational results during the third quarter were relatively impressive given the situation the company finds itself in, but they didn't necessarily translate all that well over to the financial results. Carnival is still burning through cash and even at 84% capacity barely fails to cover the interest expenses on the tremendous amount of debt it has accumulated during the last three years. Given the bleak guidance management provided, I am not sure if any good financial results are to be expected prior to the second-quarter results of the next year. Overall, the situation seems to be slowly deteriorating for the common stockholder. In our last article titled: "On Board The Titanic And Set On Collision Course", we pointed out that we deem it realistic to see the company at a $6-7 per share level, at which point we would re-evaluate the risk-reward profile which at that point might prove too enticing. Given the latest results and the somewhat weak guidance, we would have to conclude that even with Carnival selling at $7.03 we are seeing the opportunity as increasingly less favorable to the average investor. In the end, we would still have to argue that most investors are better off jumping ship and cutting their losses, as Carnival Corporation appears to be committed to a collision course with time slowly running out.

[LocoLoco1]

All is rank speculation: I worked for a Fortune500 firm that brutally carved itself up. 1/2 the company and debt went one way and the remaining 1/2 thrived albeit much smaller. If cruisings 2 polar opposites, small luxury vessels and mass market Mega ships, become the future $Moneymakers$ then that leaves HAL stuck in the middle with neither complimentary caviar nor waterslides. 

[Destiny0315]

Here is an interesting comparison of NCL vs CCL stocks that was just published today, with plenty of numbers to crunch inside it. For example, Carnival spent 28.9% less on food during the first 9 months of 2022 vs the first 9 months of 2019. Think less people and less bacon!                    https://seekingalpha.com/article/4544396-carnival-vs-norwegian-cruise-carnival-the-clear-winner

[BermudaBound2014]

3 hours ago, Florida_gal_50 said:

You'd think for some posters on this board that hal will be belly up before sundown.  No need to restructure.

 

Such drama.

 

I believe I have read every recent thread on HAL regarding the business side and haven't read a single person suggest HAL will be 'belly up before sundown'. Having an conversation around their very real financial challenges does not imply "belly up before sundown'. Using language like that is pure Hyperbole.  

Edited October 3, 2022 by BermudaBound2014

[mcrcruiser]

Bought   100 share of CCL  today ,Oct 3 ,2022 for $6.90  per share  . Taking a  7 night HAL cruise Dec 10,2022 on koningsdam to Mexico   & getting $100 OBC   . ,So my downside  will be $590 .00 after this OBC   .I think this is a good risk 

[DaveOKC]

5 minutes ago, mcrcruiser said:

Bought   100 share of CCL  today ,Oct 3 ,2022 for $6.90  per share  . Taking a  7 night HAL cruise Dec 10,2022 on koningsdam to Mexico   & getting $100 OBC   . ,So my downside  will be $590 .00 after this OBC   .I think this is a good risk 

Even less risk if you were taking a 14 day cruise and getting $250 back!

 

[Mary229]

3 hours ago, mwj said:

As Seabourn is managed through HAL, and Seabourn is up for sale https://www.cruisehive.com/carnival-in-talks-on-possible-sale-of-seabourn-brand/72702,

is HAL also part of the 'deal'?

That is questionable reporting and has not been substantiated.  It might make good sense but it has not been disclosed by CCL.

 

I think consolidation will happen with the hope of achieving  economies of scale. 
 

Also this is a difficult time where much of Asia is off the board for tourist travel due to continued lockdowns and Europe is looking much more difficult. 
 

There  is no visibility right now, in three months things may be different.  Remember just two months ago things were really picking up but the inflation numbers started finally impacting the American consumer as they watched the credit card interest rates increase and Putin and company started escalating the war 

Edited October 3, 2022 by Mary229

[Destiny0315]

33 minutes ago, BermudaBound2014 said:

 

Such drama.

 

I believe I have read every recent thread on HAL regarding the business side and haven't read a single person suggest HAL will be 'belly up before sundown'. Having an conversation around their very real financial challenges does not imply "belly up before sundown'. Using language like that is pure Hyperbole.  

I agree! The real drama is over on the Carnival board because the Carnival website is not allowing logins atm. The speculation is that they are removing the rest of the Covid protocols like NCL did today and/or putting in their new internet price increases. But then again maybe they can't pay their own internet bill.☺️

[rkacruiser]

If we shareholders only knew the financial statements of the individual operating companies, we might have some inkling as to the thought processes of the executives in Miami.  

 

I really question, at a time when belt tightening on the corporate level might help, if all of the operating companies need an Executive Vice-President (and associated personnel) for "this, that, and the other".  What harm would be done if such jobs could be performed, let's say, by whomever in charge of P&O and P&O Australia rather than by separate executives?  

[Florida_gal_50]

As usual same old same old stirring the pot.  Thankfully I miss most of it until someone quotes it.  How about imparting some helpful information.

[albingirl]

Right now, there are alot of Negative Nellies carrying on, but speculation is just that.  Nothing more.

[Gail & Marty sailing away]

5 minutes ago, albingirl said:

Right now, there are alot of Negative Nellies carrying on, but speculation is just that.  Nothing more.

Negative Nellies gets people to read ( even if not true) 

 

[Overhead Fred]

Nattering Nabobs of Negativism?

[Hlitner]

1 hour ago, albingirl said:

Right now, there are alot of Negative Nellies carrying on, but speculation is just that.  Nothing more.

I cannot single out specific companies (including HAL) from among the CCL family.  However, as an active investor who knows how to read financial reports, what we see for CCL is all very negative!  To make it simple, CCL now has a debt/equity ratio of about 3.7 in a world where anything above 2.0 carries serious negative connotations.  What this means is that CCL has an untenable amount of debt at a time when interest rates are rapidly rising (and will likely continue to rise in the near future).  We also know that CCL lost about $4.5 Billion in the past year!  Folks can debate about the future of CCL, but there is little disagreement that things cannot continue with that kind of cash drain.  The reality is that CCL has over $20 Billion of debt with few remaining tricks left that would increase cash flow.

 

Hank

[voyageur9]

18 minutes ago, Hlitner said:

... Folks can debate about the future of CCL, but there is little disagreement that things cannot continue with that kind of cash drain.  The reality is that CCL has over $20 Billion of debt with few remaining tricks left that would increase cash flow.

 

Hank

 

Edited October 4, 2022 by voyageur9

[Gail & Marty sailing away]

12 minutes ago, Hlitner said:

I cannot single out specific companies (including HAL) from among the CCL family.  However, as an active investor who knows how to read financial reports, what we see for CCL is all very negative!  To make it simple, CCL now has a debt/equity ratio of about 3.7 in a world where anything above 2.0 carries serious negative connotations.  What this means is that CCL has an untenable amount of debt at a time when interest rates are rapidly rising (and will likely continue to rise in the near future).  We also know that CCL lost about $4.5 Billion in the past year!  Folks can debate about the future of CCL, but there is little disagreement that things cannot continue with that kind of cash drain.  The reality is that CCL has over $20 Billion of debt with few remaining tricks left that would increase cash flow.

 

Hank

So what options do they have??? 

[voyageur9]

Refreshing to read Hank's well-reasoned and intelligent assessment. There's nothing negative about correctly assessing that a ship is about to sink. Even rats get it.

 

"A rotten carcass of a boat, not rigg'd,
Nor tackle, sail, nor mast; the very rats
Instinctively had quit it."

 

Shakespeare's The Tempest, Act I, Scene II (1610)

Edited October 4, 2022 by voyageur9
dropped word

[Hlitner]

50 minutes ago, Gail & Marty sailing away said:

So what options do they have??? 

I guess that is why the CEO gets the big bucks.  My fear is that the 3 major US cruise companies (CCL, RCI and NCLH) are quickly running out of options.  All three based their financial strategy (during the COVID shutdown) on business quickly coming back to normal by late 2022.  Unfortunately, all their plans were torpedoed by the surge of Omicron, continued fear of travel, a big surge in fuel prices, and general inflation.  A perfect negative storm of sorts.  

 

We have all heard the rumors that CCL has Seabourn up for sale, but I cannot help but wonder how that would shore-up (to us a nautical term) their financials.  Even if they could find a buyer willing to pay a fair price, a few $Billion more in the coffers would barely dent the over $22 Billion in long term debt.  And selling off assets further degrades future earnings potential.  

 

For now, there does not seem to be a lot of good options but to simply muddle along and hope that things get better.  But the debt clock keeps ticking (like the sword of Damocles) and debt service payments must be made   We are doing our best to help out by continuing to cruise (about 100 days a year) :).    I worry that all the cruise lines are losing the ability to refinance, with better terms, their debt in the awful financial market.   Any additional financing would likely come at an awful price and further deepen the financial slide of the cruise lines.

 

It has been difficult not to notice some of the strategies being used to infuse more cash.  Two examples are the push to get folks to pay 100% further in advance (by offering a discounted rate) and the new gift card promotion mentioned here on CC.  I sure hope we do not see the quality of cruising degrade due to excessive cost cutting.   The one positive development in recent months has been the gradual reopening of much of the world and we sure hope this trend continues.

 

Hank

[mcrcruiser]

1 hour ago, Hlitner said:

I cannot single out specific companies (including HAL) from among the CCL family.  However, as an active investor who knows how to read financial reports, what we see for CCL is all very negative!  To make it simple, CCL now has a debt/equity ratio of about 3.7 in a world where anything above 2.0 carries serious negative connotations.  What this means is that CCL has an untenable amount of debt at a time when interest rates are rapidly rising (and will likely continue to rise in the near future).  We also know that CCL lost about $4.5 Billion in the past year!  Folks can debate about the future of CCL, but there is little disagreement that things cannot continue with that kind of cash drain.  The reality is that CCL has over $20 Billion of debt with few remaining tricks left that would increase cash flow.

 

Hank

 Hank what about Seaborn  in the mix now ?