Saudis buy stake in Carnival

2020-04-07T10:14:59+00:00 April 7th, 2020|Finance|

Carnival Corp’s shares jumped last night after Saudi Arabia’s Public Investment Fund confirmed in a filing that it had acquired an 8.2% stake in the cruise ship operator.

Carnival’s shares surged 18% to $10.04 Monday on the New York Stock Exchange (NYSE) after the Saudis claimed that the fund now holds 43.5 mill shares in the major cruise company. As of last week’s close, the stake was worth $369.4 mill, Bloomberg said.

According to the financial newswire, the Saudis are getting a bargain-basement price for Carnival, as it’s share price is down by 81% this year, due to the cruise industry facing unprecedented risks because of COVID-19.

This Public Investment Fund has previously invested overseas, including taking stakes in Uber Technologies, Tesla and SoftBank Group Corp’s Vision Fund.

Carnival’s operations nearly stopped last month after a series of coronavirus outbreaks on its ships at sea.

The cruise industry was left out of the $2.2 trill US stimulus bill, which excluded non-US businesses. Although headquartered in Miami, Carnival is technically incorporated in Panama – an arrangement that allows it to avoid US income taxes and take advantage of minimum-wage requirements.

Since it stopped operations, Carnival has raised $6.25 bill to help meet expenses, but it’s paying a heavy price, Bloomberg said. Some $4 bill in bonds were priced with an 11.5% coupon last week. The shares were acquired before a planned stock offering by Carnival, so the percentage holding will change.

In an interview last Wednesday, CEO, Arnold Donald said that Carnival may turn to major shipbuilding countries, such as Italy or Germany, for lower-cost loans.

“Yes, those are definitely potential sources,” he reportedly said. “And there are others.”