After it became clear that Cruise Lines are left out of the the Stimulus bill a certain oil-rich kingdom bought more than 8% in Carnival Corporation (NYSE: CCL).Prior to this huge investment by Saudi Arabia, Carnival Corporation has issued a massive $4B in high-interest, junk debt and diluted its unfortunate shareholders to the tune of 62.500.000 additional shares priced at $8.
For us, ordinary folks, this was a huge mistake by Mohammed Bin Salman (King of Saudi Arabia).But for the market this seemed to be a good news as CCL went up 20% on the next trading day and it closed at $12.56 on Friday.
Seems like CCL saved its skin for a while same as Royal Caribbean Cruises Ltd. which has increased its liquidity with the help of a $2.2 billion loan. Miami based company (NYSE: RCL) now has more than $3.6 billion in available assets, according to a statement from the company.
But what NCLH will do now that bailout money is not here? Norwegian Cruise Line Holdings (NYSE:NCLH) is in big trouble according to leaked info. According to Reuters NCLH has hired investment bank Goldman Sachs Group Inc to explore different financing options that could include the sale of a stake in the company,
After suspended operations cruise lines have been burning cash while the end of the coronavirus lock-downs are not coming to an end. This means that major cruise companies will not survive till the end of year without serious money injections.
Several companies have turned to PIPE deals in recent weeks to weather the fallout from the COVID-19 outbreak including Carvana Co (NYSE:CVNA), payment company EVO Payments Inc (NASDAQ:EVOP), and online real estate broker Redfin Corp (NASDAQ:RDFN).
Companies usually pull a PIPE card when all other options dry out.
Warren Buffett enters the stage. The man behind the most controversial stock purchase and then a fast sale of those same stocks could be a perfect fit for cruise lines. Why Warren Buffett? As we said earlier he already did the PIPE deal with his loan to Occidental and Goldman Sachs during the 2008 financial crisis and he profited from that deal.
Why could this be a great deal for both NCLH and Mr. Buffett when all cruise ships are sitting empty in their ports? Because people are booking like crazy for 2021. Maybe you are scared of entering any floating building again but some people cant just stop travelling. Many of those bookings are also re-bookings by people whose trips were cancelled due to coronavirus.
We all know that Buffett’s Berkshire Hathaway tradition is investing in stocks and then sitting on them for a long time. well, with this information cruise stocks such as NCLH are not a “short story” anymore.
Speaking on CNBC on April 14, Carnival Corporation CEO Arnold Donald said that they “had substantial bookings,” in April and that “Bookings for 2021 are strong”.
People will travel again. And even more than before as they saw that life goes by fast, and when you are confined in your home, thinking about your life, you start remembering good times, places you have been to and things you done. And you wanna do that all over again and more.