Carnival Cruise Lines has announced that the Bahamian government is acquiring a 35 percent interest in the Crystal Palace Resort & Casino. Analysts consider the move to be Carnival’s first step towards disposition of the property.
Carnival announced last week that it is pursuing the disposition of all or part of its investment in the Crystal Palace Resort & Casino which is located in Nassau, Bahamas.
The company said the alternatives under consideration included the sale of the Crystal Palace; a writedown of Carnival’s investment to net realizable value; or a spinoff to Carnival shareholders.
The Bahamian government is said to take back $70 million in debt owed by the Crystal Palace and will contribute the land, valued at $10 million.
Jim Parker, analyst at The Robinson Humphrey Company, said that the disposition of the Crystal Palace would have a substantial positive impact on Carnival’s earnings stream and share price. He said that losses including related interest expense from the Crystal Palace were around $0.21 per share in 1990 and are estimated to be a similar amount in 1991.
According to Parker, previous estimates for 1992 also assumed that losses from the Bahamian operation would reduce Carnival’s earnings further by around $0.12 per share.
Parker said that disposition of this operation from the start of fiscal 1992 would enhance his earnings estimate from $2.00 per share to $2.10 per share.
Parker also said that the Crystal Palace has partially diverted management’s attention as well as Carnival’s financial and marketing resources from its cruise business.
Carnival’s investment in the Crystal Palace is around $200 million, and related debt is approximately $70 million.
Carnival has also announced an increase in its regular quarterly dividend on its common stock to $0.13 from $0.12 per share. The new dividend will be in effect for the fourth quarter ending November 30, 1991, payable December 16, 1991, to stockholders of record November 30, 1991.
At press time, the market had reacted favorably and Carnival shares closed at $26 on the American Stock Exchange.