Carnival: $200 Million

Carnival Cruise Lines could save $200 million in interest expenses when it redeems its outstanding zero coupon convertible subordinated notes due on June 15, 2005, at a redemption price of $384.30 per $1,000 principal amount at maturity, on June 19, 1992. The total redemption cost will be about $221 million.

In addition, Carnival said it expects to incur an extraordinary non-cash charge of approximately $5.5 million in its third quarter to write off the deferred financing costs arising from the original issuance of the notes on June 22, 1990.

Carnival said it will initially finance the redemption through short-term bank lines and working capital.

According to Mickey Arison, Chairman and CEO, the company plans to refinance the redemption with either long term debt financing or through the issuance of equity-linked securities, but has not made a decision yet.

10 Cents per Share?

By redeeming now, Carnival could save $200 million in interest costs over the next 13 years. This savings could again translate into additional earnings of 10 cents per share per year.

“We think redeeming the outstanding notes makes a great deal of sense because of the low interest rates available in today’s markets,” Arison said.

The issue price per note was $332.25 in June of 1990 with a principal amount due at maturity of $1,000 at an annual interest rate of 7.5 percent. The aggregate principal amount at maturity would have been $602 million.

Carnival raised approximately $200 million two years ago which it used to repay the $149.5 million down-payment financing of the three new shlps for Holland America Line and to increase working capital.

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