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Carnival plans to sell $1 billion in fresh stock as cruise ships remain in port

Unable to take customers around the world on its cruise ships, Carnival Corp. expects to sell some stock instead.

The cruise operator announced Monday afternoon that it will sell $1 billion in fresh shares as its ships remain docked due to the COVID-19 pandemic. Carnival CCL, +5.61% in January extended its cancellation of departures from the U.S. through the end of April, while also canceling trips departing from Australia and Europe. The company recently announced the planned resumption of Italian departures.

While the coronavirus pandemic has shut down cruise lines, investors have looked to their stocks as a way to play an eventual recovery. After falling hard early in 2020 on fears of a prolonged closure, shares have been revived: While Carnival stock has declined 37.7% in the past year, shares have gained more than 77% in the past six months, and nearly 50% in the past three months.

Carnival lost more than $2 billion in its most recently completed quarter, but Chief Financial Officer David Bernstein said when those results were released that the company has “the liquidity in place to sustain ourselves throughout 2021, even in a zero-revenue environment.”

Carnival has mostly relied on debt offerings to get through the pandemic, including a $3.5 billion debt offering earlier this month. The company’s credit rating was put on “review for downgrade” status at Moody’s Investors Service earlier this month, and is already rated deep into “junk” status.

Last month,  Truist Securities analyst Patrick Scholes wrote in a note that U.S. cruise ships could remain docked into 2022, though it is more likely cruises will resume later this year.

“We now see July as the best case for restart,” though the fourth quarter is more likely, he wrote.

Carnival shares dipped about 2.5% in after-hours trading Monday following the announcement.

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