Carnival Corporation reported its Q1 2021 results yesterday. It showed a net loss of $2bn vs $781mn in losses during the same period last year. Carnival said they expect net losses in Q2 and the full year. The cruise operator ended Q1 with $11.5bn in cash and short-term investments with a cash burn rate of $500mn, better than expected as they identified and implemented opportunities to optimize its monthly spend. They expect H1 2021 cash burn at $550mn, better than they previously expected. Carnival highlighted that booking volumes were ~90% higher than Q4 2020 showing pent-up demand and potential for cruising long-term. During the remainder of 2021, the company expects to refinance debt at lower rates and extend maturities. During the conference call, CEO Arnold Donald said “While we have secured the liquidity to sustain us well into 2022 even with zero revenue, our cash flow, once we return to full operations, will be the primary driver to return to investment-grade credit over time”. CreditSights says that there’s better risk reward in Carnival exposure on a yield basis than in Royal Caribbean Cruises..

Carnival’s USD 7.625% 2026s were up 1.7 to 109.9, yielding 4.5% and its 10.5% 2026s were up 1 cent to 119.2 cents on the dollar, yielding 3.9%

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