8-KShareholder MattersOther EventsExhibits & Filings

CARNIVAL CORP 8-K Report, Rights Modification (Apr 25, 2008)

Filed April 25, 2008For Securities:CCL

Summary

Carnival Corporation (CCL) announced on April 25, 2008, material modifications to its Senior Convertible Debentures due 2033. The primary change involves an amendment to the indenture, altering the interest payment structure and extending certain redemption and repurchase options for debenture holders. Specifically, the cash interest rate will be 0.50% per annum until October 29, 2009, with semi-annual payments commencing October 29, 2008. The company also introduced a restriction on its ability to redeem the debentures at its option until October 29, 2009, and offered holders an additional repurchase opportunity on that date. These modifications are significant for investors holding these debentures due to potential tax implications. The filing provides a detailed overview of U.S. federal income tax considerations for both U.S. and non-U.S. holders, including the possibility of a "deemed exchange" for tax purposes. While Carnival intends to treat the modification as not significant for tax purposes and potentially a tax-free recapitalization, holders are strongly advised to consult their tax advisors due to the inherent uncertainty in tax law interpretations for such debt modifications.

Key Highlights

  • 1Carnival Corporation amended the terms of its Senior Convertible Debentures due 2033.
  • 2The cash interest rate on the debentures has been set at 0.50% per annum until October 29, 2009.
  • 3Carnival cannot redeem the debentures at its option until October 29, 2009.
  • 4Debenture holders have an additional opportunity to surrender debentures for repurchase on October 29, 2009.
  • 5The company will make weighted average adjustments to the conversion rate for dividends exceeding $0.40 per quarter.
  • 6In specific change-in-control events or stock trading terminations, the conversion rate may be increased.
  • 7The filing discusses potential U.S. federal income tax consequences for debenture holders, including the concept of a 'deemed exchange'.

Frequently Asked Questions

The main changes include a reduction in the cash interest rate to 0.50% per annum until October 29, 2009, a restriction on Carnival's ability to redeem the debentures at its option until that date, and an additional repurchase opportunity for holders on October 29, 2009. Adjustments to the conversion rate for dividends and potential increases during certain change-in-control events are also noted.

The filing explains that the modifications could be treated as a 'deemed exchange' for U.S. federal income tax purposes, which may or may not be a taxable event. Carnival intends to argue that the modification is not 'significant' and thus not a taxable event, or that any deemed exchange would qualify as a tax-free recapitalization. However, due to tax law uncertainties, holders are strongly advised to consult their own tax advisors.

If debenture holders convert their holdings in connection with certain change in control events or a termination of trading of Carnival's common stock, the company will increase the conversion rate by issuing additional shares of its common stock.

For Non-U.S. holders, even if a 'deemed exchange' occurs, they generally will not be subject to U.S. federal income taxation unless the income is effectively connected with a U.S. trade or business or, in the case of non-resident aliens, they are present in the U.S. for 183 days or more and meet other conditions.