Summary
Carnival Corporation announced on September 24, 2010, its intention to redeem all outstanding 2% Convertible Senior Debentures due 2021. The redemption is scheduled for October 25, 2010, with debenture holders receiving 100% of the principal amount plus accrued interest. This action effectively forces conversion or redemption for these debentures. Investors holding these convertible notes have the option to convert their debentures into Carnival Corporation common stock before the redemption date. If they choose not to convert, the debentures will be redeemed at par value plus accrued interest. This move by Carnival suggests a potential deleveraging strategy or a desire to simplify its capital structure by retiring this debt.
Key Highlights
- 1Carnival Corporation is redeeming all of its 2% Convertible Senior Debentures due 2021.
- 2The redemption date is set for October 25, 2010.
- 3Debenture holders will receive 100% of the principal amount plus accrued interest upon redemption.
- 4Holders have the option to convert their debentures into Carnival Corporation common stock prior to the redemption date.
- 5If converted, the company will deliver cash in lieu of common stock, indicating the debentures may be trading above their conversion value.
- 6This action signals a move to retire outstanding debt or encourage equity conversion.
Frequently Asked Questions
Carnival Corporation is issuing a notice to redeem all of its outstanding 2% Convertible Senior Debentures due 2021 on October 25, 2010.
Debenture holders can choose to convert their debentures into Carnival Corporation common stock before the close of business on October 25, 2010. If they do not convert, the debentures will be redeemed for cash equal to 100% of the principal amount plus accrued and unpaid interest.
This implies that the market value of Carnival's common stock is currently such that the conversion value of the debentures is higher than their redemption value. By offering cash, Carnival is fulfilling its obligation without issuing new shares, and the holder receives the equivalent value of the stock they would have received.
This redemption will reduce Carnival's outstanding debt. The company will pay the principal amount plus accrued interest on the debentures. The cash outflow will depend on how many debenture holders choose to convert versus redeem.