8-KMaterial AgreementsFinancial Events

CARNIVAL CORP 8-K Report, Material Agreement (Jun 17, 2014)

Filed June 17, 2014For Securities:CCL

Summary

Carnival Corporation and Carnival plc have amended and restated their existing multi-currency revolving credit agreement, replacing a prior $1.6 billion, €450 million, and £150 million facility with a new five-year agreement valued at $1.7 billion, €500 million, and £150 million, with options for two one-year extensions. This new Facility Agreement, effective June 16, 2014, is with a syndicate of prominent financial institutions and provides enhanced borrowing capacity and flexibility. The amendment signifies Carnival's proactive management of its corporate liquidity. The updated credit facility offers a lower interest rate margin compared to the previous agreement (0.40% vs. 0.70% plus applicable benchmarks) and includes commitment and utilization fees that vary based on the drawn amount. Crucially, the new agreement does not contain credit rating-based default clauses or material adverse change covenants, offering greater stability in potential market fluctuations.

Key Highlights

  • 1Carnival has secured a larger, five-year revolving credit facility totaling $1.7 billion, €500 million, and £150 million, replacing a previous agreement.
  • 2The new Facility Agreement offers a reduced interest rate margin of 0.40% plus applicable benchmarks (LIBOR/EURIBOR), down from 0.70% in the prior agreement.
  • 3The facility includes customary commitment and utilization fees based on the amount drawn, incentivizing efficient use of credit.
  • 4Key financial covenants require consolidated shareholders' equity to exceed $5 billion, total borrowed monies to not exceed 65% of consolidated capital, and an EBITDA to net interest ratio of at least 3 to 1.
  • 5The agreement importantly excludes credit rating-based defaults and material adverse change covenants, providing operational flexibility.
  • 6Borrowings can be used for general corporate purposes, supporting commercial paper, and up to $300 million can be used for bonds, letters of credit, and indemnities.
  • 7Both Carnival Corporation and Carnival plc have cross-guaranteed obligations under the agreement.

Frequently Asked Questions

This Form 8-K filing announces Carnival Corporation and Carnival plc's entry into a material definitive agreement, specifically the amendment and restatement of their multi-currency revolving credit facility. This updates their existing credit arrangements to provide enhanced liquidity and financial flexibility.

The new Facility Agreement is larger, with a total capacity of $1.7 billion, €500 million, and £150 million, compared to the previous $1.6 billion, €450 million, and £150 million. It also offers a lower interest rate margin (0.40% vs. 0.70% plus benchmarks) and has a five-year term with extension options, whereas the previous agreement's term was set to expire in May 2016.

Yes, the Facility Agreement includes financial covenants. Carnival must maintain consolidated shareholders' equity above $5 billion, limit aggregate borrowed monies to 65% of consolidated capital, and ensure a ratio of EBITDA to consolidated net interest charges of at least 3 to 1. These are customary financial metrics for managing debt levels and operational performance.

The key benefits include increased borrowing capacity, a lower interest rate margin, and a longer-term commitment from lenders. Additionally, the absence of credit rating-based defaults and material adverse change covenants provides Carnival with greater operational and financial flexibility, particularly during periods of market volatility.