Carnival Corp. (NYSE:CCL) is back in the debt market, rolling out $993 million in senior unsecured notes to refinance pricier 7.625% bonds maturing in 2026. The new notes are expected to price between 5.875% and 6%, potentially slicing $16 million off the company's annual interest expenses, according to Bloomberg Intelligence estimates. It's a calculated move for a company that's been chipping away at a debt load that ballooned during the pandemic, with Fitch Ratings projecting Carnival's debt to drop to $27 billion by the end of 2025, down from $36 billion in 2022.

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Carnival's CFO David Bernstein didn't mince words in the latest earnings call: Debt reduction is priority one, two, and three. That mantra has driven $5.5 billion in refinancing this year alone, saving $145 million annually in interest costs. Fitch upgraded its rating on Carnival's senior unsecured notes, citing the company's record bookings for 2025 and 2026. The cruise operator, along with Royal Caribbean and Norwegian, is riding a wave of long-term bookings, as more travelers opt for cruises over traditional resort vacations.

The timing of Carnival's latest bond sale aligns with a broader debt issuance surge, fueled by a temporary tariff truce between the US and China. With four new junk bond deals hitting the market and $6 billion priced last week, Carnival is seizing the moment to secure lower borrowing costs as it continues to chip away at its pandemic-era debt mountain.

This article first appeared on GuruFocus.

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