Norwegian Cruise Line Holdings (NCLH) shares fell more than 4% on Monday, but Stifel analysts said the market was misinterpreting the “confusing capital market transactions” and argued the weakness is a buying opportunity.
Stifel wrote that after speaking with the company, it is “very clear to us that these transactions are an absolute positive as NCLH is not increasing its diluted share count (and is actually lowering it) and is lowering its overall borrowing costs.”
The firm added: “Net-net, we would use this weakness as a near-term buying opportunity for NCLH.”
According to Stifel, the transactions involve issuing $1.2 billion of new exchangeable senior notes due 2030 to refinance a large portion of NCLH’s 2027 convertibles.
The firm explained that because the new notes can only be settled in cash, the move will reduce the company’s dilutive share count, though the exact figure will not be known until pricing is finalised.
The analysts noted that some high-cost debt, such as the 8.125% senior notes due 2029, is also being refinanced.
While the equity issuance accompanying the deal will modestly impact dilution, Stifel said the new structure is more accretive overall: “The equity issuance is only being used to pay a premium to the 2027 convert holders. This transaction will negatively impact the diluted share count, but the new 2030 convertible is more accretive so, net-net, the overall share count will be reduced.”
Stifel sees the sell-off as overdone, arguing that with 2026 bookings back within normal ranges and European issues “seemingly fixed,” the valuation gap versus Royal Caribbean could narrow significantly, offering “material upside in NCLH shares.”
Source :
https://www.investing.com/news/stock-market-news/stifel-market-misreads-nclh-capital-moves-buy-the-dip-4231668
