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Item 1A. Risk Factors

2021-04-07 compared with 2020-10-08 · 111 added, 160 removed, 29 unchanged (90% of the section changed)

Risk Factors .

The risk factors in this Form 10-Q below should be carefully considered, including the risk factors discussed in “Risk Factors” and other risks discussed in our Form 10-K, our Form 10-Q for the quarters ended February 29, 2020 and May 31, 2020 and other filings with the SEC since the date of the Form 10-K.

The risk factors in this Form 10-Q below should be carefully considered, including the risk factors discussed in “Risk Factors” and other risks discussed in our Form 10-K.

These risks could materially and adversely affect our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity, and stock price.

Our business also could be affected by risks that we are not presently aware of or that we currently consider immaterial to our operations.

COVID-19 and Liquidity/Debt Related Risk Factors

• COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations.

The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, litigation, cash flows, liquidity, and stock price.

The spread of COVID-19 and the recent developments surrounding the global pandemic are having material negative impacts on all aspects of our business.

The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, reputation, litigation, cash flows, liquidity, and stock price.

The COVID-19 global pandemic is having material negative impacts on all aspects of our business.

We implemented a pause of our guest cruise operations in mid-March 2020 across all brands.

Although we have begun the resumption of limited guest operations in September 2020, such partial pause may be prolonged.

In addition, we have been, and will continue to be further, negatively impacted by related developments, including heightened governmental regulations and travel advisories, recommendations by the U.S.

Department of State, the Centers for Disease Control and Prevention and other regulatory authorities, and travel bans and restrictions, each of which has impacted, and is expected to continue to significantly impact, global guest sourcing and our access to various ports of call.

To date we have incurred significant costs as we paused our guest cruise operations, provided air transportation to return our passengers to their home destinations, repatriated shipboard team members and assisted some of our crew that were unable to return home, with food and housing.

We will continue to incur COVID-19 related costs as we sanitize our ships and implement additional hygiene-related protocols to our ships, as well as prepare for the continued resumption of guest operations.

In addition, the industry may be subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks, which requirements may be costly and take a significant amount of time to implement across our global fleet cruise operations.

Although we began the resumption of limited guest cruise operations in September 2020 with cruises by Costa and in October 2020 with cruises by AIDA, as of February 28, 2021, none of our ships were operating with guests onboard.

The pause with respect to these and other brands and ships may be prolonged.

In addition, we have been, and will continue to be negatively impacted by related developments, including heightened governmental regulations, travel bans and travel advisories and restrictions and recommendations by the U.S.

Department of State, the Centers for Disease Control and Prevention (“CDC”) and other governmental authorities.

We incurred significant costs as we paused our guest cruise operations, provided air transportation to return our passengers to their home destinations, repatriated shipboard team members and assisted some of our crew that were unable to return home with food and housing.

We will continue to incur COVID-19 related costs as we implement additional hygiene-related protocols to our ships, as well as prepare for the continued resumption of guest cruise operations.

In addition, the industry is subject to and may be further subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks, and these requirements may be costly and take a significant amount of time to implement across our global cruise operations.

In October 2020, the CDC announced a framework for a phased resumption of cruise ship passenger operations in U.S.

waters that is currently uncertain and will require further evaluation as we seek to resume operations.

Implementing these requirements may result in an increase in costs and take time before the resumption of our guest cruise operations.

Due to the outbreak of COVID-19 on some of our ships, and the resulting illness and loss of life in certain instances, we have been the subject of negative publicity, which could have a long term impact on the appeal of our brands, which would diminish demand for vacations on our vessels.

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We cannot predict the quantum or outcome of any such proceedings, some of which could result in the imposition of civil and criminal penalties in the future, and the impact that they will have on our financial results, but any such impact may be material.

We also remain subject to extensive, complex, and closely monitored obligations under the court-ordered

environmental compliance plan supervised by the U.S.

District Court for the Southern District of Florida, as a result of the previously disclosed settlement agreement relating to the violation of probation conditions for a plea agreement entered into by Princess Cruises and the U.S.

We also remain subject to extensive, complex, and closely monitored obligations under the court-ordered environmental compliance plan supervised by the U.S.

District Court for the Southern District of Florida, as a result of the

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previously disclosed settlement agreement relating to the violation of probation conditions for a plea agreement entered into by Princess Cruises and the U.S.

Department of Justice in 2016.

We remain fully committed to satisfying those obligations.

COVID-19 presents enormous challenges for the company, which could result in material adverse impacts.

We have insurance coverage for certain liabilities, costs and expenses related to COVID-19 through our participation in Protection and Indemnity (“P&I”) clubs, including coverage for direct and incremental costs including, but not limited to, certain quarantine expenses and for certain liabilities to passengers and crew.

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There is a $10 million deductible per occurrence (meaning per outbreak on a particular ship).

We cannot assure you that we will receive insurance proceeds that will compensate us fully for our liabilities, costs and expenses under these policies.

We cannot assure you that we will receive insurance proceeds that will compensate us fully for our liabilities, costs and expenses that exceed the $10 million deductible under these policies.

We have no insurance coverage for loss of revenues or earnings from our ships or other operations.

In connection with our capacity optimization strategy, we have accelerated the removal of ships from our fleet in 2020 which were previously expected to be sold over the ensuing years.

In connection with our capacity optimization strategy, we have accelerated the removal of ships from our fleet which were previously expected to be sold over the ensuing years.

We have sold, expect to sell or have agreements for the disposal of various vessels.

Some of these agreements or preliminary agreements for the disposal of vessels are for recycling.

Some of these agreements for the disposal of vessels are for recycling.

When we choose to dispose of a ship, there can be no assurance that there will be a viable buyer to purchase it at a price that exceeds our net book value, which could result in ship impairment charges and losses on ship disposals.

The effects of COVID-19 on the operations of shipyards where our ships are under construction will result in a delay in ship deliveries, which we cannot predict and may be prolonged.

The effects of COVID-19 on the operations of shipyards where our ships are under construction will result in a delay in ship deliveries.

We cannot predict the timing of our complete return to service and when various ports will reopen to our ships.

If we are delayed in recommencing guest cruise operations or there is a future pause in the resumption of limited guest operations, it could negatively impact our liquidity.

If we are delayed in recommencing guest cruise operations or there is a further pause in the resumption of limited guest cruise operations, it could further negatively impact our liquidity.

As our business is seasonal, the impact of a delay or further pause in the resumption of guest cruise operations will be heightened if such delay or pause occurs during the Northern Hemisphere summer months.

Moreover, even as travel advisories and restrictions are lifted, demand for cruises may remain weak for a significant length of time and we cannot predict if and when each brand will return to pre-outbreak demand or fare pricing.

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We have never previously experienced a complete cessation of our guest cruise operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our brands and future prospects is uncertain.

In particular, we cannot predict the impact on our financial performance and our cash flows required for cash refunds of deposits as a result of the current partial pause in our global fleet cruise operations, which may be prolonged, and the public’s concern regarding the health and safety of travel, especially by cruise ship, and related decreases in demand for travel and cruising.

In particular, we cannot predict the impact on our financial performance and cash flows (including as required for cash refunds of deposits) as a result of the current pause in our guest cruise operations, which may be prolonged, and the public’s concern regarding the health and safety of travel, especially by cruise ship, and related decreases in demand for travel and cruising.

Moreover, our ability to attract and retain guests and our ability to hire and the amounts we must pay our crew depends, in part, upon the perception and reputation of our company and our brands and the public’s concerns regarding the health and safety of travel generally, as well as regarding the cruising industry and our ships specifically.

As a result, we expect a net loss on both a U.S.

GAAP and adjusted basis for the quarter and year ending November 30, 2020, and our ability to forecast our cash inflows and additional capital needs is hampered.

As a result of all of the foregoing, we have raised, and expect to be required to further raise, significant additional capital, including additional equity capital.

Our access to and cost of financing depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings.

As a result of COVID-19's effects on our liquidity, since March 2020, Moody’s and S&P Global have downgraded our credit ratings to be below investment grade.

Our current short-term commercial paper credit rating prevents us from issuing additional commercial paper.

If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt financing will be further negatively impacted.

Our access to and cost of financing depends on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings.

As a result of COVID-19's effects on our operations, Moody's and S&P Global have downgraded our credit ratings to be non-investment grade.

If we are delayed in recommencing guest cruise operations or there is a further pause in the resumption of limited guest cruise operations, our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt or equity financing will be further negatively impacted.

In addition, the terms of future debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations or be unavailable due to our covenant restrictions then in effect.

There is no guarantee that debt financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations.

Additionally, the impact of COVID-19 on the financial markets is expected to adversely impact our ability to raise funds through equity financings.

There is no guarantee that debt or equity financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations.

Additionally, the impact of COVID-19 on the financial markets may adversely impact our ability to raise funds.

In addition, the COVID-19 outbreak has significantly increased economic and demand uncertainty.

The current outbreak and continued spread of COVID-19 could cause a global recession, which would have a further adverse impact on our financial

condition and operations.

The current outbreak and continued spread of COVID-19 has caused a global recession, which could have a further adverse impact on our financial condition and operations.

In past recessions, demand for our cruise vacations has been significantly negatively impacted which has resulted in lower occupancy rates and adverse pricing, with a corresponding increase in the use of credits and other means to attract travelers.

Current economic forecasts for significant increases in unemployment in the U.S.

and other regions due to the adoption of physical distancing and other policies to slow the spread of the virus is likely to have a negative impact on booking demand for our global fleet cruise operations, and these impacts could exist for an extensive period of time.

Significant increases in unemployment in the U.S.

and other regions due to the adoption of physical distancing and other policies to slow the spread of the virus have had, and are likely to continue to have, a negative impact on booking demand for our guest cruise operations, and these impacts could exist for an extensive period of time.

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The extent of the effects of the outbreak on our business and the cruising industry at large is highly uncertain and will ultimately depend on future developments, including, but not limited to, the duration and severity of the outbreak, the length of time it takes for demand and pricing to return and normal economic and operating conditions to resume.

To the extent COVID-19 adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in Item 1A.

“Risk Factors” included in our Form 10-K.

• Any potential government disaster relief assistance could impose significant limitations on our corporate activities and may not be available to us on terms that are favorable or at all .

If any government provides or agrees to provide disaster relief assistance, it may impose certain requirements on the recipients of the aid including restrictions on executive officer compensation, share buybacks, dividends, prepayment of debt, incurrence of additional indebtedness and other similar restrictions until the aid is repaid or redeemed in full.

In addition, the government may change the terms of the assistance or the eligibility requirements.

We cannot assure you that any such government disaster relief assistance will not significantly limit our corporate activities or, even if we qualify for a program, will be available to us on terms that are favorable or at all.

For example, we initially qualified for a government commercial paper program providing over $700 million of available liquidity, and in September 2020, the relevant government agency paused our access to further drawings, and the ability to roll over existing drawings, under the government commercial paper program.

Any restrictions, terms and inability to access government disaster relief assistance could adversely impact our business, operations, liquidity and financial condition.

• Our substantial debt could adversely affect our financial health and operating flexibility .

We have a substantial amount of debt and significant debt service obligations.

Our substantial debt could have important negative consequences for us.

Our substantial debt could:

◦ require us to dedicate a large portion of our cash flow from operations to service debt and fund repayments

on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures

and other general corporate purposes;

◦ increase our vulnerability to adverse general economic or industry conditions;

◦ limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

◦ place us at a competitive disadvantage compared to our competitors that have less debt;

◦ make us more vulnerable to downturns in our business, the economy or the industry in which we operate;

◦ limit our ability to raise additional debt or equity capital in the future to satisfy our requirements relating to

working capital, capital expenditures, development projects, strategic initiatives or other purposes;

◦ restrict us from making strategic acquisitions, introducing new technologies or exploiting business

opportunities;

◦ make it difficult for us to satisfy our obligations with respect to our debt;

◦ expose us to the risk of increased interest rates as certain of our borrowings are (and may be in the future) at

a variable rate of interest.

• Despite our leverage, we may incur more debt, which could adversely affect our business and prevent us from fulfilling our obligations with respect to our debt.

We may be able to incur substantial additional debt in the future.

Although the instruments governing our existing indebtedness contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that could be incurred in compliance with these restrictions could be substantial and a portion of such debt could be secured.

The instruments governing our existing indebtedness do not prevent us from incurring liabilities that do not constitute “Indebtedness” as defined therein.

If new debt is added to our existing debt levels, our business could be adversely affected, which may prevent us from fulfilling our obligations with respect to our debt.

• We are subject to restrictive debt covenants that may limit our ability to finance future operations and capital needs and to

pursue business opportunities and activities.

In addition, if we fail to comply with any of these restrictions, it could have a material adverse effect on the company .

Certain of our debt instruments limit our flexibility in operating our business.

For example, some of our debt instruments limit the ability of Carnival Corporation, Carnival plc and certain of their respective subsidiaries to, among other things:

◦ incur or guarantee additional indebtedness;

◦ pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments;

◦ make certain investments;

◦ consummate certain asset sales;

◦ engage in certain transactions with affiliates;

◦ grant or assume certain liens;

◦ consolidate, merge or transfer all or substantially all of our assets.

All of these limitations are subject to significant exceptions and qualifications.

Despite these exceptions and qualifications, we cannot assure you that the operating and financial restrictions and covenants in certain of our debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest.

Any future indebtedness may include similar or other restrictive terms.

In addition, many of our debt agreements contain one or more financial covenants that require us to maintain minimum debt service coverage, maintain minimum shareholders equity and/or limit our debt to capital ratio.

Our ability to comply with our debt covenants, including the financial maintenance covenants described above, and restrictions may be affected by events beyond our control.

These include prevailing economic, financial and industry conditions.

If we breach any of these covenants or restrictions, we could be in default under the terms of certain of our debt facilities and the relevant lenders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral, if any, securing that debt.

If the debt under certain of our debt instruments that we enter into were to be accelerated, our assets may be insufficient to repay in full our debt.

Borrowings under other debt instruments that contain cross-default provisions also may be accelerated or become payable on demand.

In these circumstances, our assets may not be sufficient to repay in full our indebtedness then outstanding.

• We require a significant amount of cash to service our debt and sustain our operations.

Our ability to generate cash depends on many factors beyond our control, and we may not be able to generate cash required to service our debt .

Our ability to meet our debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash.

This will be affected by our ability to successfully implement our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic.

If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets.

We cannot assure you that we will be able to generate sufficient cash through any of the foregoing.

If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt.

Refer to “Liquidity, Financial Condition and Capital Resources.

• Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly .

Borrowings under certain of our facilities are at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on certain of our variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

In addition, in July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it will no longer persuade or compel banks to submit LIBOR rates after 2021.

It is unclear whether or not, at that time, LIBOR will cease to exist and a satisfactory replacement rate developed or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of, among other entities, large U.S.

financial institutions, is considering replacing U.S.

dollar LIBOR with a new index that measures the cost of borrowing cash overnight, backed by U.S.

Treasury securities (“SOFR”).

SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.

Whether or not SOFR attains market traction as a LIBOR replacement rate remains in question.

As such, the future of LIBOR at this time is uncertain.

If LIBOR ceases to exist, the level of interest payments on the portion of our indebtedness that bears interest at variable rates would be affected, which may adversely impact the amount of our interest payments under such debt.

We have entered into, and in the future we will continue to enter into, interest rate swaps that involve the exchange of floating for fixed-rate interest payments to reduce interest rate volatility.

However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any such swaps may not fully mitigate our interest rate risk, may prove disadvantageous, or may create additional risks.

• As a result of the COVID-19 outbreak, we may be out of compliance with a maintenance covenant in certain of our debt facilities, for which we have waivers for the period through March 31, 2021 with the next testing date of May 31, 2021.

Under the terms of certain of our debt facilities, we are required to maintain minimum debt service coverage (EBITDA to consolidated net interest charges for the most recently ended four fiscal quarters) of not less than 3.0 to 1.0 at the end of each fiscal quarter.

As of August 31, 2020, we have entered into supplemental agreements or side letters to amend our agreements with respect to this Financial Covenant to:

• Waive compliance for all of our funded export credit facilities through March 31, 2021, August 31, 2021 or December 31, 2021, as applicable.

• Waive compliance through November 30, 2021 for certain of our bank loans.

We will be required to comply beginning with the next testing date of February 28, 2022.

• Waive compliance for the remaining applicable bank loans through their respective maturity dates.

At August 31, 2020, we were in compliance with the applicable debt covenants.

Subsequent to August 31, 2020, we extended the Financial Covenant waivers for our funded export credit facilities through at least November 30, 2021 (with the next testing date of February 28, 2022) except that for three of our funded export credit facilities with Financial Covenant waivers through March 31, 2021 (with the next testing date of May 31, 2021) or August 31, 2021 (with the next testing date of November 30, 2021), with total aggregate indebtedness of $1.3 billion as of August 31, 2020, we are currently engaged in discussions to extend the waivers for these facilities through November 30, 2021 (with the next testing date of February 28, 2022).

In addition, we have entered into supplemental agreements or side letters to amend our agreements with respect to the Financial Covenant for our unfunded export credit facilities to waive compliance through August 31, 2021 (with the next testing date of November 30, 2021) for aggregate principal of $2.7 billion, through November 30, 2021 (with the next testing date of February 28, 2022) for aggregate principal of $1.2 billion (of which we borrowed $610 million to fund delivery of a ship in September 2020), and through December 31, 2021 (with the next testing date of February 28, 2022) for aggregate principal of $3.7 billion.

For the remaining three unfunded export credit facilities with an aggregate principal of $1.8 billion, we are engaged in discussions with the counterparties to waive the Financial Covenant through March 31, 2021 (with the next testing date of May 31, 2021).

Simultaneously with obtaining the initial waivers for these three unfunded export credit facilities, we have also requested extension of waivers for these facilities through November 30, 2021 (with the next testing date of February 28, 2022).

Although highly unlikely, if the covenant waiver for any unfunded facility for which we have not yet obtained a waiver is not obtained, the lender under that facility could terminate it if we did not comply with the Financial Covenant for any fiscal quarter ending on or after August 31, 2020.

Even though we have or expect to have waivers in place with respect to this covenant, we may be out of compliance with the Financial Covenant following March 31, 2021 with the next testing date of May 31, 2021 or in future periods for certain agreements because of the pause in our guest operations.

If we expected to be out of compliance, we would again seek waivers from the lenders under the applicable facilities prior to any covenant violation.

Covenant waivers have led and may continue to lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities.

Our ability to provide additional lender protections under these facilities, including the granting of security interests in collateral, will be limited by the restrictions in our indebtedness.

There can be no assurance that we would be able to obtain waivers in a timely manner, on acceptable terms or at all.

If we were not able to obtain a covenant waiver under any one or more of these debt facilities, we would be in default of such agreements, which could result in cross defaults to our other debt agreements.

As a consequence, we would need to refinance or repay the applicable debt facility or facilities, and would be required to raise additional debt or equity capital, or divest assets, to refinance

or repay such facility or facilities.

If we were to be unable to obtain a covenant waiver under any one or more of these debt facilities, there can be no assurance that we would be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

With respect to each of these debt facilities, if we were not to obtain a waiver or refinance or repay such debt facilities, it would lead to an event of default under such facilities, which could lead to an acceleration of the indebtedness under such debt facilities.

To the extent COVID-19 adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many other risks.

• As a result of the COVID-19 outbreak, we may be out of compliance with one or more maintenance covenants in certain of our debt facilities, with the next testing date of November 30, 2022.

Under the terms of certain of our export credit facilities, we are required to comply with the Interest Coverage Covenant of not less than 3.0 to 1.0, and ensure that our Debt to Capital Covenant does not exceed 65% at the end of each fiscal quarter.

As of February 28, 2021 (and while being in compliance with the Debt to Capital Covenant as of such date), we obtained waivers of compliance with the Interest Coverage Covenant and Debt to Capital Covenant in our export credit facilities through August 31, 2022 (with the next testing date of November 30, 2022) or November 30, 2022 (with the next testing date of February 28, 2023) for our funded export credit facilities with aggregate indebtedness of $8.9 billion as of February 28, 2021 and unfunded export credit facilities with an aggregate principal amount of $6.5 billion as of February 28, 2021.

During the first quarter of 2021 we entered into supplemental agreements with respect to our Revolving Credit Facility and many of our bank loans.

Under our Revolving Credit Facility and many of our bank loans, we are now required to maintain the Interest Coverage Covenant from February 28, 2023, at a ratio of not less than 2.0 to 1.0 for the February 28, 2023 and May 31, 2023 testing dates, 2.5 to 1.0 for the August 31, 2023 and November 30, 2023 testing dates, and 3.0 to 1.0 from the February 28, 2024 testing date onwards, or through their respective maturity dates, and the Debt to Capital Covenant at the end of each fiscal quarter before the November 30, 2021 testing date at a percentage not to exceed 65%.

From the November 30, 2021 testing date until the May 31, 2023 testing date the Debt to Capital Covenant is not to exceed 75%, following which it will be tested at levels which decline ratably to 65% from the May 31, 2024 testing date onwards.

Even though we expect to obtain further amendments under our debt facilities with respect to the Interest Coverage Covenant or the Debt to Capital Covenant, if such amendments are not obtained we may be required to take certain actions, which in the case of the Debt to Capital Covenant could include issuing additional equity and/or reducing our indebtedness, failing which we may not be in compliance with the Interest Coverage Covenant or the Debt to Capital Covenant following August 31, 2022 with the next testing date of November 30, 2022 for such debt facilities, or as of future testing dates for certain agreements, because of the pause and limited resumptions of our guest cruise operations.

Amendments and waivers of the Interest Coverage Covenant and Debt to Capital Covenant have led and may continue to lead to increased costs, increased interest rates, additional restrictive covenants and other lender protections that are, or may become, applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities.

For example, in connection with the amendments to the Revolving Credit Facility and certain agreements governing our bank loans described above, we have made certain changes to more closely align the financial covenants among the various facilities and agreements.

In addition, we have agreed to additional restrictive covenants in such facilities and agreements with respect to debt incurrence, lien incurrence, restricted payments and investments that are substantially consistent with those contained in the indentures governing our recent unsecured notes issuances.

Our ability to provide additional lender protections under these facilities, including the granting of security interests in certain collateral and the granting of guarantees with respect to certain outstanding debt, will be limited by the terms of such agreements as amended, and our other debt facilities.

There can be no assurance that we will be able to obtain amendments in a timely manner, on acceptable terms or at all.

If we were not able to obtain the financial covenant amendments described above under any one or more of these debt facilities, we would be in default of any such agreement.

As a consequence, we would need to refinance or repay the applicable debt facility or facilities, and would be required to raise additional debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

If we were to be unable to obtain financial covenant amendments as may be required under any one or more of these debt facilities, there can be no assurance that we would be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

With respect to each of the unfunded debt facilities, if we were unable to obtain amendments under such debt facilities, the relevant lender under such facility could terminate that facility.

With respect to each of our funded debt facilities, if we were unable to obtain amendments or refinance or repay such debt facilities, it would lead to an event of default under such facilities, which could lead to an acceleration of the indebtedness under such debt facilities.

In turn, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contract payables.

As a result, the failure to obtain the covenant waivers described above would have a material adverse effect.

• The covenants in certain of our debt facilities may require us to secure those facilities in the future.

Certain of our debt facilities contain provisions which may require that we provide a security interest in certain assets.

In certain of our debt facilities, there is a requirement that if the credit rating of our senior indebtedness should fall below investment grade (which occurred on June 24, 2020) and at such time we have granted liens or security interests in respect of indebtedness in an amount exceeding 25% of our total assets (excluding for these purposes the value of any intangible assets) as shown in our most recent Consolidated Balance Sheet, then we will be required to provide a first-priority security interest in certain designated assets.

In addition, under our export credit facilities, there is a requirement that if a security interest or lien is granted in respect of a vessel to secure borrowed money under certain other debt facilities, then a first-priority security interest will be required to be provided over certain designated vessels.

If the events described above were to occur, we may be unable to comply with this requirement and expect to seek waivers from the lenders under the relevant facilities.

Any such waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities.

Our ability to give additional lender protections under these facilities, including the granting of security interests in collateral, will be limited by the restrictions in our indebtedness and security interest we have already granted.

If we were not able to obtain a waiver, the occurrence of such events may result in an event of default under these facilities and other debt facilities that contain cross default provisions that would be triggered.

• Breaches in data security and lapses in data privacy as well as disruptions and other damages to our principal offices, information technology operations and system networks, including the recent ransomware incident, and failure to keep pace with developments in technology may adversely impact our business operations, the satisfaction of our guests and crew and lead to reputational damage

We have been and may continue to be impacted by breaches in data security and lapses in data privacy, which occur from time to time.

These can vary in scope and intent from economically motivated attacks to malicious attacks intended to disrupt or compromise our shoreside and shipboard operations by targeting our key operating systems.

Breach or circumvention of our systems or the systems of third parties, including by ransomware or other attacks, results in disruptions to our business operations;

unauthorized access to (or the loss of company access to) competitively sensitive, confidential or other critical data (including sensitive financial, medical or other personal or business information) or systems;

loss of customers;

financial losses;

regulatory enforcement actions and fines;

litigation and misuse or corruption of critical data and proprietary information, any of which could be material.

On August 15, 2020, we detected a ransomware attack and unauthorized access to our information technology systems.

We engaged a major cybersecurity firm to investigate the matter and notified law enforcement and regulators of the incident.

While the investigation is ongoing, early indications are that the unauthorized third-party gained access to certain personal information relating to some guests, employees and crew for some of our operations.

There is currently no indication of any misuse of this information.

While at this time we do not believe that this information will be misused going forward or that this incident will have a material adverse effect on our business, operations or financial results, no assurances can be given and further we may be subject to future attacks or incidents that could have such a material adverse effect.

Our principal offices, information technology operations and system networks may be impacted by actual or threatened natural

disasters (for example, hurricanes, earthquakes, floods, fires, tornadoes, tsunamis, typhoons and volcanic eruptions) or other

disruptive events.

Our maritime and/or shoreside operations, including our ability to manage our inventory of cabins held for

sale and set pricing, control costs, and serve our guests, depends on the reliability of our information technology operations and

system networks as well as our ability to refine and update to more advanced systems and technologies.

As a result, the failure to obtain the financial covenant amendments described above would have a material adverse effect.

Table of C ontents

INDEX TO EXHIBITS

Incorporated by Reference Filed/

Number Exhibit Description Form Exhibit Filing

Articles of incorporation and by-laws

3.1 Third Amended and Restated Articles of Incorporation of Carnival Corporation

8-K 3.1 4/17/2003

3.2 Third Amended and Restated By-Laws of Carnival Corporation

8-K 3.1 4/20/2009

3.3 Articles of Association of Carnival plc

8-K 3.3 4/20/2009

Material Contracts

10.1 Indenture dated as of February 16, 2021 among Carnival Corporation as issuer, Carnival plc, the other Guarantors party thereto and U.S.

Bank, National Association, as trustee, principal paying agent, transfer agent and registrar, relating to the 5.75% Senior Unsecured Notes due 2027

10.2 Form of Executive Time-Based Restricted Share Unit Agreement for the Carnival plc 2014 Employee Share Plan

10.3 Form of Executive Time-Based Restricted Stock Unit Agreement for the Carnival Corporation 2020 Stock Plan

Rule 13a-14(a)/15d-14(a) certifications

31.1 Certification of President and Chief Executive Officer of Carnival Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer and Chief Accounting Officer of Carnival Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3 Certification of President and Chief Executive Officer of Carnival plc pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.4 Certification of Chief Financial Officer and Chief Accounting Officer of Carnival plc pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Table of C ontents

INDEX TO EXHIBITS

Incorporated by Reference Filed/

Number Exhibit Description Form Exhibit Filing

Section 1350 certifications

32.1* Certification of President and Chief Executive Officer of Carnival Corporation pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2* Certification of Chief Financial Officer and Chief Accounting Officer of Carnival Corporation pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3* Certification of President and Chief Executive Officer of Carnival plc pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.4* Certification of Chief Financial Officer and Chief Accounting Officer of Carnival plc pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Interactive Data File

101 The consolidated financial statements from Carnival Corporation & plc’s joint Quarterly Report on Form 10-Q for the quarter ended February 28, 2021, as filed with the Securities and Exchange Commission on April 7, 2021, formatted in Inline XBRL, are as follows:

(i) the Consolidated Statements of Income (Loss) for the three months ended February 28/29, 2021 and 2020;

(ii) the Consolidated Statements of Comprehensive Income (Loss) for the three months ended February 28/29, 2021 and 2020;

(iii) the Consolidated Balance Sheets at February 28, 2021 and November 30, 2020;

(iv) the Consolidated Statements of Cash Flows for the three months ended February 28/29, 2021 and 2020;

(v) the Consolidated Statements of Shareholders’ Equity for the three months ended February 28/29, 2021 and 2020;

(vi) the notes to the consolidated financial statements, tagged in summary and detail.

104 The cover page from Carnival Corporation & plc’s joint Quarterly Report on Form 10-Q for the quarter ended February 28, 2021, as filed with the Securities and Exchange Commission on April 7, 2021, formatted in Inline XBRL (included as Exhibit 101)

* These items are furnished and not filed.

** Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.

Table of C ontents

Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CARNIVAL CORPORATION CARNIVAL PLC

/s/ Arnold W.

Donald Arnold W.

President and Chief Executive Officer President and Chief Executive Officer

/s/ David Bernstein By:

/s/ David Bernstein

David Bernstein David Bernstein

Chief Financial Officer and Chief Accounting Officer Chief Financial Officer and Chief Accounting Officer

April 7, 2021 Date:

April 7, 2021

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors