Lesson 1 of 8
Every claim, in order
One filing gives four ranked layers over 27.4 billion dollars of debt, and the layer that matters most is the one with no subsidiary guarantee behind it.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- A capital structure is a ranked list, and the ranking is written in the filing rather than inferred from the balance sheet.
- Two claims from the same issuer can rank differently because one is guaranteed by the operating subsidiaries and the other is not.
- Where the equity's market value sits above the whole debt stack, nothing in the debt is being priced as impaired, and the equity is the interesting claim.
The balance sheet gives one number for debt. The debt note gives the structure, and the structure is what decides who recovers what.
Carnival's claims in order, fiscal 2025
Paid first
- Secured, subsidiary guaranteed · first-priority on collateral of about 22.4bn$3,098m5.3%
- Unsecured, subsidiary guaranteed$23,042m39%
- Unsecured, no subsidiary guarantee · structurally subordinated$1,244m2.1%
- Common equity, market value$31,000m53%
Paid last
Total$58,384m
What the four layers mean
Secured, subsidiary guaranteed. 3,098 million, secured on a first-priority basis by collateral whose net book value the filing puts at about 22.4 billion, including 20.8 billion of ships. Collateral that far above the claim is why this layer barely moves in a bad year.
Unsecured, subsidiary guaranteed. 23,042 million, the bulk of the debt. Unsecured means no specific asset stands behind it, but the operating subsidiaries that own the ships have guaranteed it, so the claim reaches the assets before the parent's shareholders do.
Unsecured, no subsidiary guarantee. 1,244 million, from the same issuer, and this is the layer worth understanding. Without the subsidiary guarantee the claim sits at the parent, one level further from the assets, behind every creditor of the operating companies. That is structural subordination, and it is invisible in a total labelled "total debt".
Common equity. The residual. At the last stored close the market values it at about 31.0 billion, above the 27.4 billion of debt principal.
The obligations that are not in the debt note
Two more claims rank ahead of the shareholders and neither appears in that note. Finance lease obligations of 1,353 million sit on the balance sheet separately. And 6,831 million of customer deposits are a liability to deliver a service, not to repay cash, which is the subject of the liquidity lesson later in this course.
Reading the stack rather than the total
A total of 27,383 million tells you the company owes a lot. The table tells you that 3.1 billion of it is over-collateralised, 23.0 billion has direct access to the operating assets, and 1.2 billion is behind everything.
In a stressed case those three recover at very different rates, and an investor who bought "the bonds" without reading which line they were in owns something they did not choose.
What this stack is not telling you
Each layer's market price. A claim's recovery is settled by what it trades at against what it is owed, and bond prices come from the bond market, which this product does not hold. The filing gives amounts and ranking; the pricing has to come from a broker screen or a public trade-reporting feed.
Here that gap matters less than usual: with the equity's market value above the entire debt stack, no layer of the debt is being priced as impaired, and the question is about the equity rather than about recovery.
Check yourself
Two unsecured claims from the same issuer, one guaranteed by the operating subsidiaries and one not. Which ranks ahead?
- They rank equally, both being unsecured
- The guaranteed one, because it reaches the subsidiaries' assets before the parent's residual interest in them
- The one with the earlier maturity
Show the answer
Answer: B.
That is structural subordination. The unguaranteed claim sits behind every creditor of the companies that own the assets.What does collateral of about 22.4 billion behind a 3.1 billion claim imply?
- The company is over-borrowed
- That layer is well covered and barely moves in value when the business deteriorates
- The collateral will be sold
Show the answer
Answer: B.
Coverage that heavy makes the secured layer close to money-good, which is exactly why it trades differently from the unsecured claims above it.Which figure does a filing not give you?
- The ranking of each claim
- The market price of each claim
- The principal outstanding on each claim
Show the answer
Answer: B.
Amounts, ranking, maturities and covenants are in the filing. Prices come from the bond market and have to be fetched separately.Sources
- Carnival Corporation and plc, Form 10-K, fiscal year ended 30 November 2025, filed 2026-01-27, accession 0000815097-26-000007: Note 5 Debt, the collateral pool disclosure, finance lease obligations and customer deposits.
- The US Bankruptcy Code, and the absolute priority rule that makes the ranking binding in a reorganisation.
- Item 15 of Form 10-K: the exhibit list where credit agreements themselves are filed.
What this leaves out
- Principal amounts are as filed at one fiscal year end. A company that refinances heavily, as this one did during the year, looks different a quarter later.
- No claim's market price appears here, because this product holds no bond prices.
- The equity's market value uses a stored closing price and the last filed diluted share count, so it is an approximation of the residual claim rather than a quote.
- Nothing here is advice about any security.