The deal is almost too good to be true said several analysts about Carnival Corporation's proposal to restructure Kloster Cruise.

It may very well have been "too good." This week, Carnival announced tersely that it has terminated its talks with equity holders of Kloster Cruise, but refused to give any reason for the move. Vice Chairman Howard Frank said that Carnival was "exploring its alternatives" for the $101 million of Kloster's 13 percent senior secured notes it holds.

Kloster, meanwhile, announced that both its parent company, Vard, and representatives of Kloster's bondholders have rejected the latest proposal of Carnival. Kloster President Adam Aron, said that "Our bondholders, our shareholders, and Carnival have not been able to reach an agreement satisfactory to all concerned."

While none of the parties involved would release details, observers were left to their own speculations which focused on Carnival tightening the reins as negotiations proceeded.

It has been reported that Carnival had proposed to put $65 million in fresh capital into Kloster Cruise and $10 million in Yard. ln addition, Carnival would help to reduce the outstanding bond debt "significantly." In return, Carnival would acquire a 65 percent share in Yard and Kloster Cruise.

While neither Carnival nor Kloster would confirm these reports, Carnival may have gotten tougher on the details which in turn may have led to the break.

But there have also been reports that Carnival's terms may have heen unacceptable, including selling off ships, closing down one of Kloster's divisions, and possibly transferring another to Europe.

On the other hand, it is also known that several Yard shareholders have worked actively to reach alternative solutions which they, for their own reasons, would be more comfortable with than the Carnival partnership. That scenario may put Carnival in what may seem like a "hostile take-over" which the company may not have been interested in pursuing.

Reports include a proposal for a new share offering in Norway to raise $250 million; a restructuring and financial plan from the financial firm Donaldson, Lufkin & Jenrette (DLJ); as well as involvement by a Michigan-based investment group named Questor which reportedly specializes in turning companies around. All these deals, however, seem familiar to proposals that have previously been made and rejected by Vard.

Hence, there are obviously many rocks in the waters before any deal with Carnival could have been consummated.

Nevertheless, a Carnival partnership may still be in the cards. Carnival Corp. still holds $101 million worth of Kloster's 13 percent bonds secured in the Norway and the Seaward.

Without commenting on the issues, Aron said confidently to this newsletter that "we will solve the financial problems of Kloster Cruise. There is a lot moving now.

"There is a mood of confidence and relaxed optimism at Kloster," Aron said.

Choices

Kloster Cruise does not have many choices. A partnership with Carnival could have ensured capital and economies of scale to continue and to expand, pending Carnival's intentions, which they will not comment on.

Alternatively, Kloster must raise sufficient capital to reduce its debt and launch a newbuilding program. The capital can come from a strong partner or from a share offering, although time may have run out on the latter.