MOODY'S CONTINUES ITS REVIEW OF CARNIVAL'S A2 LONG-TERM, AND PRIME-1 SHORT-TERM RATINGS FOR POSSIBLE DOWNGRADE.
New York, October 07, 2002 -- Moody's Investors Service is continuing its review of Carnival Corporation's long-and short-term debt ratings for possible downgrade following last Friday's (10/04/02) announcement by the Federal Trade Commission that it will take no action to prohibit an acquisition of P&O Princess by either Carnival Corporation or Royal Caribbean. Moody's placed Carnival's ratings on review for possible downgrade on December 17, 2001 after the company's announced that it had made an offer to acquire all of the outstanding shares of P&O Princess Cruises PLC in a hostile transaction. Carnival's bid folowed an agreement between Royal Caribbean and P&O Princess in November 2001 to merge the two companies under a dual listed company (DLC) structure. P&O Princess' shareholders now must vote on whether to accept one of the two competing bids from Carnival and Royal Caribbean. Moody's ongoing review of Carnival's ratings is focusing on whether the shareholders accept Carnival's bid and, if so, the impact of the transaction on the debt protection measures of Carnival, the synergies that the combination could achieve, and potential integration risks, as well as the impact of the currently difficult cruise operating environment that is characterized by capacity expansion and price weakness.
Ratings that remain under review for possible downgrade are:
Senior unsecured notes, debentures, and convertible notes at A2.
Senior unsecured shelf registration at (P) A2.
Subordinated shelf registration at (P) A3.
Commercial paper program at Prime-1.
Carnival's has offered to purchase each P&O Princess share for Carnival stock with a possible partial cash alternative for a portion of the purchase price. The value of this transaction was approximately $5.4 billion as of the date of the original offer. The industry pricing environment was significantly impacted by the events of September 11, 2001. More recently the pricing environment has improved, but remains below year ago levels through the last quarter ended 8/30/02, and Moody's is concerned that the pricing environment may remain weak as capacity continues to be added over the next few years. According to the company's 9/20/02 press release, pricing levels for the fourth quarter for 2002 are still slightly below year ago levels. Additionally, the risk of travel disruptions caused by safety concerns related to terrorist activity or a possible war with Iraq has increased.
Carnival Corporation, headquartered in Miami, Florida and its subsidiaries operates six brands under the names, Carnival Cruise Lines, Holland America Line, Costa, Windstar Cruises, Cunard Line and Seabourn Cruise Line. During the year ended November 30, 2001, Carnival's revenues were approximately $4.5 billion.
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