New York, March 11, 2020 -- Moody's Investors Service, ("Moody's") downgraded
the senior unsecured rating, and senior secured revenue bond ratings
of Carnival Corporation and Carnival plc (together, "Carnival")
to Baa1 from A3. At the same time, Moody's placed the
company's ratings, including its Prime-2 short-term
rating for commercial paper on review for further downgrade.
"The downgrade reflects Moody's expectation that soft booking
trends and increased cancellations related to the global spread of the
coronavirus (COVID-19) will significantly impact Carnival's
earnings in 2020, resulting in metrics outside of levels appropriate
for a single A rating," stated Pete Trombetta, Moody's
lodging and cruise analyst. "Following earnings pressure
in the second half of 2019 due to the ban on travel to Cuba and European
pricing pressure, Carnival entered 2020 with metrics that were slightly
within the range for an A3 long-term credit rating with minimal
cushion to absorb a shock such as COVID-19," added
Trombetta. While the cruise industry has seen past cyclical downturns
including recession and terrorist attacks, Moody's believes
that the COVID-19 coronavirus will more significantly pressure
the cruise companies' earnings, cash flow, and liquidity
as compared to previous cycles.
The cruise industry has been one of the sectors most visibly impacted
by the spread of COVID-19, with quarantined ships due to
confirmed cases of infected passengers prominent in global media coverage
that could cause some customers, especially first time cruisers
and older passengers, to pull back from cruising altogether.
With COVID-19 cases increasing exponentially and global countermeasures
becoming increasingly severe and restrictive, Moody's sees
scope for a significant drop in cruise passenger volumes and net yields
in 2020 as well as the potential for a reduction in demand for cruises
beyond 2020. The industry's seasonal peak in the third quarter
of 2020 will be impacted, and as the virus continues to spread across
North America over the coming months, we expect to see lower demand
and pricing pressure into 2021 and possibly beyond. While cruise
demand has proven to be resilient following previous challenges,
the eventual return to a more normalized state is likely to take longer
than in the past and could alter the trajectory of demand in the industry.
Downgrades:
..Issuer: Carnival Corporation
....Senior Unsecured Shelf, Downgraded
to (P)Baa1 from (P)A3; Placed Under Review for further Downgrade
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa1 from A3; Placed Under Review for further Downgrade
..Issuer: Carnival plc
....Senior Unsecured Shelf, Downgraded
to (P)Baa1 from (P)A3; Placed Under Review for further Downgrade
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa1 from A3; Placed Under Review for further Downgrade
..Issuer: Long Beach (City of) CA
....Senior Secured Revenue Bonds, Downgraded
to Baa1 from A3; Placed Under Review for further Downgrade
On Review for Downgrade:
..Issuer: Carnival Corporation
....Senior Unsecured Commercial Paper,
Placed on Review for Downgrade, currently P-2
..Issuer: Carnival plc
....Senior Unsecured Commercial Paper,
Placed on Review for Downgrade, currently P-2
Outlook Actions:
..Issuer: Carnival Corporation
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Carnival plc
....Outlook, Changed To Rating Under
Review From Stable
RATINGS RATIONALE
The review will focus on Carnival's ability to preserve its liquidity
during this period of significant earnings decline, the likely impact
on future bookings from the spread of COVID-19 in Europe and North
America, as well as Moody's view regarding the long-term
demand profile of the industry.
Carnival Corporation and Carnival plc own the world's largest passenger
cruise fleet operating under multiple brands including Carnival Cruise
Line, Holland America, Princess Cruises, AIDA Cruises,
Costa Cruises, and P&O Cruises, among others. Carnival
Corporation and Carnival plc operate as a dual listed company.
Headquartered in Miami, Florida, US and Southampton,
United Kingdom. Annual net revenues for fiscal 2019 were approximately
$16.0 billion.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Peter Trombetta
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Margaret Taylor
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653