NOTE: On February 19, 2021, the press release was corrected as follows: In the debt list, under downgrade actions for Carnival plc, the seniority of the first item was changed to senior unsecured. Revised release follows.
New York, February 10, 2021 -- Moody's Investors Service, ("Moody's") placed
the ratings of Carnival Corporation (along with Carnival plc "Carnival")
on review for downgrade including its B1 corporate family rating,
B1-PD probability of default rating, Ba2 first lien senior
secured rating, B1 second lien secured rating, and existing
B2 senior unsecured rating. At the same time, Moody's
assigned a B2 to the company's planned $2 billion senior
unsecured note issuance. Carnival's speculative grade liquidity
rating of SGL-2 is unchanged.
Proceeds from the planned $2 billion unsecured note issuance will
be used to refinance upcoming maturities.
"The review for downgrade will focus on the timeline for Carnival
to return to service, the potential to ramp up operations in a meaningful
way in 2021, and the resulting impact to its liquidity,"
stated Pete Trombetta, Moody's lodging and cruise analyst.
Moody's does not expect US cruise operations will be able to resume until
there are indications that the coronavirus spread is slowing.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continues to disrupt
the cruise sector. Our analysis has considered the effect on the
performance of Carnival from the ongoing travel restrictions in the US
and other global regions, the current weak US economic activity
and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. As a result, the
degree of uncertainty around our forecasts is unusually high. We
regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
On Review for Downgrade:
..Issuer: Carnival Corporation
.... Probability of Default Rating,
Placed on Review for Downgrade, currently B1-PD
.... Corporate Family Rating, Placed
on Review for Downgrade, currently B1
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)B2
....Senior Secured 1st Lien Bank Credit Facility,
Placed on Review for Downgrade, currently Ba2 (LGD2)
....Senior Secured 1st Lien Regular Bond/Debenture,
Placed on Review for Downgrade, currently Ba2 (LGD2)
....Senior Secured 2nd Lien Regular Bond/Debenture,
Placed on Review for Downgrade, currently B1 (LGD3)
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently B2 (LGD5)
..Issuer: Carnival plc
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)B2
....Senior Secured 1st Lien Regular Bond/Debenture,
Placed on Review for Downgrade, currently Ba2 (LGD2)
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently B2 (LGD5)
..Issuer: Long Beach (City of) CA
....Senior Secured Revenue Bonds, Placed
on Review for Downgrade, currently Ba2 (LGD2)
Assignments:
..Issuer: Carnival Corporation
....Senior Unsecured Regular Bond/Debenture,
Assigned B2 (LGD5); Placed Under Review for further Downgrade
Outlook Actions:
..Issuer: Carnival Corporation
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Carnival plc
....Outlook, Changed To Rating Under
Review From Negative
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE
OF THE RATINGS
Carnival's credit profile is supported by its good liquidity given
its significant cash balances and Moody's view that over the long run,
the value proposition of a cruise vacation relative to land-based
destinations, as well as a group of loyal cruise customers,
supports a base level of demand once health safety concerns have been
effectively addressed. The company also benefits from its position
as the largest worldwide cruise line in terms of revenues, fleet
size and number of passengers carried, with significant geographic
and brand diversification. In the short run, Carnival's credit
profile will be dominated by the length of time that cruise operations
continue to be suspended, the path forward to resuming service and
the resulting impact on the company's cash consumption, liquidity
and credit metrics. The normal ongoing credit risks include Carnival's
near term extremely high leverage, the highly seasonal and capital
intensive nature of cruise companies, competition with all other
vacation options, and the cruise industry's exposure to economic
and industry cycles as well as weather related incidents and geopolitical
events. We expect Carnival's leverage will exceed 6.0x
for at least the next two years.
Prior to the review for downgrade, the factors that could lead to
a downgrade include if the company's liquidity weakened in any way or
if the recovery in cruising activity is delayed beyond our base assumptions
which include a resumption of US cruising in the first half of 2021 with
capacity days reaching at least 65% of their 2019 levels and occupancy
reaching at least 70% by the second quarter with continued improvement
from there. The ratings could also be downgraded if there are indications
that the company is not on a path to restoring leverage to a sustainable
level. The outlook could be revised to stable if the impacts from
the spread of the coronavirus stabilizes and cruise operations resume
at a level that enables the company to maintain debt/EBITDA below 5.5x.
Ratings could be upgraded if the company is able to maintain leverage
below 4.5x with EBITA/interest expense of at least 3.0x.
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 billion.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
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
Vice President - Senior 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
