New York, November 29, 2012 -- Moody's Investors Service assigned an A3 rating to Carnival Corporation's
("Carnival") proposed five year $500 million note draw
down from the company's debt shelf previously rated (P) A3.
Proceeds from the proposed notes are to be used for general corporate
purposes, including refinancing upcoming scheduled debt maturities.
At the same time, Moody's affirmed the company's A3
senior unsecured debt rating and Prime-2 commercial paper rating.
The outlook for Carnival's ratings is stable. The proposed
notes are guaranteed by Carnival plc and are pari passu with all of Carnival's
existing and future senior unsecured indebtedness.
RATINGS RATIONALE
The affirmation of Carnival's A3 senior unsecured rating reflects Moody's
view that Carnival's margins and credit metrics will rebound from the
negative impact of the Costa Concordia incident (January 2012) as pressure
on net revenue yields continues to abate and better net revenue yield
environment emerges in 2013.
Carnival's A3 rating is supported by its large scale and significant geographic
and brand diversification, along with the favorable value proposition
of cruise vacations in general. These attributes, along with
the significant barriers to entry that characterize the cruise industry,
have historically enabled Carnival to achieve significant operating margins
of between 15% and 20%. Also considered is what we
believe to be a conservative financial policy, and reduced capacity
expansion plans for Carnival and the cruise industry overall which should
translate into improved industry pricing and higher levels of free cash
flow.
Key credit concerns include use of free cash flow to fund a recently announced
special dividend, our expectation that margin pressure will continue
over the next 12 -- 15 months as a result of weak economic conditions
in Europe, and the capital intensive nature of the cruise industry.
The use of free cash flow to support the special dividend is a credit
negative given our concern that the weak global macro-environment
could adversely affect Carnival's ability to raise cruise prices.
Nevertheless, early booking trends for 2013 suggest net revenues
yield will grow in the low to mid single digits.
The stable rating outlook reflects our expectation that the pressure on
Carnival's profitability caused largely by the Costa Concordia incident
will abate, industry pricing power will benefit from slower capacity
expansion and a better net revenue yield environment will emerge in 2013.
In 2013, assuming net revenue yield growth of 3%, we
expect retained cash flow to net debt and EBIT/interest will remain around
28% and 5.0 times, respectively. Carnival's
ratings could be downgraded if it appears likely the company will not
be able to achieve and sustain retained cash flow/net debt around 25%
and EBIT/interest at 4.5 times.
The principal methodology used in rating Carnival was the Global Lodging
& Cruise Industry Rating Methodology published in December 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Carnival Corporation and Carnival plc (collectively, "Carnival")
own the world's largest passenger cruise fleet operating principally in
North America, Europe, and Australia under brands including
Carnival Cruise Lines, Holland America Line, Princess Cruises,
AIDA Cruises, Costa Cruises, P&O Cruises among others.
Headquartered in Miami, Florida, U.S.A.
and London, England, Carnival Corporation and Carnival plc
operated as a dual listed company.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, 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 has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
Peggy Holloway
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's rates Carnival's proposed senior notes A3; all other ratings affirmed
