New York, July 14, 2020 -- Moody's Investors Service, ("Moody's") assigned
Carnival Corporation's planned second lien note issuance a Ba1 rating.
At the same time, Moody's placed the long term ratings of
Carnival Corporation (together with Carnival plc, "Carnival") on
review for downgrade, including its Ba1 Corporate Family Rating,
Ba1-PD Probability of Default rating, Baa3 senior secured
rating, and Ba2 senior unsecured rating. The company's
Speculative Grade Liquidity rating of SGL-2 remains unchanged.
The proceeds of Carnival's planned approximate $1 billion
2nd lien senior secured note offering will be used to bolster the company's
liquidity while US cruise operations continue to be suspended.
"The review for downgrade will focus on Carnival's recovery
prospects in 2021 given the recent resurgence in coronavirus cases in
the US increasing the uncertainty around the reopening of the US and the
company's plans for the eventual return to service of its US operations,
including what precautions will be put in place when sailings do resume
and the associated incremental costs," stated Pete Trombetta,
Moody's lodging and cruise analyst.
On Review for Downgrade:
..Issuer: Carnival Corporation
.... Probability of Default Rating,
Placed on Review for Downgrade, currently Ba1-PD
.... Corporate Family Rating, Placed
on Review for Downgrade, currently Ba1
....Senior Unsecured Shelf , Placed
on Review for Downgrade, currently (P)Ba2
....Senior Secured Bank Credit Facility,
Placed on Review for Downgrade, currently Baa3 (LGD2)
....Senior Secured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa3 (LGD2)
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Ba2 (LGD5 from LGD4)
..Issuer: Carnival plc
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)Ba2
....Senior Secured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa3 (LGD2)
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Ba2 (LGD5 from LGD4)
..Issuer: Long Beach (City of) CA
....Senior Secured Revenue Bonds, Placed
on Review for Downgrade, currently Baa3 (LGD2)
Assignments:
..Issuer: Carnival Corporation
....Senior Secured 2nd Lien Regular Bond/Debenture,
Assigned Ba1 (LGD3); Placed on Review for 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 position as the largest
worldwide cruise line in terms of revenues, fleet size and number
of passengers carried, with significant geographic and brand diversification.
Carnival also benefits from 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. In the
short run, Carnival's credit profile will be dominated by the length
of time that cruise operations continue to be highly disrupted and the
resulting impact on the company's cash consumption, liquidity and
credit metrics. The normal ongoing credit risks include Carnival's
near term very 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.
The rapid spread of the coronavirus outbreak and deteriorating global
economic outlook are creating a severe and extensive credit shock across
many sectors, regions and markets. The combined credit effects
of these developments are unprecedented. The cruise sector has
been one of the sectors most significantly affected by the shock given
its sensitivity to consumer demand and sentiment. More specifically,
Carnival's exposure to ongoing travel restrictions and consumers health
safety concerns has left it vulnerable to shifts in market sentiment in
these unprecedented operating conditions and the company remains vulnerable
to the continued uncertainty around the potential recovery from the outbreak.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Today's action reflects the impact on Carnival from the breadth and severity
of the shock, and the broad deterioration in credit quality it has
triggered.
Prior to the review for downgrade, the factors that could lead to
a downgrade include indications over the coming months that 2021 demand
recovery may be weaker than expected resulting in lower profitability
or an expectation that debt/EBITDA will remain above 4.5x or EBITA/interest
expense was stabilized below 3.0x. Ratings could also be
downgraded if the level of free cash flow deficits deepen in 2020 or should
liquidity deteriorate for any reason. Given the review for downgrade,
an upgrade is highly unlikely over the near term. However,
ratings could eventually be upgraded if the company can maintain debt/EBITDA
below 3.5x, and EBITA/interest expense above 5.0x.
A ratings upgrade would also require a financial policy and capital structure
that supports the credit profile required of an investment grade rating
through inevitable industry downturns.
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_1133569.
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.
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
