Carnival Becomes Latest Fallen Angel While Covid Halts Cruises
(Bloomberg) - Carnival Corp. is the latest cruise line to lose its investment grade credit rating after S&P Global Ratings downgraded the company on Tuesday.
S & P lowered the company's long-term rating from BBB- by three levels to BB-. The cruise line's credit ratios are “likely to remain very weak until at least 2021” as it is slowly starting to operate again. The S&P cut gives the company a second high-yield credit rating, meaning its debt will leave investment-grade credit indices.
Moody's Investors Service reduced the company to garbage in May. In a statement on Tuesday, Carnival's unsecured credit rating was downgraded to Ba2, the second highest junk rank. Carnival's planned term loan, Baa3, was rated with the lowest investment grade rating. S&P rated the new loan BB + or one step lower.
Carnival's recovery will be much slower in 2021 as the cruise line plans to gradually return to normal operations, S&P said. In addition, the borrower expects Carnival to take several months to get all of its ships back in Goes into operation because the virus scares off previous demand.
"There is still a high degree of uncertainty about when and how the company will resume service and its ultimate recovery path," analysts Ariel Silverberg and Melissa Long wrote in a report on Tuesday.
On Friday, the Cruise Lines International Association industry group announced that it would continue to suspend travel from US ports until September 15, which means that the world's largest cruise lines will now operate for at least six months without American customers.
Last month, Carnival had already announced a return to the seas on August 1st. However, there has been an increase in Covid-19 cases in many parts of the United States in recent weeks, including Florida, where the largest cruise port in the world is located. Carnival Cruise Line, the Carnival brand of the same name, recently announced that North American operations will remain suspended until September 30th.
Miami-based Carnival is currently marketing approximately $ 1.5 billion in loans in European and US credit markets to secure its liquidity as the coronavirus pandemic stops cruises. The final round of financing follows a $ 4 billion bond sale in April.
The company had long-term debt of $ 9.7 billion as of February 29, according to a government filing.
Carnival shares fell about 2% after regular trading in New York ended.
(Updates with S&P comment, additional details from the fifth paragraph.)
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