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Standard & Poor’s lifted Royal Caribbean Cruises Ltd.’s credit rating from BBB- to BB+, making the company’s bonds investment grade for the first time.
The change followed an earlier move by Moody’s Investor Service to increase its rating on RCCL’s senior unsecured debt in April from Ba1 to Baa3. (The Baa3 rating means RCCL’s bonds are judged to be investment grade.)
Standard & Poor’s said the new rating reflect its expectation that solid cruise demand and pricing will allow the cruise company to increase net yields across brands.
Achieving investment grade has been a longstanding goal at RCCL. It means the company’s bonds are no longer technically considered “junk bonds.”
Other things being equal, it means lower borrowing costs. It also widens the number of funds and other investment vehicles that can own the bonds, making them more tradable.
Moody’s said its change acknowledges that RCCL’s debt will remain in its targeted range, in which it could pay off all borrowings with annual cash flow in 3 to 3.5 years.
“The rating considers that while industrywide capacity will increase, capacity expansion will remain at a rational level as a result of supply constraints,” Moody’s said. “In addition, Moody’s believes that the value proposition of a cruise vacation will support continued penetration of the vacation market by cruise operators.”
Moody’s said key credit risks include the highly seasonal and capital-intensive nature of cruise companies.
Sоurсе: travelweekly.com