Ratings agency Standard & Poor’s on Tuesday downgraded bonds of Carnival Corp to junk status, forecasting continued weak demand for the cruise industry hammered by the COVID-19 pandemic.
Standard & Poor’s cut its rating on the world’s biggest cruise operator’s secured bonds to ‘BB+’ from ‘BBB-‘, and its unsecured bonds to ‘BB-‘ from ‘BBB-‘. Both are now regarded as non-investment grade or junk bonds.
Carnival’s overall issuer credit rating was also lowered to ‘BB-‘ from ‘BBB-‘. Last month, Moody’s Investors Service also cut the company’s rating to junk status.
Earlier in June, Carnival reported record $4.4 billion in preliminary quarterly losses after its business was crippled by the health crisis, forcing it to take major write-downs on the disposal of some docked ships.
The company, which in recent weeks fully drew down a $3 billion credit line and issued $6.6 billion in bonds and equity, has also been looking for further waivers on debt repayments due next year, without which it could breach some loan conditions.
“We forecast that the company’s credit measures will remain very weak through 2021 and anticipate that its adjusted leverage may potentially exceed 10x in 2021 following a significant deterioration in its performance in 2020,” S&P said in a statement.
S&P has a “BB” issuer credit rating, also a junk status, on Carnival rival Royal Caribbean Corp.