Carnival Corp has moved a step closer to investment-grade status after credit rating agency S&P Global Ratings upgraded its credit rating two notches to BB-.
The upgrade comes just days after the cruise giant posted better-than-expected results, helped by relatively strong bookings and higher prices.
US-listed Carnival Corp lost its investment-grade status in 2020 during the early part of the pandemic.
Last week the cruise line reported a more than 40% jump in quarterly revenue, and operating income of $384m compared with an operating loss of $1.13bn in the corresponding quarter in 2022.
“The company reported that it booked approximately two-thirds of its 2024 occupancy at considerably higher prices than in 2023, providing good revenue visibility,” S&P credit analysts Melissa Long and Dan Daley said.
“Recovery in occupancy, increased capacity, and higher prices should support significant Ebitda growth and additional leverage improvement in 2024.”
S&P’s two-notch upgrade now puts Carnival on par with its competitor Royal Caribbean Cruises, which is also rated BB- by S&P.
However, Jody Lurie, senior credit analyst at Bloomberg Intelligence, wrote in a Friday note that Carnival is “a few quarters behind Royal in its turnaround story,”
Carnival said it made debt payments of $6bn during 2023 and ended the year with just over $30bn of debt, which is $3bn better than it forecast earlier this year.
“During 2023, we proactively addressed our debt profile as we successfully started our refinancing and deleveraging program,” Carnival’s chief financial officer David Berstein told analysts on its results call last week.
“We took actions in both 2022 and early in 2023 to increase the fixed rate percentage of our debt portfolio to over 80% up significantly from our 58% fixed levels at the end of 2021, which provided us protection from rising interest rates. Our overall average interest rate is just over 5.5%.
“During 2024 we will be replacing higher cost fixed rate debt with lower cost export credit financing as we take delivery of ships during 2024,” he added.
Looking forward, Berstein said the cruise line will continue to evaluate refinancing opportunities and opportunistically pre-pay additional debt.
