19th May 2020 11:15
(Alliance News) - Moody's Investors Service slapped Carnival PLC with a ratings downgrade on Tuesday, as the cruise ship operator remains moored due to the Covid-19 pandemic with only a "slow recovery" expected when things do begin to pick up again.
Moody's downgraded Carnival's senior unsecured rating to Ba1 from Baa3 and senior secured rating to Baa3 from Baa2.
"The downgrades reflect the risks Carnival faces as its operations continue to be suspended and Moody's expectation of a slow recovery resulting in financial metrics that are not indicative of an investment grade rating for the foreseeable future," said Moody's Lodging & Cruise Analyst Pete Trombetta.
"Moody's current assumption is that cruise operations will continue to be suspended in the US beyond the current July 24 no-cruise order issued by the Centers for Disease Control &
Prevention and available capacity will be modest for the remainder of 2020 and into early 2021 as the risk of fully restarting operations before proper safety protocols are in place far exceed the potential benefits."
The spread of the contagion has hit travel plans, hurt demand and caused governments to impose lockdown measures.
Carnival last Thursday said it begin a series of layoffs, furloughs, reduced work weeks, and salary reductions across the company to combat the lack of revenue due to the pandemic.
These moves will "contribute hundreds of millions of dollars in cash conservation on an annualised basis" to the company which admitted it had "no meaningful revenue" since it paused its cruise operations in early March.
Promisingly though, Moody's said: "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's stock was flat at 1,014.53 pence each in London on Tuesday morning.
Shares in the company had soared 16% to close at USD14.72 in New York on Monday, though in pre-market trade on Tuesday it was 0.8% lower at USD14.61.
By Eric Cunha; [email protected]
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