Carnival Corp.'s Proposed $900 Million Second-Priority Secured Notes Rated 'BB+' (Recovery: '1') On CreditWatch Negative

NEW YORK (S&P Global Ratings) Aug. 14, 2020--S&P Global Ratings today assigned its 'BB+' issue-level rating and '1' recovery rating to U.S.-based global cruise operator Carnival Corp.'s proposed $900 million second-priority senior secured notes due 2027 and placed the issue-level rating on CreditWatch with negative implications. The '1' recovery rating indicates our expectation for very high (90%-100%; rounded estimate: 95%) recovery for noteholders in the event of a payment default. We expect the company will use the proceeds from the proposed notes to enhance its liquidity position, including by refinancing its upcoming debt maturities. The proposed debt does not materially alter our forecast for Carnival's adjusted leverage because we had previously assumed it would secure additional financing. Additionally, Carnival recently

...secured notes, $1.86 billion and 800 million term loans, and certain other secured debt. Simulated default assumptions - Our simulated default scenario contemplates a default occurring by 2024 due to a significant decline in cash flow from permanently impaired demand for cruises following the negative publicity and travel advisories during the COVID-19 pandemic, a prolonged economic downturn, and/or increased competitive pressures. - We estimate a gross enterprise value at emergence of about $24.3 billion by applying a 7x multiple to our estimate of the company's EBITDA at emergence. We use a multiple that is at the high end of our range for leisure companies to reflect Carnival's good position in the cruise industry, which is a small but underpenetrated segment of the overall travel and vacation industry. - We include the tranches of loans Carnival recently entered into with various export credit agencies in its unsecured claims. - We assume that about 80% of our estimated gross enterprise...

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