Cruise Operator Carnival Corp.'s Proposed Second-Priority Senior Secured Notes Due 2026 Rated 'BB+' (Recovery: '1')

SAN FRANCISCO (S&P Global Ratings) July 14, 2020--S&P Global Ratings today assigned its 'BB+' issue-level rating and '1' recovery rating to global cruise operator Carnival Corp.'s proposed $550 million and €400 million second-priority senior secured notes due 2026, 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 to use the proceeds from the proposed notes to enhance its liquidity position, including refinancing its upcoming debt maturities. The proposed debt raise does not materially alter our forecast that Carnival's adjusted leverage will remain very weak and potentially exceed 10x in 2021. In

...Simulated default assumptions - Our simulated default scenario contemplates a default occurring by 2024 due to a significant decline in cash flow stemming from permanently impaired demand for cruises following the negative publicity and travel advisories related to the cruise industry 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 its 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 in our unsecured claims tranches of loans recently entered into by Carnival and various export credit agencies. - We assume that about 80% of our estimated gross enterprise value at emergence is available to cover secured claims....

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