Research Update: Carnival Ratings On Watch Negative On Higher Expected Leverage From Lower Bookings And Yields Due To The Coronavirus

We believe that reduced demand stemming from the broadening global reach of the new coronavirus (COVID-19) will cause Carnival Corp.'s adjusted leverage to increase above our 2.5x downgrade threshold this year. Given recent events, including highly publicized quarantines and incidences of COVID-19 on cruise ships, we believe it is increasingly likely that the demand for cruises will remain weak even after the virus is contained, which will jeopardize Carnival's ability to improve its cash flow and reduce its leverage by the end of next year. We are placing our issuer credit rating on Carnival and our issue-level rating on its unsecured debt on CreditWatch with negative implications. At the same time, we are affirming our 'A-2' rating on the company's

...- We believe that reduced demand stemming from the broadening global reach of the new coronavirus (COVID-19) will cause Carnival Corp.'s adjusted leverage to increase above our 2.5x downgrade threshold this year. - Given recent events, including highly publicized quarantines and incidences of COVID-19 on cruise ships, we believe it is increasingly likely that the demand for cruises will remain weak even after the virus is contained, which will jeopardize Carnival's ability to improve its cash flow and reduce its leverage by the end of next year. - We are placing our issuer credit rating on Carnival and our issue-level rating on its unsecured debt on CreditWatch with negative implications. - At the same time, we are affirming our 'A-2' rating on the company's commercial paper program. - When we resolve the CreditWatch, we plan to update our base-case forecast for Carnival's net revenue yield, costs, capacity growth, EBITDA, and leverage to reflect reduced cruise demand and increased cancellations...

Research Update