S&P downgrades Royal Caribbean

S&P said it cut Royal Caribbean Cruises Ltd.’s issuer rating to B+ from BB and removed all of its ratings from CreditWatch, where they were placed with negative implications on June 4.

Concurrently, S&P downgraded the company’s senior secured notes and unsecured non-guaranteed debt by two notches to BB and B+, respectively, in conjunction with the downgrade. The 1 and 4 recovery ratings, respectively, remain unchanged.

The agency also lowered Royal Caribbean’s guaranteed unsecured notes and other guaranteed unsecured debt by one notch to BB- and changed the recovery ratings on the issues to 2, from 3 and 4, respectively, due to the downgrade.

“The downgrade reflects our updated forecast that Royal’s adjusted leverage will remain very high at about 10x or above through 2021 because of a protracted recovery in the cruise industry. We believe the cruise industry, and thus Royal may face an extended period of low demand because of weak economic conditions and consumer fears around traveling due to Covid-19 given the absence of a vaccine or effective medical treatment,” S&P said in a press release.

The outlook is negative.

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