Moody's raises Royal Caribbean

Moody's Investors Service said it upgraded Royal Caribbean Cruises Ltd.’s ratings, including its corporate family rating to B1 from B2 and probability of default rating to B1-PD from B2-PD. Moody's also raised Royal Caribbean's senior unsecured rating to B1 from B3, backed senior unsecured rating to Ba3 from B2, and senior secured rating to Ba1 from Ba3. The company's speculative grade liquidity rating of SGL-3 is unchanged. The outlook, previously stable, was changed to positive.

"The upgrade to B1 reflects Moody's expectation that increased capacity, stronger pricing and improved cost controls will enable Royal Caribbean to lower debt/EBITDA to around 5x at the end of 2023," said Pete Trombetta, a Moody's vice president and senior analyst, in a press release.

The agency noted Royal Caribbean continues to reduce its debt. The company paid down about $2 billion of debt this year through the end of August using cash and cash flow. Improved cash flow will be driven by demand strength, low double-digit net yield improvement in 2023 compared to 2019 along with 8% capacity growth in 2024.

The improved outlook reflects an expectation that capacity growth and strong booking trends will enable Royal Caribbean to lower debt/EBITDA to below 4.5x by the end of 2024, the agency said.

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