S&P drops Royal Caribbean to junk

Standard & Poor's said it lowered Royal Caribbean Cruises Ltd.'s corporate credit rating to BB+ from BBB-.

The outlook is stable.

S&P said the downgrade reflects its assessment that given the company's aggressive, partially debt-financed fleet expansion strategy, the company will not generate sufficient growth in EBITDA to drive its credit metrics to levels consistent with an investment-grade rating over the intermediate term.

The rating reflects an aggressive financial risk profile, the capital-intensive nature of the cruise industry and the sensitivity of the travel and leisure sector to economic cycles, the agency said.

These factors are somewhat offset by solid brands, a relatively young and high-quality fleet of ships, high barriers to entry in the cruise industry and an experienced management team, S&P said.

The issuer's adjusted total debt-to-EBITDA ratio improved to about 4.5 times as of Dec. 31.

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