Moody's ups Royal Caribbean

Moody's Investors Service said it upgraded Royal Caribbean Cruises Ltd.'s senior unsecured ratings to Ba1 from Ba2 and assigned a stable outlook.

The upgraded ratings include Royal Caribbean's senior unsecured shelf registration and senior unsecured debt to Ba1 from Ba2, preferred stock registration to prospective Ba3 from prospective B1, senior implied rating to Ba1 from Ba2, long-term issuer rating to Ba1 from Ba2 and speculative grade liquidity rating to SGL-1 from SGL-3.

Moody's said the upgrade reflects Royal Caribbean's increase in net revenue yield due to an improving cruise price environment, a decline in leverage to around 5.3x from 6.5x and increase in interest coverage to 2.4x from 2.0x, between 2004 and 2003, the expectation that these trends are likely to continue leading to an improvement in debt to EBITDA and interest coverage, the completion of the company's extensive capital spending program and Royal Caribbean's transition from being a net borrower to a generator of free cash flow that has improved its credit profile.

Moody's said it anticipates continuation of the recently improved industry conditions and Royal Caribbean's focus on reducing leverage.

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