Royal Caribbean Stock Downgraded
Moody's Investors Service downgraded Royal Caribbean's senior unsecured debt ratings reflecting higher than anticipated debt levels associated with the company's shipbuilding program, and a weaker price environment that may continue given the capacity expansion projected for the industry overall, as well as the weakening economic outlook.
The outlook is stable.
In 2000 the industry including Royal Caribbean experienced flat to declining net yields as a result of competitive conditions. Moody's expects this pricing pressure is likely to continue given the industry capacity expansion, and the weakening economic outlook that may result in slower demand growth relative to supply. Additionally, margins may also be negatively impacted by rising fuel costs resulting in lower than expected cash flow to support the company's ship building program.
Royal Caribbean will spend in excess of $5 billion over the next four years to build 10 ships, six of which will be delivered over the next two years. The company currently has 10 ships on order through the year 2004. Moody's notes, that despite the competitive pricing environment, the company was nevertheless able to increase retained cash flow in 2000 from the addition of two new ships to its fleet during the year. The ratings continue to reflect the company's strong market position, brand equity, as well as the company's conservative financial policies which are cxpected to continue. The ratings also incorporate the quality and age of Royal Caribbean's fleet as well as its experienced management team. Royal Caribbean is the second largest cruise line company. Moody's expect cruise passenger growth will generally kept up with net supply additions as has occurred in the past. However, Moody's believes it is likely that the pricing environment may be more difficult than that experienced during previous periods of capacity expansion given that the competitive pricc environment occurred during the more robust economic climate of 2000 and at the early stage of the industry capacity expansion. Moody's expects older ships will continue to be retired, as about 15 percent of the industry capacity is more than 20 years old which will aid the supply and demand balance. Furthermore, the industry has been consolidating with the top three cruise companies comprising more than 70 percent of capacity up from about 45 percent in 1991. Additionally, demographics are favorable to the industry since the average age (50) of the typical cruiser is within one of the fastest growing segments of the population. Also, the company continues to attract new first time cruisers, that indicates continued penetration of the cruise product.
Royal Caribbean, headquartered in Miami, Fla., operates a cruise line under the brand names, Royal Caribbean International and Celebrity Cruises. During the year ended December 31, 1999, the company's revenues were S2.5 billion.
Other stories from February 2001 issue
- Plug & Play page: 36B
- Uniservice: Innovative Product Keeps Cruise Ships Running page: 36C
- Transas Expands Capabilities page: 36G
- Kvaerner Conducts Sea Trials; Docks Out New Cruise Vessels page: 36A
- Drew Offers Electronic Steam System Monitoring page: 36H
- Crystal Cruises Signs Contract For New Ship page: 5
- Mediterranean Shipping Orders New Cruise Ship page: 5
- Two-Stroke Milestones page: 8
- Dear President Bush... Reasons for More Title XI Funding page: 11
- Real Time, On-line Credit Services Offered page: 14
- Major Ocean Carriers Partner To Launch E-Commerce Solution page: 15
- San Francisco Bay Area Company Leads in NOX Reduction page: 16
- Alabama Shipyard Signs Another Tug/Barge Contract page: 17
- Bollinger To Construct Supply Boat Trio page: 19
- Curacao Carves A Cruise Niche page: 20
- U.S. Lines' MS Patriot Challenges Cascade General page: 21
- Royal Caribbean Stock Downgraded page: 25
- ! Safe Haven1 Debate Could Have Resounding Effects page: 27
- ABS Under Fire, Fights Back page: 29
- Queen Mary 2: Cunard's Answer to Royalty on the Seas page: 30
- Kaparis Defines Safety on Cruise Ships page: 32
- The Dickinson Way page: 34
- Oceancell by GEOLINK: The First GSM Solution Via Satellite Aboard Ships page: 40
- Heroes on the High Seas page: 43
- MAVCO Onboard Explorer Of The Seas page: 49
- New Cat-Powered Tugboat Ordered As Gdansk Gears Up For Port Growth page: 58
- ARCOMS Appoints President For Subsidiary page: 61
- Grat Cruise Ships of 2000 page: 71
- The Cradle of Cruising Creativity? page: 72