Page 25: of Maritime Reporter Magazine (February 2001)

Cammell Laird Loses $74 Million Contract

The finale of a long-standing saga is not good news for Britain's Cammell

Laird, which announced that it lost a cru- cial $74.7 million contract, which is like- ly to put hundreds of jobs at risk. The company is considering its legal options. The shipbuilder and repairer said the owner of cruise ship Costa Classica,

Costa Crociere of Italy — a unit of Carnival Corp — had terminated a con- tract for the ship's conver- sion. The deal was effec- tively scuttled late last year, and the two parties had been involved in an arbitration process to resolve the matter. Cam- mell Laird maintains its position that it has com- plied with its contractual obligations. 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 posi- tion, brand equity, as well as the compa- ny's conservative financial policies which are cxpected to continue. The rat- ings 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 experi- enced during previous periods of

Royal Caribbean

Stock Downgraded

Moody's Investors Ser- vice downgraded Royal

Caribbean's senior unse- cured debt ratings reflect- ing higher than anticipat- ed debt levels associated with the company's ship- building program, and a weaker price environment that may continue given the capacity expansion projected for the industry overall, as well as the weakening economic out- look. The outlook is sta- ble.

In 2000 the industry including Royal

Caribbean experienced flat to declining net yields as a result of competitive conditions. Moody's expects this pricing pres- sure is likely to continue given the industry capaci- ty expansion, and the weakening economic out- look that may result in slower demand growth relative to supply. Addi- tionally, margins may also be negatively impact- ed 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 bil- lion over the next four years to build 10 ships,

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