Carnival Becomes Latest Fallen Angel While Covid Halts Cruises (Source Bloomberg)

Carnival Corp. is the latest cruise line to lose its investment-grade credit ratings after S&P Global Ratings downgraded the company Tuesday.

S&P slashed the company’s long-term rating by three levels to BB-, from BBB-, saying the cruise line’s credit metrics are likely “to remain very weak through at least 2021” as it begins to slowly resume its operations. The cut from S&P hands the company a second high-yield credit rating, meaning its debt will leave investment-grade credit indexes.

Moody’s Investors Service cut the company to junk in May. In a statement Tuesday, it downgraded Carnival’s unsecured credit ratings by one notch to Ba2, the second-highest junk rank. It also rated Carnival’s planned term loan Baa3, the lowest investment-grade rating. S&P graded the new loan BB+, or one step lower. Carnival’s recovery will be much slower in 2021 due to the fact the cruise line plans to return to normal operations in phases, S&P said. Additionally, the credit rater also expects it will take several months for Carnival to return all its ships to service as the virus deters previous demand.