<\/p>\n
Carnival Corp and Royal Caribbean\u00a0Cruises said last week that scrapped itineraries in Asia due to the outbreak would affect their earnings per share more than expected. Norwegian\u00a0Cruise\u00a0Line Holdings on Thursday forecast an impact of 75 cents per share on full-year adjusted earnings, citing virus-linked fallout.<\/p>\n
<\/p>\n
\u201cIt reduces the flexibility that these companies have in their\u00a0rating\u00a0categories,\u201d said Moody\u2019s analyst Peter Trombetta. \u201cIt removes some of their cushion.\u201d<\/p>\n
<\/p>\n
The earnings impact on both Carnival and Royal Caribbean were deemed \u201ccredit\u00a0negative\u201d by Moody\u2019s although neither company\u2019s\u00a0credit\u00a0ratings were immediately affected.<\/p>\n
<\/p>\n
In a note published on Wednesday, S&P Global analysts wrote that the impact on Carnival\u2019s cash flow from the coronavirus outbreak is expected to drive leverage above the 2.5 debt to EBITDA ratio in 2020, the threshold that would normally warrant a downgrade if breached. However, if the analysts believe the impact on Carnival to be temporary and that leverage could be lowered within a year or two, they do not expect to downgrade the\u00a0rating.<\/p>\n
<\/p>\n
Financially, \u201cCarnival would be impacted the most. They also have the most capacity in China. So they would probably see the biggest hit to earnings,\u201d said Trombetta.<\/p>\n
<\/p>\n
In response to a request for comment, a Carnival spokesman said, \u201cThe primary impact on the\u00a0cruise\u00a0industry is focused mostly on China, which is an emerging market for the\u00a0cruise\u00a0industry, so the impact is relatively small.\u201d Neither Royal Caribbean nor Norwegian responded to a request for comment.<\/p>\n
<\/p>\n
While the outbreak casts a shadow on the\u00a0cruise\u00a0industry in the short-term,\u00a0credit\u00a0analysts said they did not expect the effect to be lasting.<\/p>\n
<\/p>\n
\u201cWe have very short memories,\u201d said Trombetta, citing disasters like the wreck of the Costa Concordia ship in 2012, which killed 32 people. \u201cPeople want to go on\u00a0cruises. Once some time passes, that demand \u2013 so far \u2013 seems to keep coming back.\u201d<\/p>\n
<\/p>\n
Fitch\u00a0Ratings, the third of the three largest\u00a0credit\u00a0ratings agencies does not publicly rate the\u00a0cruise\u00a0companies, but analyst Colin Mansfield, who covers the gaming, lodging and leisure sectors, said he expected the consequences of the epidemic to be temporary.<\/p>\n
<\/p>\n
And yet, Norwegian\u00a0Cruise\u00a0Line Chief Executive Frank Del Rio noted on a call with investors on Thursday that the coronavirus in particular \u201chas caused near panic in the traveling public.\u201d<\/p>\n
<\/p>\n
\u201cThe decrease in bookings is similar to what we see \u2013 we have seen in past similar events, whether they be geopolitical during the financial crisis, et cetera. What\u2019s a little bit different about this one is the increase in cancellations.\u201d<\/p>\n
<\/p>\n
That bias could create longer-term problems for the industry. There is some potential for \u201ca softer demand picture in general if\u00a0cruise\u00a0gets some bad PR from this that sticks in peoples\u2019 minds for any period of time,\u201d said Paul Golding, analyst at Macquarie Capital. (Reporting by Kate Duguid; Editing by Megan Davies, Steve Orlofsky and Daniel Wallis)<\/p>\n
gCaptain<\/p>\n","protected":false},"excerpt":{"rendered":"
Carnival Corp and Royal Caribbean\u00a0Cruises said last week that scrapped itineraries in Asia due to the outbreak would affect their earnings per share more than expected. Norwegian\u00a0Cruise\u00a0Line Holdings on Thursday forecast an impact of 75 cents per share on full-year adjusted earnings, citing virus-linked fallout. \u201cIt reduces the flexibility that these companies have in their\u00a0rating\u00a0categories,\u201d …<\/p>\n","protected":false},"author":1,"featured_media":4904,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[56],"tags":[1034,1494,1153,1492,1495,1070,1493],"class_list":["post-4903","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-marine-world","tag-coronavirus","tag-credit","tag-cruise","tag-pose","tag-ratings","tag-ship","tag-threat"],"_links":{"self":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/4903","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/comments?post=4903"}],"version-history":[{"count":0,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/4903\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media\/4904"}],"wp:attachment":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media?parent=4903"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/categories?post=4903"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/tags?post=4903"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}