WHEN MOODY’S SPEAKS, EVERYONE LISTENS

In June and July of 1994, Moody’s changed its ratings on three major companies involved in one form or another in the shipping industry. The good news is that on June 10th and 29th, Moody’s upgraded its rating on two of the premier cruise companies in the industry, Carnival Corporation and Royal Caribbean Cruises Ltd. Carnival’s rating for unsecured notes and debentures that was already firmly entrenched in the investment grade sector of Moody’s rating with a Baa1 rating, was upgraded to A3, and its convertible subordinated notes were raised from Baa2 to Baa1. Meanwhile, Royal Caribbean had its senior subordinated notes raised to Ba2 from Ba3 (both ratings not investment grade), its senior unsecured “shelf” debt to (P) Baa3 from (P) Ba1(non investment grade to investment grade) and, finally, its preferred stock “shelf” to (P) Ba2 from (P) Ba3 (both non-investment grade). Royal’s shelf registration was discussed in June in Marine Money (vol. 10, no. 10).

OMI Downgraded
On the bad news side, Moody’s cut OMI Corporation’s already low rating of B1 to B2 in July, 1994. Moody’s claims that the rating action reflects the continued depressed rates in the international crude tanker market and the much reduced activity level in the US flag dry bulk carrier trade, as well as the company’s continued high leverage and diminishing interest coverage. EBITDA-to-interest expense has decreased to roughly 1.6 times for the first quarter 1994, and total debt-to-annualized EBITDA would be approximately 6.0 times. Moody’s out-look for the rating will remain negative.

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