Standard & Poor's has lowered Royal Caribbean Cruises Ltd.’s credit rating to junk status; it had been one level above junk.
S&P said capital expenditures associated with RCCL's fleet expansion are expected to “substantially exceed” the company's operating cash flow over the next few years. Also, S&P weighed economic factors, including rising fuel costs, in making its decision to downgrade RCCL’s credit rating.
S&P said that the rating “reflects an aggressive financial risk profile, the capital-intensive nature of the cruise industry and the sensitivity of the travel-and-leisure sector to economic cycles. It added that these factors are “somewhat offset by RCCL's solid brands, a relatively young and high-quality fleet of ships, high barriers to entry in the cruise industry and an experienced management team.