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Standard & Poor's expects the slowing economy to continue to affectdemand and yields during 2001. Still, the substantial growth in RCL'scapacity from the delivery of four ships since the second half of 2000is expected to result in moderate cash flow growth in 2001 despite theanticipated margin erosion.
Given the increase in debt related to new builds, leverage, asmeasured by total debt to EBITDA, is expected to remain weak for therating at more than 5 times at the end of 2001.
Longer term, RCL's solid business profile offsets the near-termindustry weakness in supporting the company's low investment-graderating.
Although current ratings are not affected by the news, Standard &Poor's will continue to track the company's prospects for moderatecash flow growth in 2001 and will review the ratings and outlook ifgrowth assumptions for the second half appear to be too optimistic.
Can anyone decode what it means into laymans English?
This may well apply to many of the major cruise lines opperating in America? It does not mean RCL are about to go bust!
My newspaper sums it all up, very nicely: "Too many ships are chasing too few passengers in America's crowded cruise market"
At least we should see some good deal?
quote:Originally posted by JP:Royal Caribbean Cruises Ltd. is the parent company of RCI and Celebrity.
I find it rather disturbing that Royal Caribbean Cruises Ltd. is incorporated under the laws of Liberia. The Liberian government is not one to be emulated and depending on your political views, supported!
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortizatiion) is the generally used measure of cash available to service debt. Because Interest is a tax deductible expense you calculate interest coverage before taxes. Depreciation and amortization are non-cash expenses.
Because ships are essentially mortgaged like a building about 80% (or more) of the value of a new ship is borrowed. That is what happened to Premier it defaulted on the debt and DLJ took the ships.
Given all the new capacity in the past few years most ships are running at less than capacity, and their is a lot of discounting of fares. A weak economy doesn't help.
What S&P basically said is that cash earnings are weaker than normal relative to debt service needs for the bonds given the current bond ratings.
If this continues for too long they will cut the ratings. Lower ratings mean that the interest cost will increase.
Bill
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