The issuer credit rating went to B+, a notable improvement, and the company's senior secured debt ratings were raised to BB/BB- while its unsecured debt went up two notches to B.
What the ratings mean
'B' and 'BB' are still a non-investment grade ratings but 'B' indicates a company currently has the capacity to meet its financial commitments, though adverse business, financial or economic conditions may impact its position. 'BB' is higher, indicating less financial vulnerability.
S&P highlighted several factors for the upgrade, including NCLH's current forward-booked position, increased capacity, occupancy recovery and higher pricing, providing good revenue and cash flow visibility for 2024.
In addition, S&P noted the company’s leverage will benefit from higher revenue, EBITDA and cash as it generates a full year of operations from its 2023 ship deliveries, without incurring incremental ship delivery debt in 2024.
Highest rate debt eliminated
Further enhancing its financial position, NCLH refinanced its $650m backstop commitment with Apollo, from a secured to an unsecured commitment.
And, as part of this refinancing, the company repaid its $250m 9.75% senior secured notes due 2028, eliminating its highest interest rate debt.
'The upgraded ratings are an important recognition of the strength of our business and our ability to reduce leverage,' NCLH EVP/CFO Mark Kempa said. This refinancing, which reduces interest costs while releasing the related collateral, is 'a clear demonstration of our commitment to de-levering and improving our balance sheet,' he added.
