S&P rates NCL notes B+

Standard & Poor's said it assigned its BB corporate credit rating to cruise companies NCL Corp. Ltd. and its 100% parent, Star Cruises Ltd. The outlook on both ratings is stable.

At the same time, S&P assigned its B+ rating to NCL's proposed senior unsecured $350 million notes due 2014. Proceeds of the issue will be used to repay debt, fund the construction of new cruise ships, and for general corporate purposes.

"The rating on NCL is closely tied to the creditworthiness of its parent, Malaysia-based Star Cruises, given the importance of NCL as the North American arm of the group, and strong influence of Star Cruises on NCL's business operations and financial policies. The rating is also based on the expectation that Star Cruises will continue to provide support to NCL," said S&P credit analyst Ee-Lin Tan.

S&P said that as such, NCL's rating reflects the strengths and weaknesses of the Star Cruises group.

Star Cruises' rating is constrained by its weaker market position, lower profitability, and small size relative to its main competitors, Carnival Corp. (A-/negative/A-2) and Royal Caribbean Cruises Ltd. (BB+/stable/--). The group, therefore, lacks the critical mass and scale benefits enjoyed by its larger peers. While Star Cruises is dominant in Asia, the key challenge lies in strengthening NCL's position in North America, without letting its older fleet with less facilities damage its brand equity in the near to medium term.

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