S&P upgrades Oceania Cruises

Standard & Poor's said it raised its ratings on Oceania Cruises Inc., including upgrading the corporate credit rating to B+ from B.

The outlook is stable.

The agency said the upgrade reflects Oceania's preliminary results for 2007, which were strong relative to S&P's initial expectations; the company's substantial progress in booking occupancy for 2008; and S&P's assessment that the proposed capital structure of Prestige Cruise Holdings Inc. (a corporation controlled by Apollo Management LP), which will directly own both Oceania Cruises and Regent Seven Seas Cruises, is aligned with the B+ rating. Although management's intention is to maintain Oceania and Regent as two independent brands, the agency believes the strategic relationship between the entities within the context of Apollo's investment in the high-end cruise line niche warrants this consolidated approach.

The B+ corporate credit rating reflects the company's vulnerability within the cruise sector because of its small fleet and niche market strategy, minimal cash flow diversity with three ships, high debt leverage, the capital-intensive nature of the industry and the travel industry's susceptibility to economic cycles and global political events, S&P said.

As a partial offset, the vessels are of high quality, S&P has a favorable view of the niche segment in which Oceania operates and the company has good visibility into future bookings, the agency added.

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