S&P rates Oceania loan B

Standard & Poor's said it assigned a B rating of Oceania Cruises Inc.'s proposed $375 million first-lien senior secured facility, comprised of a $75 million revolver due 2018 and a $300 million term loan due 2020.

The agency also assigned a recovery rating of 3, indicating 50% to 70% expected default recovery, to the facility.

The proceeds will be used to refinance its existing first- and second-lien facilities. The 3 recovery rating on the planned first-lien facilities is different than the recovery rating of 2, which indicates 70% to 90% expected default recovery, on the existing first-lien facilities.

While the rating on the planned facilities is B, the rating on the existing facilities is B+.

Both the planned revolving credit facility and term loan are larger than the existing facilities, which results in a greater amount of first-lien debt outstanding at default the simulated default scenario and reduces the recovery prospects for the planned facilities enough to warrant the lower recovery rating of 3.

All other ratings on the company are unchanged.

The B corporate credit rating reflects Oceania's financial risk as highly leveraged and the company's business risk as weak, the agency said.

The company has high debt levels following delivery of Marina and Riviera and an expectation that total lease-adjusted debt-to-EBITDA will be in the low-7x area in 2013 and improve to about 6x in 2014, S&P said.

The weak business profile is based on its small fleet and focus on the niche upper-premium cruise space, the capital-intensive nature of the cruise industry and the travel industry's susceptibility to economic cycles and global political events, the agency added.

The high quality of Oceania's vessels and good visibility into future bookings partially offset the negative rating factors, S&P said.

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