Moody's upgrades Oceania Cruises

Moody's Investors Service said it upgraded Oceania Cruises, Inc.'s corporate family rating to B2 from B3, its probability of default rating to B2-PD from B3-PD and its $75 million senior secured five-year first-lien revolving credit facility and $300 million senior secured seven-year first-lien term loan to B1 (LGD3, 34%) from B2 (LGD3, 37%). The outlook is stable.

The agency said the upgrade reflects a reduction in debt of about $100 million since the end of 2012 on rising EBITDA (up 32% since end of 2012) that has resulted in an improvement in reported consolidated leverage and coverage metrics. The ratio of debt to EBITDA declined to 6.8 times for 12 months ended March 31 from 8.5 times at the end of 2012.

Oceania's B2 corporate family rating reflects the company's small scale in terms of revenue and number of ships, high leverage relative to the assigned rating category and the need for large non-cancelable commitments of capital for new ships several years in advance of delivery, Moody’s said.

Positive rating consideration is given to the Oceania's good liquidity and interest coverage and its track record in building a profitable market niche targeting destination type cruises that appeal to the growing number of retirees with disposal income and a propensity to travel, Moody’s said.

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