Moody's assigns TUI Cruises B3, notes Caa2

Moody's Investors Service said it gave a B3 corporate family rating and a B3-PD probability of default rating to TUI Cruises GmbH. Concurrently, Moody's assigned a Caa2 instrument rating to €300 million of senior unsecured notes to be issued by TUI Cruises. Moody's also assigned a stable outlook to TUI Cruises. This is the first time Moody's has given TUI Cruises ratings.

"The inaugural B3 CFR assigned to TUI Cruises balances the group's very profitable business model prior to the coronavirus outbreak, its strong deleveraging prospects once the virus will start subsiding on the one hand and the company's very weak point in time credit metrics as a result of the demand shock from the coronavirus outbreak on the other hand,” said Stanislas Duquesnoy, a Moody's senior vice president, in a press release.

The notes’ Caa2 reflects the deeply subordinated nature of the instrument with €3.3 billion of debt ranking ahead of the notes, Moody’s said. The unsecured notes rank junior to €2.3 billion of ECA financing that have first-lien security over a large portion of the fleet, €800 million of bank debt that have second-lien security over certain vessels and a €300 million KfW loan that has security over the Mein Schiff trademark.

The stable outlook reflects the forecast that TUI Cruises will be able to gradually ramp up cruise activities starting in the late second quarter leading to a gradual improvement in earnings and operating cash flows, the agency said.

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