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March 18, 2013

Credit rating firm lowers outlook on Carnival Cruise Lines

Carnival Corp. continues to take a hit after several mechanical glitches made news over the last month.

Carnival Corp. continues to take a hit after several mechanical glitches made news over the last month.

Standard & Poor’s Ratings Services on Monday affirmed its BBB+ rating for Carnival, but lowered its outlook to negative from stable.

In a note, credit analyst Emile Courtney said the change comes as a result of the believe that net revenue yields may drop as Carnival Cruise Lines is forced to discount cruises in order to attract customers after a handful of ships have experienced back-to-back technical problems. Costs are also expected to increase as ships need repairs and preventative upgrades.

Moody's Investors Service also revised the Miami-based company’s rating outlook to negative.

The note from Moody’s said in part: “Although Carnival has historically rebounded relatively quickly from ship events, the number of incidents within a short time frame has resulted in more broad and intense media coverage that could cause the rebound to take longer and be more costly than in the past.”

A February fire aboard the Carnival Triumph left the ship without power for several days and prompted the company to conduct a review of all its ships to find and address potential problems with backup power and redundancy systems.

Carnival stock closed at $33.92 Monday, down nearly 3 percent.

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