Royal Caribbean is tapping the high-yield bond market for first time this year

The announcement comes just hours after Royal Caribbean
RCL,
+7.95%
raised its earnings guidance for the year, citing “accelerating demand” and a strong start to the year. That’s after it reported fourth-quarter profit and guidance that were better than Wall Street expected in early February, citing record bookings to start the Wave season.

“The company continues to be very encouraged about the demand and pricing environment for 2024,” Royal Caribbean said. “Bookings have been significantly higher than during the same period last year.”

Don’t miss: Royal Caribbean stock jumps as strong start to ‘wave season’ sparks upbeat outlook

For 2024, all four quarters and all key products are booked ahead of the same time last year in both rate and volume, the company said. Consumer spending onboard also continues to exceed prior years “driven by greater participation at higher prices, indicating quality and healthy future demand.”

“Since our last earnings call, robust demand for our vacation experiences has significantly exceeded our initial expectations,” Chief Executive Jason Liberty said in a statement.

Moody’s Investors Service promptly upgraded the company’s corporate family rating by two notches to Ba2 from B1 and said the outlook is positive, meaning it may upgrade again over the medium term.

The upgrade “reflects its strong performance driven by higher pricing, reduced cost inflation, capacity growth, and a return to pre-pandemic occupancy rates,’ Moody’s said in a statement.

That will allow the company to get to debt/Ebitda and Ebita/interest expense of 3.5 times and 3.0 times, respectively, at the end of 2024, the agency said in a statement. Those debt ratios are closely watched by the rating agencies as a measure of how easily an issuer can cover its interest costs.

“Cash from operations will also improve to a level sufficient to cover all planned capital expenditures including new ship deliveries. Moody’s expects that a portion of the company’s free cash flow will be used to further reduce debt,” said Moody’s.

The company’s outstanding bonds rose by 30 to 50 cents on the dollar on Thursday, as the following charts from data solutions provider BondCliQ Media Services show.

The bonds have been stable in the year to date and the Moody’s upgrade was expected and built in, said one market source.

There was net selling of the bonds early on Thursday, but that later turned to net buying.

Royal Caribbean has more than $11 billion in outstanding bonds, the bulk of which come due in 2025.

The stock was up 8% and has gained 73% in the last 12 months, outperforming the S&P 500
SPX,
+1.67%,
which is up 25%.

Related: Carnival’s stock is having a record year as cruise demand keeps increasing