Cruise Lines See Brighter Capital Markets - TheStreet

Cruise Lines See Brighter Capital Markets

With Carnival looking at a dividend reinstatement, and Royal Caribbean lining up financing for a new vessel sooner than expected, the capital markets are improving for the cruise sector.
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MIAMI (

TheStreet

) --Though

Carnival

(CUK) - Get Report

reduced its first-quarter guidance while reporting earnings last week, one positive item on deck for shareholders may be the reinstatement of the cruise-ship operator's dividend.

Last week's quarterly results may have demonstrated short-term weakness for Carnival shares, but

the report also hinted at some longer-term buoyancy.

Carnival's balance sheet has improved enough that analysts now expect the company to reinstate its dividend some time next year. When asked by analysts on the earnings conference call about the dividend -- shelved by Carnival in November 2008 during the heart of the credit crisis -- executives said that a special meeting will be held in January to discuss the issue, with an announcement by the middle of the month.

"I think a quarterly common dividend reinstatement is largely expected," said Kevin Milota, a cruise-line analyst at

JPMorgan Chase

(JPM) - Get Report

, who participated in the call. "Given where Carnival's earnings guidance is, and their liquidity position, it's likely to change their view on dividends."

The Carnival dividend is one of two recent signs that the capital-markets environment for cruise-ship operators has improved more rapidly than expected.

On Monday,

Royal Caribbean Cruises

(RCL) - Get Report

received $1.1 billion in unsecured financing to help pay for its Allure of the Seas ship.

BNP Paribas

(BNPQY)

,

Citigroup

(C) - Get Report

,

Nordea Bank

(NDBAY)

and SEB each provided 25% of the funding.

Sharon Zackfia, an analyst with

William Blair

, said Royal Caribbean was able to line up financing for the Allure vessel much earlier than expected.

Combined with Carnival's improved balance sheet, the Royal Caribbean news highlights the stronger financing environment, she noted.

Royal Caribbean, however, may not be as quick to reinstate its dividend as Carnival. The company's balance sheet, according to Zackfia, won't be strong enough to do so until 2011.

-Reported by Eric Rosenbaum in New York.

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