Cruise ship operator Carnival Corp. (NYSE:CCL) (NYSE:CUK) has been hard hit by impacts from the COVID-19 pandemic. Now, because of those impacts, ratings agency Standard & Poor's (S&P) has dealt another blow by lowering Carnival's credit rating to junk, according to a Reuters report. 

S&P cut its rating from BBB- to BB+ on the cruise operators secured bonds, and to BB- on unsecured bonds. Any level below BBB- is considered below investment grade, also known as a "junk bond." Rating agency Moody's (NYSE:MCO) had previously cut Carnival to junk last month, according to the report. 

drawn image of cruise ship with COVID-19 caution tape keeping people away

Image source: Getty Images.

This is the second time in less than three months that S&P has lowered its ratings on Carnival. On April 1, 2020, S&P said it was due to the "expectation that the cruise ship operator will likely generate minimal, if any, EBITDA in 2020 as a result of sailing suspensions due to the coronavirus outbreak." Since that time, Carnival was successful in obtaining financing, but at a hefty price. 

The company raised $4 billion in early April through the issuance of three year senior secured notes at an annual interest rate of 11.5%, and another $1.75 billion from convertible notes paying 5.75%. 

On June 22, 2020, Carnival extended its suspension in operations through Sept. 30, 2020. Carnival not only has to contend with the additional lack of cash flow, but it also is offering customers incentives for future travel. For passengers willing to rebook, it is offering future cruise credits, and on-board spending credits of up to $600. 

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