Moody’s Ratings has affirmed the ‘B3’ corporate family rating of Hong Kong-listed Cambodian casino operator NagaCorp Ltd, as well as the ‘B3’ senior unsecured rating of the firm’s U.S. dollar bond, the latter guaranteed by the major operating subsidiaries of NagaCorp.
The rating agency changed NagaCorp’s outlook to ‘stable’, from negative, according to a Wednesday report.
“The change in outlook to stable reflects our view that refinancing risk has abated as NagaCorp has sufficient funds to repay its U.S. dollar bond in July,” wrote analyst Yu Sheng Tay. “Liquidity has improved over the past 12 months, helped by the drawdown of a shareholder loan and reduction in discretionary spending.”
NagaCorp, operator of NagaWorld (pictured), a casino resort monopoly in the Cambodian capital Phnom Penh, drew down last week US$70 million of an US$80-million shareholder loan it received in October last year.
“The company is confident that with this drawdown, the 2024 notes will be discharged in full upon their maturity,” stated at the time the casino firm, referring to the outstanding notes. The total principal of the notes at issuance was US$472.2 million.
According to Moody’s, “pro forma for the loan drawdown, NagaCorp has sufficient liquidity to address the … U.S. dollar bond maturing on 6 July 2024.”
It added: “The improved liquidity also reflects the company’s efforts to accumulate cash since 2022 by reducing development capital expenditure and declaring scrip dividends in lieu of cash.”
Following the maturity of its U.S. dollar bond next month, Moody’s estimates NagaCorp “will have total debt of around US$120 million, including lease liabilities”.
The rating agency forecasts NagaCorp’s earnings before interest, taxation, depreciation and amortisation (EBITDA) “will improve to US$320 million to US$370 million over the next 18 months,” from US$295 million in 2023, “as the tourism sector in Cambodia gradually recovers”.
Despite what Moody’s described as an “healthy balance sheet,” the institution said NagaCorp’s ‘B3’ rating “reflects the structural shift for gaming operators in the region, as the referral VIP gaming business has significantly declined following regulatory restrictions on the operations of junkets.”
As a result, Moody’s projections for NagaCorp’s EBITDA over the next 18 months were for “less than 60 percent of the amount generated by the company in 2019, which indicate a slower recovery trajectory compared with its peers in the region.”
In a voluntary filing in early April, the casino group stated that first-quarter gross gaming revenue rose 23.7 percent year-on-year, to nearly US$145.4 million.
