Cambodian casino operator NagaCorp Ltd’s tender offer to repurchase up to US$120-million principal value of its outstanding US$541.7-million senior notes due in July 2024, is not a “distressed exchange”, but refinancing risk remains for the firm, said Moody’s Investors Service Inc in a memo.
Hong Kong-listed NagaCorp’s move to repurchase up to 22 percent of its outstanding notes would be funded by its own cash, the gaming business had said in a Friday filing.
NagaCorp has a long-life casino monopoly for the Cambodian capital, Phnom Penh, where it runs the NagaWorld casino complex.
Moody’s analysts Yu Sheng Tay, Yi Ying Chin, Jacintha Poh, and Vikas Halan stated in commentary issued the same day: “While there could be economic losses depending on the clearing price, we see the transaction as opportunistic rather than a distressed exchange because of no apparent default avoidance.”
The institution said the casino operator remained exposed to refinancing risk for the US$421.7-million balance of the notes, assuming investors tender the maximum value of notes via the exercise. That was because NagaCorp’s operating performance for 2022 and 2023 was expected to remain “well below” that of pre-pandemic trading in 2019, the ratings agency said.
“NagaCorp’s operating performance is recovering following [Covid-19] pandemic-related disruptions last year. However, we expect EBITDA [earnings before interest, taxation, depreciation and amortisation] in 2022 and 2023 to remain well below that of 2019, at 38 percent and 52 percent, respectively,” the Moody’s team remarked.
It added: “Consequently, we expect the company is likely to require external financing to repay its outstanding notes.”
The casino operator might however have difficulty in that regard due to “tight funding conditions” amid the prevailing economic environment, Moody’s observed.
“At the same time, NagaCorp has limited sources of liquidity because of its lack of bank facilities and divestible non-core assets,” its analysts wrote.
