Moody’s Investors Service Inc said on Monday it had affirmed a ‘B1’ rating on senior unsecured notes for NagaCorp Ltd, a casino operator in Cambodia. B1 is a non-investment grade rating.
Moody’s said the notes ought to provide Hong Kong-listed NagaCorp with “sufficient liquidity” to support its cash needs “over the next 18 to 24 months”. The firm’s Phnom Penh casino monopoly operation, NagaWorld, was suspended at the start of March, due to the pandemic, and remains so.
NagaCorp announced on Tuesday that it was to issue the 7.95-percent senior notes in the aggregate principal amount of US$200 million. The notes, which will not be convertible into shares, will mature on July 6, 2024. These new notes were to be consolidated and form the same series as the US$350-million notes issued last year, NagaCorp said.
In a Tuesday statement, Moody’s said it has also affirmed the ‘B1’ corporate family rating of NagaCorp.
“The rating affirmation reflects our expectation NagaCorp’s tap issuance will provide the company with sufficient liquidity to fund its cash burn over the next 18 to 24 months, should its casino operations remain suspended,” wrote Jacintha Poh, a Moody’s vice president and senior credit officer.
In 2019 and 2020, gaming revenue from NagaWorld generated “more than 95 percent” of NagaCorp’s revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA), Moody’s noted.
“While leverage will stay weak in 2021, we expect it will recover to within the company’s B1 rating parameters in 2022 as casino operations gradually resume in the second half of 2021,” Ms Poh suggested.
Moody’s also said it expected NagaCorp’s revenue to be “weaker in 2021” than last year. The ratings agency explained that it has estimated the firm’s revenue for the current calendar year could be equivalent to around “40 percent” of its 2019 level, assuming the current suspension at NagaWorld does not exceed three and a half months, ie., the length of a pandemic-related suspension of Cambodian casinos in 2020.
Moody’s expected NagaCorp’s earnings recovery could be delayed until 2022, due to Covid-19 disruption. The ratings house also suggested that the company could delay – with “no financial penalties” – spending planned for its new casino resort project in Vladivostok, Russia, as well as the expansion project Naga 3.
“NagaCorp’s leverage, as measured by debt/EBITDA, will weaken to 2.7x in 2021 from 2.6x in 2020, driven by high debt levels because of the tap issuance and lower earnings. Nonetheless, Moody’s forecasts leverage will recover to around 1.0x in 2022 if the company’s casino operations are not suspended in that year,” the ratings house noted.
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