Moody’s Investors Service Inc said on Monday it had confirmed a “B1” rating on its senior unsecured bond against Cambodia’s casino operator Naga Corp Ltd. B1 is a non-investment rating.
Moody’s said the note should provide Hong Kong-listed Nagakov with “sufficient liquidity” to support cash demand “for the next 18 to 24 months.” The company’s Phnom Penh casino monopoly, Nagaworld, was suspended in early March due to the pandemic but has remained so.
Nagakov announced on Tuesday that it will issue a 7.95% senior bond with a total principal amount of $200 million. The bond, which cannot be converted into shares, will mature on July 6, 2024. Nagakov said the new bond will merge to form the same series as the $350 million issued last year.
Moody’s also confirmed Nagakov’s “B1” corporate family rating, Moody’s said in a statement on Tuesday.
“This rating confirmation reflects our expectation that Nagakov’s Tab issuance will provide us with sufficient liquidity to finance cash burn over the next 18-24 months if casino operations cease,” wrote Jagintapo, Moody’s vice president and chief credit officer.
In 2019 and 2020, Nagarwold’s gaming revenue generated “more than 95%” of Nagarov’s revenue and revenue before interest, taxation, depreciation and amortization (EBITDA), Moody’s noted.
“Although leverage will remain weak in 2021, we expect it to recover within the company’s B1 rating parameters in 2022 as casino operations gradually resume in the second half of 2021,” Poe suggested.
Moody’s also said it expected Nagakov’s sales to be “weaker in 2021” than last year. The rating agency explained that it estimated that sales for the current calendar year could be around “40%” of 2019 levels, assuming that Nagakov’s current suspension period does not exceed the pandemic-related suspension of Cambodian casinos in 2020.
Moody’s predicted that the COVID-19 disruption could delay Nagakov’s earnings recovery until 2022. The rating agency also suggested that planned spending on new casino resort projects in Vladivostok, Russia, as well as the Nagar3 expansion project could be postponed to “no financial disadvantage”.
“Nagakov’s leverage, as measured by debt/EBITDA, will weaken from 2.6 times in 2020 to 2.7 times in 2021 on the back of higher debt levels driven by tap issuance and lower revenue,” the rating agency noted. Nevertheless, Moody’s forecast leverage will recover to about 1.0 times in 2022 unless the company’s casino operations are halted in that year.
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