The rating agency Moody’s has raised Cambodian gaming operator NagaCorp’s outlook from negative to stable, citing liquidity improvements.
In its rating comment, Moody’s notes that the change in outlook to ‘stable’ reflects its view that the refinancing risk has abated, as NagaCorp has sufficient funds to repay its US dollar bond in July.
“Liquidity has improved over the past 12 months, helped by the drawdown of a shareholder loan and a reduction in discretionary spending,” says Yu Sheng Tay, a Moody’s analyst.
The rating action follows NagaCorp’s announcement on June 2nd, 2024, that it has drawn down a $70 million loan from an entity controlled by its majority shareholder, the Chen family.
After the loan drawdown, NagaCorp has sufficient liquidity to address the $472 million US dollar bond maturing on July 6th, 2024. This improved liquidity also reflects the company’s efforts to accumulate cash since 2022 by reducing capital expenditures on development and declaring scrip dividends instead of cash.
Following the maturity of its US dollar bond in July, Moody’s estimates that NagaCorp will have a total debt of around $120 million, including lease liabilities. The rating agency forecasts NagaCorp’s EBITDA will improve to between $320 million and $370 million over the next 18 months, up from $295 million in 2023, as Cambodia’s tourism sector gradually recovers.
Moody’s has affirmed NagaCorp’s B3 corporate family rating (CFR) and the B3 senior unsecured rating of the company’s US dollar bond. This reflects the structural shift for gaming operators in the region, as the Referral VIP gaming business has significantly declined due to regulatory restrictions on junket operations.
Additionally, due to the region’s intensifying competition, Moody’s projects that NagaCorp’s EBITDA over the next 18 months will be less than 60 percent of the amount generated in 2019, indicating a slower recovery compared to its regional peers.
NagaCorp holds a casino monopoly concession for the Cambodian capital Phnom Penh, where it runs the NagaWorld complex.
