Moody’s Investors Service said Friday it has placed NagaCorp’s B2 corporate family rating (CFR) and the B2 senior unsecured rating on the company’s US dollar bond on review for downgrade should it fail to take substantial action around refinancing looming debt in the coming months.
The review comes after Moody’s had already stated last November that efforts by NagaCorp ro repurchase up to US$120 million of its US$541.7 million notes due July 2024 was unlikely to help the company avoid a default when the remaining notes fall due. NagaCorp ultimately repurchased US$69.5 million of its notes, leaving around US$472 million outstanding.
In a Friday note, Moody’s analyst Yu Sheng Tay explained, “The ratings review reflects the likelihood of a downgrade if NagaCorp fails to make substantial progress over the next three months to refinance its outstanding US$472 million bond coming due in July 2024.”
The ratings agency added that NagaCorp is exposed to heightened refinancing risks given the looming notes maturity and tight funding conditions.
While conditions in Cambodia, where NagaCorp’s integrated resort NagaWorld in Phnom Penh holds a monopoly on casino gaming within a 200km radius, are tipped to improve over the next two years – with NagaCorp expected to generate EBITDA of around US$370 million in 2023 and US$485 million in 2024, this will not be enough to alleviate financial pressure.
As such, Moody’s said NagaCorp will likely rely on external financing to repay its bond given it had cash and deposits of just S$175 million as of 31 December. It also faces considerable costs related to the ongoing development of the US$3.5 billion Naga3 expansion.
“Moody’s review will focus on NagaCorp’’ ability to address its bond maturity over the next three months,” the agency said.
“An upgrade of NagaCorp’s ratings is unlikely, given the review for downgrade. However, Moody’s could confirm the ratings if the company addresses its refinancing risk.
“Moody’s could downgrade NagaCorp’’ ratings if the company is unable to address its refinancing risk; or undertakes a liability management exercise that Moody’s views to be an avoidance of default that results in economic loss for its bondholders.”
NagaCorp recently announced a net profit of US$107.3 million in 2022, reversing a 2021 loss of US$47.0 million on a 99.5% increase in gross gaming revenue to US$445.9 million.
