Moody’s Investors Service has described a US$80 million shareholder loan provided to NagaCorp by its controlling shareholder, Tan Sri Dr Chen Lip Keong, as “credit positive” for the firm but said refinancing risks still remain.
As reported by Inside Asian Gaming, the US$80 million is to be put towards repayment of US$472 million in outstanding bonds due July 2024, with the remainder to be paid from cash on hand.
This, says Moody’s, could be problematic for NagaCorp because with US$298 million in cash and cash equivalents, and assuming it maintains a working cash balance of US$40 million and fully draws down the $80 million shareholder loan, the company will need to generate free cash flow of US$135 million over the next three quarters to cover the bond maturity.
Moody’s has previously stated its belief that NagaCorp will struggle to raise external financing because of tight funding conditions prevailing in the current economic environment.
“At the same time, NagaCorp has limited sources of liquidity because of its lack of bank facilities and divestible noncore assets,” the ratings agency said last year.
In a Friday note, Moody’s observed that NagaCorp’s earnings recovery has to date been slower than anticipated although should continue to improve over the next 12 months from seasonal peaks in Cambodia’s tourist arrivals in the first and fourth quarters of each year.
“We assume that the company can generate EBITDA of around US$350 million in 2023 and US$485 million in 2024, but a slower-than-expected recovery would be likely to put pressure on NagaCorp’s liquidity,” it said.
“For the first nine months of 2023, the company reported EBITDA of US$215 million, which is tracking behind our full-year projection as earnings recovery in the third quarter was hindered by election activities in Cambodia.”
On a positive note, Moody’a said it expects NagaCorp to limit capex spending on development to US$40 million over the next year having recently announced a four-year delay to the planned opening of Naga3 until September 2029.
At the same time, we expect it will not pay cash dividends until it addresses its bond maturity,” Moody’s wrote. “NagaCorp has not paid a cash dividends since 2021.”
