Covid-19 countermeasures and economic uncertainty surrounding casino operations in the Philippines have led Fitch to downgrade Universal Entertainment.
Japan.- Fitch Ratings has revised its outlook for the gaming company Universal Entertainment Corp, lowering it from B to CCC+, which means default is a real possibility for the group.
Fitch said that unless Universal Entertainment saw significant improvement in the second half of the year 2021, it may have insufficient liquidity to meet a repayment of nearly JPY14bn (US$118m) senior secured notes (SSN) due in December 2021.
The credit ratings provider was also influenced to lower Universal Entertainment rating due to its increased earnings and cash flow volatility, which has been amplified by the Covid-19 pandemic.
The biggest complications Universal Entertainment faces are ongoing travel restrictions and further lockdowns which, according to Fitch, could lead to further cash burn and deteriorating liquidity
Fitch Ratings stated: “We are monitoring UEC’s liquidity closely before the USD118 million SSN mature in December.”
Universal Entertainment reporting net sales down 64 per cent year-on-year for the first quarter at JPY14.7bn (US$134.1m).
The Amusement Equipment business saw sales fall to 12,708 units compared with 52,631 units in the same period of 2020. Its net sales were JPY5.38bn, down 78.2 per cent year-on-year.
Universal reported a net loss of JPY5.2bn (US$48m), which is attributed to restrictions at Okada Manila.
The Okada Manila Integrated Resort had been operating limited to a capacity of 30 per cent but has been closed since March.
A week ago, the Philippines’ president announced that Metro Manila was moving to general community quarantine until May 31. However, there’s no word yet on casinos reopening.
Casinos at Entertainment City shut in March. For now, Okada Manila, City of Dreams Manila and Solaire Resort and Casino have not updated their websites to announce a reopening.