Fitch expects 70% revenue drop for Okada Manila in Q2

Fitch highlighted the financial impact of Covid-19 and Universal’s greater exposure as a single property operator.

Philippines.- Fitch Ratings has downgraded Universal Entertainment’s credit rating and expects its Okada Manila property to post a 70 per cent drop in Q2 revenue.

Universal Entertainment Corporation’s (UE) Long-Term Issuer Default Rating went from ‘B+’ to ‘B’ and the senior secured rating to ‘B’ from ‘B+’ with a Recovery Rating of ‘RR4’.

Fitch highlighted the financial impact of Covid-19 and Universal’s greater exposure as a single property operator.

It said: “The downgrade is driven by increasing risks to UE’s earnings and cash flows as a result of the Coronavirus pandemic.

“The gaming sector is highly exposed to the outbreak and UE’s vulnerability is exacerbated by its single location focus and its lack of a track record in casino operations as its integrated resort (IR) in the Philippines, the Okada Manila, is still in the ramp-up phase.”

Regarding Okada Manila’s potential revenue drop, it added: “Fitch believes the IR is likely to remain closed through May and only resume operations in mid-June.

“Under this scenario, we assume a 70 per cent YoY drop in revenue in 2Q20, followed by a 25 per cent decline in 3Q20 and a 15 per cent decline in 4Q20, in line with our assumptions for comparable global casino markets.”

In March, Fitch downgraded MGM, citing its “decreased financial flexibility” to face the pandemic.