Moody’s downgrades NagaCorp corporate family rating to B3

The decision was due to he company’s “lack of refinancing progress”.

Cambodia.- Moody’s Investor Services has downgraded the corporate family rating of NagaCorp Ltd from ‘B2’ to ‘B3’ due to the company’s “lack of refinancing progress for its US$472m bond coming due in July 2024. The bond forms all of the company’s debt in its capital structure.”

Moody’s analyst Yu Sheng Tay said: “Despite NagaCorp having reduced its discretionary spending, its ability to repay the bond depends on the pace of earnings recovery, which currently remains uncertain.”

Moody’s downgraded its senior unsecured rating of NagaCorp’s US dollar bond from ‘B2’ to ‘B3’. It added that its rating outlook for the casino operator has changed to ‘negative’. 

Over the next 18 months, NagaCorp’s discretionary spending will decrease. Earlier this month, the company announced that it has decided to push back its Naga 3 project in Phnom Penh by four years to 2029.

Due to this, the casino operator expects to “spend less than US$50m on development capital expenditure in 2023, compared with the company’s previous guidance of US$100m to US$125m.” 

Nevertheless, analysts stressed the company’s ability to meet its bond repayment obligations depends on the pace of its earnings recovery, which remains uncertain. Moody’s analysts anticipated a progressive improvement in NagaCorp’s earnings within the next 18 months, aligning with the revival of Cambodia’s tourism sector and the return of Chinese tourists.

According to Moody’s estimations, NagaCorp could generate EBITDA ranging between US$350m and US$370m in 2023, followed by a projected increase to US$485m in 2024. However, a slower-than-anticipated recovery may exert pressure on the company’s liquidity.

NagaCorp benefits from exclusive rights to operate casinos in and around Cambodia’s capital until 20245. Nonetheless, the credit rating reflects its reliance on a single-site operation and exposure to potential political risks and Cambodia’s evolving regulatory landscape.

During the first quarter of 2023, NagaCorp reported EBITDA of merely US$59m, primarily attributed to reduced win rates and escalating staff expenses.