An offer by NagaCorp Ltd to repurchase up to US$120 million of its outstanding US$541.7 million notes due in July 2024 is unlikely to help the company avoid a default when the remaining notes fall due, according to Moody’s Investors Service.
NagaCorp, which operates integrated resort NagaWorld in Phnom Penh, Cambodia, announced its offer on Friday, stating the purpose of doing so was to enable the company “to manage its overall funding level and to reduce its gross debt and interest costs, while maintaining a prudent approach to liquidity.”
While Moody’s called the offer opportunistic rather than a distressed exchange, it added that the size of the tender offer – up to 22% of the outstanding notes – is unlikely to support NagaCorp in avoiding a default given that US$421.7 million in notes will remain outstanding.
“Assuming the maximum amount of the notes is tendered, the company remains exposed to refinancing risk stemming from the remaining US$421.7 million in notes,” it said.
Of particular concern to Moody’s is NagaCorp’s potential sources of funding, with analysts having previously cited the company’s slow recovery from the COVID-19 pandemic due to heightened regulatory scrutiny and China’s junket crackdown.
“NagaCorp’s operating performance is recovering following pandemic-related disruptions last year. However, we expect EBITDA in 2022 and 2023 to remain well below that of 2019, at 38% and 52%, respectively,” Moody’s writes.
“Consequently, we expect the company is likely to require external financing to repay its outstanding notes. However, its ability to raise external financing is difficult because of the 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.”
NagaCorp recently provided a business update on the 3Q22 performance of NagaWorld, with all gaming segments showing gains – although it also noted that daily EBITDA suffered a hit on lower win rates on the gaming floor.
Daily EBITDA of US$578,000 in Q3 was 19.6% lower than 1H22 daily EBITDA of US$719,000.