NagaWorld pause a negative for NagaCorp credit: Moody’s

NagaWorld pause a negative for NagaCorp credit: Moody’s

The temporary suspension of business at Cambodian casino resort NagaWorld, after 11 staff tested positive for Covid-19, is a “credit negative” for its Hong Kong-listed promoter NagaCorp Ltd, said Moody’s Investors Service Inc, in a Wednesday note.

Any “prolonged closure of operations could derail earnings recovery and weigh on NagaCorp’s credit quality,” said the memo from Junling Tan, Yu Sheng Tay and Vikas Halan.

Moody’s currently considers credit instruments issued by NagaCorp as ‘B1’ – a non-investment grade – with, in NagaCorp’s case, a ‘negative’ outlook.

The Moody’s team stated: “NagaWorld will experience a decline in foot fall because of social distancing and density control measures – as well as health and safety concerns – when the operations resume.”

Business had been “immediately and voluntarily” suspended at NagaWorld (pictured) in the Cambodian capital Phnom Penh, after 11 employees tested positive for Covid-19 amid screening of 3,000 workers, said the resort’s promoter in a Monday filing to the Hong Kong Stock Exchange.

Neither the date the suspension began, nor a possible date for resumption of operations, was mentioned in the filing.

Moody’s said it nonetheless expected NagaCorp’s leverage – as measured by the formula of debt/earnings before interest, taxation, depreciation and amortisation (EBITDA) – to be under 1 times in 2021-2022, versus the institution’s trigger point for a rating downgrade, which would be 2.5 times debt/EBITDA.

This meant NagaCorp had “some capacity to weather any temporary deterioration of earnings,” stated the ratings house.

Moody’s added the casino firm had “very good liquidity” for the next 12 months.

The institution noted that as of September 30, the company had cash and deposits of US$478 million. “In conjunction with around US$500 million of operating cash flow, we expect the company to meet its cash needs, including its expansionary capital spending and the repayment of its US$300-million senior unsecured notes due May 2021,” wrote the analysts.

Moody’s also expected an “estimated cash surplus of more than US$200 million will be sufficient to cover an estimated cash burn for more than 18 months”.

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