Moody Corporation’s bond credit rating business, Moody’s Investor Service, is concerned about the future of NagaCorp amid China’s war on junkets. The Hong Kong-listed Cambodian operator has been struggling to recover from the pandemic and now faces significant refinancing risks.

Moody Is Concerned about NagaCorp

Moody’s concerns became evident when the rating company downgraded NagaCorp’s corporate family and senior unsecured ratings from B1 to B2. The former firm expressed concerns about the Cambodian operator’s recovery and believes that tough years might await the gambling and hospitality company.

One of Moody’s biggest concerns is a $545 million bond that will mature in mid-2024. This might be a significant problem as NagaCorp’s current sources of liquidity have been limited and the company lacks bank facilities and divestible non-core assets.

Yu Sheng Tay, analyst at Moody’s, said that the downgrade is in line with NagaCorp’s slow recovery. He noted that the company will very likely require external financing to pay the outstanding bond. The rating also reflects the large refinancing risks caused by the current economic environment.

There Is Hope on the Horizon

If NagaCorp manages to deal with this, however, Moody’s predicts that the company will experience a strong recovery and will be generating revenues by the end of 2024. According to the ratings firm’s specialist, NagaCorp will generate an EBITDA of roughly $252 million in 2022 and an EBITDA of about $352 million in 2023. For comparison, the Cambodian casino and hospitality giant barely had an EBITDA of $16 million last year.

While there is light at the end of the tunnel, the situation still isn’t rosy. In 2019, prior to the COVID-19 pandemic, NagaCorp recorded an EBITDA of $672 million. The current results and forecasts show that the company still has a long way to go before returning to pre-pandemic levels.

Regulatory scrutiny, Moody’s said, is one of NagaCorp’s biggest challenges right now. It has greatly limited the company’s marketing and, by extension, has hurt its revenues.

Moody’s concluded that NagaCorp might be able to maintain liquidity if it reduces its development capital expenditure for its Naga 3 expansion project. The company must also limit cash dividends if it wants to seamlessly deal with its $545 million bond.

In other Cambodia-related news, the country’s authorities continue their crackdown on gambling-related crime. The country has long struggled with fraud but the current ministers are bullish on restoring Cambodia’s reputation.

Meanwhile, PokerStars announced its first APPT poker festival in the country.