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04 Aug 2010
Approx USD 55 million debt affected
Buenos Aires, August 04, 2010 -- Moody's Latin America has assigned a first-time B3 local currency
corporate family rating and an A3.ar Argentina national scale rating
to Argentine Gaming Group. (AGG). The outlook for all ratings
AGG's B3 and A3.ar ratings reflect its position as one of
the largest private gaming companies in term of revenues operating in
Argentina and solid operating performance. Its gaming revenues
continued to grow despite the impact of the recession, which was
driven by an increasing inflationary framework that led to higher consumer
expenditures. Continued marketing and promotional activity and
a favorable competitive position in its primary market are also helping
ACG's performance. The ratings also reflect AGG's relatively
low leverage and solid credit metrics for its rating category.
Credit negatives that partly offset these strengths include AGG's
small revenues and assets size, high property concentration risk,
with cash flow generation coming from a single market niche, and
its relatively short historical track as operations started only in 2007.
Going forward, Moody's will continue to closely monitor the
likelihood that negative pressure on future revenues and earnings will
develop because of potentially reduced gaming demand in the company's
primary market. Such a reduction is possible given the high level
of unemployment in areas around its operations, which could reduce
gaming demand in the coming months.
AGG's B3 local currency rating reflects its global default and loss expectation,
while the A3.ar national scale rating reflects the standing of
AGG's credit quality relative to its domestic peers. Moody's
National Scale Ratings (NSRs) are intended as relative measures of creditworthiness
among debt issues and issuers within a country, enabling market
participants to better differentiate relative risks. NSRs in Argentina
are designated by the ".ar" suffix. Issuers or issues rated
A3.ar present above average creditworthiness relative to other
domestic issuers. NSRs differ from global scale ratings in that
they are not globally comparable to the full universe of Moody's rated
entities, but only with other rated entities within the same country.
The stable outlook indicates that Moody's expects AGG to continue
to have success implementing its business model, thus allowing the
company to maintain strong credit metrics for its rating category.
The outlook also shows that Moody's expects the company to follow
prudent financial policies in terms of up-streaming any cash or
dividend payout to its parent company. Finally, the outlook
is stable because Moody's expects that AGG will be able to maintain
adequate access to bank loans, even as market conditions remain
An upgrade of the ratings or outlook could result from AGG increasing
its revenues and assets size and becoming more geographically diverse
as the business environment in Argentina improves. Quantitatively,
upward momentum could result if AGG's total adjusted debt to EBITDA is
sustained below 1 times (2.0 times as of last fiscal year ended
December 31, 2009) and operating margins above 28% (23.7%
as of last fiscal year ended December 31, 2009). Also important
for upward rating pressure is for Argentina to have a more predictable
outlook for economic activity.
Negative pressure on the ratings or outlook could result from recovery
in the Argentinean economy having a less-than-expected positive
impact on gaming demand, affecting revenues and margins.
Quantitatively, a downgrade could result from a drop in AGG's
EBIT margin to below 15.0% on a three-year average
basis or a significant increase in leverage, with adjusted total
debt to EBITDA of above 3.5 times. Indications of a weakening
market share in the domestic gaming market could also drive negative pressure.
Headquartered in Panama, Hillview Enterprises Inc. ("Hillview")
is a company which started operations on April 4th, 2007 and is
engaged in investment activities. VR Global Partners L.P.
("VR"), a hedge fund based in Russia, is its controlling
company, holding an ownership interest in Hillview of 60.2%.
Holding 0.4% of shares, AGG's manages all companies
operating three gaming halls (bingos and electronic gaming machines) in
Argentina. With total revenues of USD 101 million as of last fiscal
year ended December 31, 2009, the main gaming hall was founded
in 1992 and is one of the largest gaming companies operating in Argentina.
Asst Vice President - Analyst
Corporate Finance Group
Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Latin America, Calificadora de Riesgo
Moody's assigns B3/A3.ar ratings to Argentine Gaming Group
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
No Related Data.
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