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19 Jan 2009
Approximately US$430 million of debt securities affected
Hong Kong, January 19, 2009 -- Moody's Investors Service has downgraded the corporate family rating
and senior unsecured debt rating of Galaxy Casino S.A. (Galaxy)
to B3 from B1. The outlook for both ratings is negative.
This concludes the rating review initiated on November 21, 2008.
"The downgrade reflects Moody's expectation that Galaxy's
credit profile will remain weak in the near-to-medium term
due to lower than expected cash flow generation in the context of a tough
gaming market and delayed opening of the Galaxy Macau Resort (formerly
known as Cotai Mega Resort) to 2010," says Kaven Tsang, Moody's
lead analyst for Galaxy.
"There is a high likelihood of further delay in the opening of the
Resort given the uncertain market environment and if Galaxy cannot replenish
the liquidity applied for buying back its US$ bond in the next
12 months. As a result, the company will have increased funding
needs arising from the further delay to service its projected capex and
scheduled debt repayment in the medium term," says Tsang.
"However, the tightened global credit environment will add
material uncertainty to Galaxy's fund raising activities in the
near-to-medium term," adds Tsang.
"Despite the buyback of bond, Galaxy's debt burden will
remain high relative to its cash flow generation capacity in the near-to-medium
term. Estimated Debt/EBITDA (including the zero interest subordinated
loan from parent company with no definite repayment date) above 10x and
EBITDA interest coverage around 1.5x in the next 2 years will position
the company at the low B rating level," adds Tsang.
The negative outlook reflects Moody's concerns that Galaxy's credit
and liquidity profiles could weaken further if 1) performances of the
existing casinos deteriorates due to weakened market position or deepening
of the Macau gaming market downturn; 2) opening of the Galaxy Macau
Resort is further postponed, and/or 3) the tight credit and financing
environments restrain Galaxy's funding abilities in the near-to-medium
Galaxy's ratings will come under further downward pressure if the company's
operating and financial profile deteriorates further such that EBITDA
interest coverage drops below 1-1.2x. Inability of
Galaxy to raise new financing through debt and/or equity to service its
projected capex and scheduled debt repayment in the next 2 years that
in turn stresses its liquidity will also pressure the ratings.
The ratings are unlikely to be upgraded given the negative outlook.
However, the outlook could revert to stable if Galaxy 1) demonstrates
abilities in raising additional financing to service its projected capex
and debt repayment needs in the next 2 years, and 2) the Galaxy
Macau Resort commences operation and realizes its business plan,
such that EBITDA interest coverage approaches 2x and Debt/EBITDA drops
below 8-9x on a sustained basis.
The principal methodology used in rating Galaxy is the Global Gaming Methodology,
which can be found at www.moodys.com in the Credit Policy
& Methodology, in the Ratings Methodologies subdirectory.
Moody's last rating action on Galaxy was taken on November 21,
2008, when Galaxy's ratings were put on review for possible
Galaxy Casino S.A. (Galaxy), incorporated in 2001,
holds one of six concessions/sub-concessions licensing it to undertake
gaming activities in Macau. In July 2004, Galaxy opened the
Waldo Casino, the group's first casino operation. Since then,
the company has opened four other casinos in Macau, with the flagship
StarWorld facility opening in October 2006. In addition,
Galaxy is constructing a large resort in Macau which is expected to open
Asst Vice President - Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077
Moody's downgrades Galaxy to B3; outlook negative
Senior Vice President
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077
No Related Data.
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