Casino group NagaCorp proposes notes issue to aid liquidity

Jun 22, 2020 Newsdesk Latest News, Rest of Asia, Top of the deck  

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NagaCorp Ltd, operator of a large casino resort in Cambodia, is proposing an international offering of notes to “investors in Asia and Europe” against the backdrop of a pause in its gaming operations amid the Covid-19 pandemic. The net proceeds would be used to redeem “some or all” of the group’s outstanding notes due in 2021; with anything left over going toward general corporate purposes, according to a Monday filing to the Hong Kong Stock Exchange.

After the exercise the firm thinks it would have approximately 18 months of operational liquidity, even if it remained in a “minimal revenue” business environment.

The group owns and runs the NagaWorld casino complex (pictured) in Phnom Penh, the capital of Cambodia. Gaming at the site has been suspended since April 1 on the orders of the national government, as part of measures to prevent the spread locally of the novel coronavirus responsible for Covid-19 infection.

According to the Monday filing, the terms of NagaCorp’s proposed notes issuance would be determined though a book building exercise by Credit Suisse (Hong Kong) Ltd, Morgan Stanley and Co International plc and UBS AG Hong Kong Branch as joint global coordinators, joint bookrunners and joint lead managers.

NagaCorp’s outstanding 2021 notes are senior notes issued on May 21, 2018, with an aggregate principal amount of US$300 million and with interest at 9.375 percent.

“Although we have no other existing facilities to provide further liquidity, we believe that after… the proposed notes issue… our liquidity could support approximately 18 months of operating expenditure and interests expenses, with minimal revenue,” NagaCorp mentioned in its Monday filing.

“Our actual level of cash operating expenses in coming periods could be impacted by unanticipated developments of events beyond our control,” the firm added.

The filing also noted that irrespective of market demand for NagaCorp’s proposed notes, the firm’s chief executive and executive director Chen Lip Keong will subscribe for “up to US$45 million” – measured by principal amount – in the new notes. That was in order to show Mr Chen’s “support for and confidence” in NagaCorp, the filing noted.

NagaCorp stated in its Monday update that the firm is currently operating its Naga 1 Hotel – with reduced occupancy rates – and “limited food and beverage operating facilities”. Duty-free businesses at NagaCity Walk remain open but the firm’s Naga 2 hotel facility is currently closed.

NagaCorp said its cost-control measures amid the global crisis included scaling down hotel and food and drink businesses; reducing since April payroll expenses “by limiting staff on site and reducing employee pay since April 2020”; and closing some unspecified facilities.

After the initiatives, “we expect that our monthly run-rate operating costs will be US$3.9 million,” NagaCorp said. The firm’s average monthly expenditures – based on the three months ended March 31 – were US$18.4 million.

The firm also noted that its “cash and deposits”, as of March 31 and May 31 this year respectively, were US$464.9 million and US$527.1 million, respectively.

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