NagaCorp loan a positive step amid refinancing risk, Moody’s says

Analysts say the US$80m loan is a positive, but the company remains exposed to refinancing risk.

Cambodia.- Moody’s Investors Service Inc has taken a positive view of the loan of up to US$80m offered to NagaCorp. The loan comes from the trust established by its founder and controlling shareholder, Chen Lip Keong, and would address the 2024 maturity of a company bond.

Nevertheless, analysts have pointed out that NagaCorp is still at risk of refinancing. The company needs to generate enough free cash flow to repay its 2024 notes, which largely depends on its earnings. Moody’s has suggested that a sustained recovery in earnings and low discretionary spending will help the company achieve this goal.

The focal purpose of the loan, at an annual interest rate of 8 per cent, is refinancing and discharging a portion of outstanding 2024 notes, specifically two categories of 7.95 per cent senior notes with a combined principal value of US$550m set to mature on July 6, 2024. These were issued by NagaCorp in July 2020 and June 2021, respectively. NagaCorp repurchased some of these notes last year, leaving approximately US$472.2m outstanding. 

Moody’s anticipates an improvement in NagaCorp’s earnings over the next year due to a rise in tourists in Cambodia in the first and fourth quarters. They expect NagaCorp to register earnings before interest, taxation, depreciation, and amortization (EBITDA) of approximately US$350m in the current year and US$485m in 2024. However, they caution that any deviation from this could exert pressure on NagaCorp’s liquidity.

Moody’s reported that NagaCorp is expected to allocate approximately US$40m towards development capital for Naga 3. This investment is expected to take place over the next 12 months. Moody’s says NagaCorp is unlikely to pay any cash dividends until it addresses its bond maturity. It has not paid any cash dividends since 2021.