Fitch Rating scores B- for Okada Manila parent company

Fitch Ratings Inc has placed Universal Entertainment Corp’s ‘B-’ long-term issuer default rating (IDR) and the ‘B-’ rating on its outstanding U.S.-dollar senior secured notes on ‘rating watch negative’.

The conglomerate, which is the parent of Tiger Resort, Leisure and Entertainment Inc, promotes the Okada Manila casino resort in Metro Manila.

Fitch explained that this action reflects the fact that the maturity of the US$760-million notes due December 2024, which constitutes the bulk of the company’s debt, is drawing closer. Fitch added: “While the company [Universal Entertainment] is in advanced stages of executing a refinancing plan, legally-binding commitments to refinance are not in place.”

The agency further observed: “Fitch will resolve the ‘rating watch negative’ if the company successfully refinances its debt. Any delays in refinancing execution will likely lead to further negative actions.”

Fitch additionally noted: “While our analysis suggests that all the debt instruments would be fully recovered, we observe that a significant amount of Universal Entertainment’s enterprise value is tied to assets located in the Philippines.”

The Okada Manila business posted net sales of nearly JPY20.38 billion (US$132.2 million) in the first quarter, representing 59.2 percent of Universal Entertainment’s first-quarter consolidated net sales of nearly JPY34.43 billion.

Due to Universal Entertainment’s exposure to the Philippines market, Fitch stated, “the country cap for the Philippines will be applied, which limits the recovery rating to ‘RR4′ as per Fitch’s country-specific treatment of recovery ratings criteria.”

Fitch expects business growth at Okada Manila “to soften” this year. First-quarter casino gross gaming revenue (GGR) declined 24.1 percent year-on-year at Okada Manila, according to an April announcement from Tiger Resort.

Regarding parent Universal Entertainment, Fitch said: “Following a strong 2023 performance, we forecast… revenue growth to flatten in 2024 before rising from 2025, albeit at a moderate rate.”

However, Fitch revised down its forecast for revenue from the company’s integrated resort (IR) in the Philippines, while maintaining a positive outlook for the IR, supported by the Philippines’ healthy economic growth and the continued recovery in inbound tourist volume.

Universal Entertainment’s first-quarter net sales fell 3.0 percent year-on-year to just under JPY34.43 billion. The parent’s operating profit dropped 15.5 percent from the prior-year quarter, to just over JPY4.02 billion. However, net income attributable to owners of the parent rose 17.1 percent year-on-year to JPY3.45 billion.

Universal Entertainment reported in a Tuesday announcement on its first-quarter results that sales of its new “smart pachislot” machines had improved and were “meeting the expectations of pachinko hall operators” in Japan. However, it added: “In the integrated resort business, market conditions were affected by the slowdown in the junket business.”

Group-wide, Universal noted: “there was a foreign exchange gain in the first quarter due in part to the [Japanese] yen’s depreciation and strength of the U.S. dollar. “However, interest income from U.S. dollar-denominated bonds increased because of the dollar’s strength,” the company added.

Related Posts