Fitch, Universal Ent Founder Spurt Upgrades Manila IR
In a note on Thursday, Fitch Ratings acknowledged that Japan's leisure giant Universal Entertainment, the ultimate parent of Okada Manila Casino Resort in the Philippines, was a party to the dispute with its founder and former chairman Kazuo Okada.
The rating agency said it affected how it evaluates the company's environmental, social and governance scores.
But Okada Manila nonetheless predicted it could reach 80% of its pre-pandemic revenue within the year.
In April, Okada Manila said it began offering it through its casino facility, an online game for local customers, in mid-April.
In a note on Thursday, Fitch upgraded the Japanese parent's long-term issuer default rating (IDR) from "CCC+" to "B-" and gave a "stable" outlook.
A key driver of Fitch's upgrade was the assumption that sales at Okada Manila would be "about 80% of pre-pandemic levels in 2022, which is largely in line with our assumptions about the comparable global casino market."
In addition, Universal Entertainment upgraded the U.S. dollar senior bond's rating from "CCC+" to "B-" while maintaining its recovery rating of "RR4."
Universal Entertainment's core business has been its popular Japanese leisure sector's Pachinko machine. But prior to pandemic-related travel and capacity restrictions, Okada Manila had been expanding its contribution to the group's bottom line.
Fitch noted that while Okada Manila was "the largest casino in Manila Entertainment City," it was nevertheless "the only integrated resort asset" of Universal Entertainment.
"The integrated resort is very small [businessally] compared to most of its graded peers," observed report authors Satoru Aoyama, Gupta Akashi and Kalai Pillay.
Fitch said completing Okada Manila's outstanding phase, scheduled for 2023, would "ease the parent's capital expenditure burden."
"After the completion of the 335 billion yen integrated facility construction, we assume a total facility investment of 15 billion yen [US$117 million] and 8 billion yen in 2022 and 2023, respectively."
This is "significantly lower" than the total capital expenditure of 100 billion yen between 2018 and 2021, the authors added.
Fitch expected Okada Manila to generate low negative free cash flow in 2022 before it transitioned positive from 2023 due to higher revenue, lower costs and completion of IR.
Fitch said it had taken a "neutral" view of the planned listing of its Okada Manila assets through a merger between Okada Manila International, a subsidiary of Universal Entertainment in the Philippines, and Nasdaq-listed special purpose acquisition company 26, due at the end of June 2022.
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