Macau casino developer Galaxy Entertainment Group is staring at a potential cash crunch, but not as immediate or as large as the one that drove rival Las Vegas Sands Corp to the brink of a loan default and back earlier this month.
Credit ratings agency Moody's Investors Service yesterday placed Galaxy on review for a possible downgrade after the firm announced it would delay opening its flagship 1,700-room Cotai resort from next year until 2010.
'While the [delay] could to a certain extent lower [Galaxy's] overheads and spread out its capital outlays - amid the highly uncertain operating environment - it will also reduce the cash-flow generation originally expected for 2009 and 2010,' analyst Kaven Tsang said.
Most analysts expect Galaxy's bank balances, credit lines and projected cash flows will be ample or slightly more than enough to fund completion of its HK$10.5 billion Cotai project.
But they worry that unless it is able to refinance debt or raise new funds, it will not have enough cash to repay a US$250 million note that comes due in December 2010.
Analysts project the potential shortfall will be between HK$1 billion and HK$3 billion.
'The Cotai delay has effectively pushed [back] the cash-flow requirement,' Gabriel Chan, a Credit Suisse analyst who expects Galaxy shares to underperform, wrote yesterday in a research note.