S&P Global Ratings upgraded Universal Entertainment's (TYO:6425) long-term issuer credit and long-term issue ratings to B from CCC+ and removed them from CreditWatch with positive implications.
The actions followed the company's refinancing of notes due in December, which significantly cut refinancing and liquidity risk, S&P said in a Friday release.
However, the company's operations face pressure from sensitivities to economic trends, a structural decline in market and regulatory trends that impact the gaming sector, the concentration of its casino resort business and a smaller volume compared to peers abroad, S&P said.
Foreign exchange rate volatility and governance factors that include litigation risk also serve as rating constraints for Universal Entertainment, S&P said.
The ratings have a stable outlook, based on expectations of a significant boost in the company's liquidity and a stable performance from its pachinko machine business in Japan and casino operations in the Philippines.
The rating agency expects the company to maintain a debt-to-EBITDA ratio of about 4x in the next one to two years, saying it does not see leverage eroding again given the stable operations at its casino facilities.
Significant movements in the company's debt-to-EBITDA ratio and short-term liquidity could compel the rating agency to carry out future rating actions.
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