Universal Entertainment downgraded to ’B-’ by S&P on slow recovery

Investing.com -- S&P Global Ratings has downgraded Universal Entertainment Corp. to ’B-’ from a higher rating, citing prospects of slow recovery in its business operations. The outlook remains stable.

The rating agency expects Universal Entertainment ’s companywide EBITDA to fall to approximately ¥18 billion in 2025 from ¥21.2 billion in 2024, which had already shown significant year-on-year deterioration. S&P forecasts EBITDA will likely remain around ¥24 billion-¥25 billion for about one year from 2026.

The company’s casino resort business in the Philippines has fallen into the red again due to intensifying competition, although its Japanese gaming machines business has shown some recovery. Gross gaming revenue at Tiger Resort, Leisure and Entertainment Inc., Universal Entertainment’s Philippine operating subsidiary, has declined in double digits year-on-year for consecutive years.

This decline stems from sluggish performance in VIP customer services due to decreased tourist numbers from China and other regions, combined with stiff competition in the Philippine casino market. S&P expects the casino resort business’ EBITDA will be around ¥12 billion in 2025, and around ¥15 billion-¥16 billion for about one year after that, below the approximately ¥19 billion recorded in 2024.

The Japanese gaming machines business is expected to stabilize, though sales remain difficult to predict as compliance rates for new machine models have been sluggish. The business’ EBITDA will likely be around ¥12 billion in 2025 and stabilize at around ¥15 billion thereafter, exceeding the ¥8.5 billion for 2024 but still only about 60% of the 2023 level.

S&P forecasts the company’s debt to EBITDA ratio will deteriorate to around 10x from 8.9x at the end of December 2025, and expects the ratio to be around 7x for the next year or so thereafter.

The rating agency believes Universal Entertainment’s liquidity is unlikely to deteriorate significantly in the near term, as the company maintains cash and deposits of ¥27.4 billion as of September 2025, up from ¥21.2 billion at the end of March 2025. The company has $800 million in long-term bonds and loans, with debt due over the next 12 months likely to remain around ¥1 billion-¥2 billion.

S&P would consider a downgrade if EBITDA and cash flow do not recover as expected, if consolidated cash and deposits fall below ¥25 billion, or if there is greater likelihood of liquidity deterioration or covenant breaches. An upgrade would require the debt-to-EBITDA ratio to remain below 5x with significant business recovery, though S&P notes this possibility is limited in the near term.

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