Fitch Ratings downgrades Enjoy’s credit rating

Latin American casino operator Enjoy has been placed on ‘Rating Watch Negative’ by the Fitch Ratings credit rating agency following the downgrading of its Issuer Default Rating (IDR) from ‘B+’ to ‘B’.

The downgrade can be somewhat attributed to the ongoing global economic crisis that has been caused by the shutting down of markets due to the COVID-19 outbreak. This market shutdown has in turn greatly impacted the gambling industry, with the Superintendency of Gambling and Casinos (SCJ) of Chile announcing a mandatory closure of all casinos in the country until March 29.

Enjoy, which operates in Chile as well as in Uruguay and Argentina, has as a result been forced to suspend operations, with this fact being considered in the rating downgrade as Enjoy is now set to face economic hurdles as the closure of its casinos will undoubtedly damage its cash flow in the short term. 

With this being said, the COVID-19 is not the sole reason for the operator’s demotion to a ‘B’ IDR, as Fitch has also cited ‘weak results in different operating units in 2019’, which were worsened by the social crisis in Chile that forced the company to close its casinos for a week last year, as a reason for its ultimate decision. 

The rating agency stated: “Fitch base case scenario considers the casinos will be closed for a period of one month, but this could be extended, and if the impact on revenues goes over a two month period, the company’s liquidity could not be enough to face its fixed costs and financial obligations without external funds support.”

According to decree No. 4 of the Ministry of Health, casinos could remain closed for an extended period, and facilities could have the autonomy to decide to close their doors for a longer time with prior notice given to the SCJ.

The move to extend these closure periods is currently ‘in consideration’ and would be in line with the ongoing ban on activities involving over 200 people in order to safeguard public health and ensure that the virus is contained.