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Galaxy could face potential liquidity threats PDF Print E-mail
Thursday, 27 November 2008
Galaxy could be facing potential risks of lack of liquidity, although not as severe as those affecting gaming billionaire Sheldon Adelson's Las Vegas Sands.
The financial credit rating agency Moody's announced this week that it is studying the possibility of lowering the estimates for the gaming operator, after the company announced the postponement of the opening of his new hotel-casino in the Cotai for 2010.
According to financial credit rating agency, although the postponement could reduce some risks, at a time when there are many uncertainties in the gaming industry in Macau, this will also reduce the revenue originally planned for 2009 and 2010, according to Kaven Tsang, an analyst at Moody's.
If such happens, it could undermine the payment of debts that have already graduated to the end of December 2010.
However, Galaxy has said it has hopes that the current crisis could lead to cuts in construction costs in order to “save some money”.
Meanwhile, earlier in the week, Moody's Investors Service also said that property developers in China face a bleak 18 months as operating uncertainties mount, credit becomes harder to obtain, and new government regulations are implemented.
Moody's said in its report that China's rated property developers faced critical challenges in the near and medium term.
Australia's Sydney Morning Herald reported Kaven Tsang had said contractions in sales volumes, price declines, and land purchases in the first half of the year had caused balance-sheet liquidity and financial profiles to deteriorate to such an extent that Moody's had had to take various negative rating actions over the past six months.
According to the report, Tsang said that while some developers had access to overseas financing that could mitigate the handicap of limited or no overseas credit, increased borrowing from domestic banks presented subordination risks for bondholders.
"Some developers have been selling assets and equity interests in projects to raise cash and improve their liquidity, but opportunities for doing so have diminished. Potential overseas investors such as property funds have had to repatriate money to the US amid a credit crisis that has starved them of capital."
A senior credit officer at Moody's, Peter Choy, said that as developers completed projects now under construction, the resulting rise in supply of new housing would further depress the market. The Chinese government had made moves to stabilise the market with tax cuts and by relaxing restrictions on mortgages, alongside steps by local governments to encourage home purchases, the report added.
"The impact of these actions remains unknown, and uncertainty over how regulators will approach the problem in the future has exposed developers to high regulatory risks."

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