Kerznerﾴs plans to carry out a $1 billion expansion of its Atlantis Paradise Island Resort has prompted the international credit rating agency, Standard & Poorﾴs, to place the company on a watch list that could mean a downgrade.
S & P said in a release Thursday that it placed its ratings on Kerzner, including its BB corporate credit rating, on CreditWatch with negative implications.
One analyst explained to the Journal Thursday from New York that if Kerzner were to sell additional debt, it could face higher interest rates.
Several weeks ago, Kerzner announced that it was selling off some of its debt to raise millions of dollars to help fund its Atlantis expansion.
Peggy Hwan, another S & P analyst quoted in the release said, ﾓThe rating action follows the companyﾴs announcement that it has further increased spending associated with its Phase III expansion project for Atlantis on Paradise Island, Bahamas.
ﾓGiven the greater spending, in addition to the companyﾴs previously announced growth initiatives, debt leverage is now likely to increase beyond Standard & Poorﾴs expectations.ﾔ
In resolving the CreditWatch listing, Standard & Poorﾴs will meet with management to further discuss its spending plans, operating performance, and long-term growth and financing strategies.
Standard & Poorﾴs said it has determined that if a downgrade were to occur, it would be limited to one notch, to a BB-.
When the company first came to The Bahamas a decade ago, it faced difficulties in raising the $80 million to fund its initial phase of Atlantis, according to CEO Butch Kerzner, who spoke at the 10th anniversary celebrations Wednesday night.
But a lot has changed since then, Mr. Kerzner indicated.
ﾓI was having a discussion with our bankersﾅand it was amazing to me the transition from when we started 10 years ago when we were really scratching around for the $80 million to build the first phase,ﾔ he said. ﾓIt ended up being $140 millionﾅtoday, literally on telephone calls we can raise $500 million for this next phase through our banks and weﾴre talking about the biggest banks in the world.
He added, ﾓWe donﾴt even address the question about The Bahamas or Bahamian risks. Those issues are gone and thatﾴs a big deal.ﾔ
Candia Dames, The Bahama Journal
