Research Update: Spain-Based Cirsa Enterprises Ratings Placed On CreditWatch Negative On Negative Free Cash Flow And Uncertain Recovery

Cirsa Enterprises S.L.U.'s operations in Spain, Italy, and some Mexican states have restarted and initial trading recovery is better than expected; July revenues in Spain were about 90% compared with July 2019. However, it is unclear when Cirsa's remaining gaming sites will reopen in some Latin American countries. We forecast Cirsa's EBITDA will decline materially in the financial year ending Dec. 31, 2020 (FY2020) to below €200 million--resulting in a highly leveraged capital structure--and free operating cash flow (FOCF) of more than negative €100 million. In our view, because the group's operations may not fully reopen until 2021, potentially impairing the speed and strength of recovery in turnover, Cirsa may not be able to return to meaningful FOCF generation during

...- Cirsa Enterprises S.L.U.'s operations in Spain, Italy, and some Mexican states have restarted and initial trading recovery is better than expected; July revenues in Spain were about 90% compared with July 2019. However, it is unclear when Cirsa's remaining gaming sites will reopen in some Latin American countries. - We forecast Cirsa's EBITDA will decline materially in the financial year ending Dec. 31, 2020 (FY2020) to below 200 million--resulting in a highly leveraged capital structure--and free operating cash flow (FOCF) of more than negative 100 million. - In our view, because the group's operations may not fully reopen until 2021, potentially impairing the speed and strength of recovery in turnover, Cirsa may not be able to return to meaningful FOCF generation during the next 12 months relative to S&P Global Ratings-adjusted debt of almost 3 billion. - We are therefore placing our 'B-' issuer credit and issue ratings on Cirsa on CreditWatch with negative implications. We are affirming...

Research Update