ONEVIEW HEALTHCARE PLC
Fitch Ratings has affirmed
The Rating Outlook is Stable.
HRNI's IDR reflects its 'b-' Standalone Credit Profile (SCP) with a one-notch uplift related to its relationship with
The one-notch uplift to the IDR from HRNI's SCP is pursuant to Fitch's Parent and Subsidiary Linkage Rating Criteria and reflects the entity's linkage to SHRE, which Fitch considers to be a stronger parent. SHRE indirectly owns 76% of HRNI.
Key Rating Drivers
Moderate Leverage to Increase: Gross leverage (total debt/EBITDA) was 3.9x as of
Competitive Pressure: HRNI will be subject to multiple new competitive properties, including a casino in
Fitch forecasts a high-teen percentage revenue decline in 2024 following the opening of the south suburban casino. Fitch's base case does not forecast this casino to meaningfully expand the total addressable gaming market due to Chicagoland's existing casinos and video lottery terminals. Pro forma leverage is likely to approach 5.0x, assuming a roughly 50% flow-through to EBITDA, which is more consistent with a 'b-' SCP for the standalone property.
Longer-Term Risk from Downtown Opening: Fitch looks through this competitive opening to evaluate the long-term credit risk for HRNI, due to the likely impact it will have on the marketplace and on HRNI's credit metrics. Similar to the south suburban license, Fitch's base case does not contemplate meaningful growth to the overall addressable market and assumes significant cannibalization from all Chicagoland casinos. Fitch forecasts HRNI's leverage to remain in the 5.0x-5.5x range, assuming a mid-teens percentage revenue cannibalization for HRNI and similar flowthrough as the south suburban competitive opening.
Lack of Diversification: HRNI operates a single property in a competitive market that is subject to new supply risk, limiting rating upside as future cash flow generation will be challenged. Most single-site operators are rated in the single 'B' category unless there are unique end-market dynamics. These include monopolistic positions, being a clear market leader, or having a conservative balance sheet. HRNI's geographic concentration offsets decent leverage and credit metrics.
Good Initial Performance: The property opened in
Tepid Regional Gaming Outlook: Fitch anticipates a pullback in broader regional gaming demand in the back half of 2022 and into 2023, due both to tough yoy comparisons from an exceptionally strong 2021 and concerns on the current macroeconomic backdrop. The impressive gaming performance in domestic markets seen in 2021 and to-date in 2022 should subside, especially as levels of discretionary spend become more pressured amid the current inflationary environment. Chicagoland casino gross gaming revenue grew 2% over 2019 levels in 2021.
Fitch is forecasting a mid-single-digit revenue decline to most regional gaming operators in the second-half 2022 and 2023. Current revenues continue to outpace pre-pandemic performance, so declines will generally be manageable for operators. The strong and sustained level of profitability post-pandemic will also help to offset top-line declines for regional gaming operators across the board.
SHRE Relationship Positive: Fitch believes HRNI's association with SHRE warrants a one-notch uplift from HRNI's SCP due to management and brand overlap. Fitch considers SHRE as a stronger parent based on its underlying SCP, which is consistent with 'b+' pro forma for SHRE's purchase of the Mirage from
Fitch's assessment of moderate operational incentives recognizes that HRNI shares common executive management with SHRE, is part of SHRE's broader 'Unity' player rewards program, and that its property is part of SHRE's regional gaming expansion strategy. SHRE owns 76% of HRNI and controls a majority of its board of directors. SHRE has also supported the entity through equity injections in 2021 when it took majority control following the prior majority owner's (
Derivation Summary
HRNI's SCP is consistent with most other single-site gaming operators, including
HRNI is considered weaker than its larger, more geographically diversified regional gaming peers, including Bally's Corporation (B+/Negative) and
Key Assumptions
Fitch assumes the positive market share gains HRNI has seen in Chicagoland to continue through 2022, with decelerating growth during the second half of the year. Fitch assumes a modest pullback in regional gaming, and at the Hard Rock property in 2023 amid macroeconomic uncertainty, inflationary pressures, and challenging yoy comparisons;
A competitive south suburban
A second competitive casino opens in 2026 in downtown
EBITDA margin to decline over the long term from the strong initial performance due to competitive openings, expiration of tax holidays and increasing management fees;
Delevering ahead of the competitive openings to be driven through amortization (10% this year and next, then 5% thereafter) and some degree of voluntary debt paydown (potentially through an excess cash flow sweep), but Fitch expects leverage to rise from 2024 due to cannibalization;
Capex limited to maintenance through the forecast.
No shareholder distributions or acquisitions assumed.
RECOVERY ANALYSIS
The recovery analysis assumes HRNI would be reorganized as a going-concern in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim and full draw on the
Going-concern EBITDA of
Going-concern EBITDA assumes a level of win-per-unit-per-day of slots and tables of
Fitch applies a 6.0x enterprise value/EBITDA multiple, which reflects the competitiveness of the Chicagoland market and new supply risk, and the property's limited operating record. It also reflects the single-site limitations of the credit. The 6.0x multiple is in line with comparable regional gaming peers. The quality of the property and healthy initial performance help to offset these concerns.
Fitch forecasts a post-reorganization enterprise value of roughly
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Greater degree of confidence that gross debt/EBITDA will remain below 5.0x and the FCF margin will exceed 10% amid the competitive pressures in the greater
An increase in rating linkage with SHRE;
Geographical diversification away from the Chicagoland market.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Gross debt/EBITDA sustaining above 7.0x;
FCF approaching breakeven;
Decrease in rating linkage with SHRE or weakening of SHRE's SCP.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Liquidity is adequate between operational cash and availability on its
Issuer Profile
HRNI is the owner and operator of
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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