A smoking ban in Chile’s casinos is blamed for a 31 percent market-wide plunge in pre-tax income since it was imposed last March.
Enjoy, the country’s largest operator, said visits have fallen by 24 percent. Slot revenue is down 18 percent.
“The tobacco ban hit them hard,” said Carlos Garcia, an analyst at Santiago-based credit rating company Clasificadora de Riesgo Humphreys. “It may take Enjoy several years to recover from that blow.”
It is estimated that more than 40 percent of adult Chileans smoke, the highest rate in the Americas.
“That could be one explanation,” said Enjoy CFO Ignacio de la Cuadra. “The other thing is that habits are different. Chileans go outside to smoke and are more sociable. They have a cigarette and take a drink with them and they’re there for 40 minutes.”
Bond investors, meanwhile, are concerned that Enjoy, which has 71 billion pesos of debt payments due this year, will fail to meet covenants that require it to keep its ratio of net debt to earnings before interest, taxes, depreciation and amortization below 5.5 times. The company, which said April 24 that the ratio was 5.41 at the end of the first quarter, persuaded bondholders in 2012 and 2013 to give it more time to bring its debt down below the agreed limits after breaching the covenant.
Enjoy will meet its debt covenants, de la Cuadra said. The company has shares it can sell and is considering divesting minority stakes in the property companies through which it owns its hotels, he said.
Enjoy currently operates seven casinos in Chile, one in Argentina and one in Uruguay.