International edition
September 22, 2020

According to Moody's rating agency

Possible implications for Ritzio of proposed gaming legislation in Russia

(Russia).- The law on gambling business will not damage the business of Ritzio Entertainment Group, says the statement by the international rating agency Moody's regarding the possible changes in Ritzio's rating.

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oody’s Investors Service comments on the potential implications for the Ritzio Entertainment Group (B2 corporate family rating, A3.ru NSR, stable outlook) of the proposed ’Law on State Regulations of Gaming’ which was recently approved by the State Duma and the President. According to Moody's assessment restrictions prescribed by the law with regards to the capitalization and gaming halls size will not lead to a reduction in the company's cash generating assets.

Moody's comments that in its current format the Law would have far-reaching implications for the gaming industry in Russia as a whole, including with regards to the size, capitalization, and number of slot machines and tables. From 1 July 2007 the minimum payout ratio will be increased from 75% to 90%. Moody's notes that Ritzio is largely in compliance with this aspect of the Law, which will not lead to a reduction in the company's cash generating assets in 2007.

The company may be required to replace an insignificant share of its smaller-sized halls with larger ones, although the quantity of slot machines is not expected to diminish. In this respect Ritzio may be better positioned than some smaller rivals. The second stage of the Law stipulates that the entire gambling industry should be confined to four designated regions in Russia, notably the Kaliningrad, Rostov/Krasnodar, Far East and Altai regions, which are distant from major cities, effectively transforming the industry into a highly localized business.

However, the second stage of the Law is not due to be enacted until July 2009 and Moody’s believes that in the interim its content could be significantly altered. The parameters of the designated zones remain to be finalised.

As per earlier reports, Moody's assigned B2 corporate family rating to Ritzio, with a stable outlook. At the same time Moody's Interfax Rating Agency, whose majority stockholder is Moody's international agency, rated the company-owner of the Russian slot machine operator Vulcan as “A3.ru”.

“Changes in the legislation and the approval of the Federal Law will certainly have an impact on the entertainment industry in Russia, including the operation of the Holding's Russian companies, - says the President of Ritzio Entertainment Group Oleg Boyko. - The key positive feature of the new legislative regulation of this sphere is the market's higher stability and transparency, and an improved quality of services offered by market players. The Ritzio Entertainment Group Holding is the leader on the leisure and entertainment market of Russia, and new changes will be more than acceptable for us, even to operate in future in four designated regions according to the Federal Law, primarily due to our resources, the best financial indicators in the industry and our experience on the Russian market. The Holding's plans for the future include a continued expansion to new markets of Eastern Europe and Latin America.”

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