Moody’s rating agency has downgraded Genting Berhad (GENB) and two subsidiaries, while maintaining a ‘stable’ outlook for all three ratings. Genting Berhad was downgraded from Baa3 to Baa2, the same downgrade applied to Genting Overseas Holdings Limited (GOHL).
This also implies a downgrading of the backed senior unsecured rating of the notes issued by a wholly owned subsidiary of GOHL.
Meanwhile, Genting Singapore Limited (GENS) was downgraded from an A3 rating to a Baa1 rating.
The outlook on all of the ratings is ‘stable’, while they had been on review previously for downgrade.
The reclassification comes after a review commenced on October 16th of this year.
Speaking of the change, Moody’s Ratings Analyst Anthony Prayugo noted that “The ratings downgrade reflects GENB’s already weak position due to prolonged deleveraging amid slower than expected earnings recovery, further strained by increased debt to fund its take-over offer for Genting Malaysia Berhad (GENM) and expected spending following the potential award of a downstate New York City (NYC) commercial casino license”.
The ratings agency notes that GENB completed its take-over offer for Genting Malaysia Berhad on December 1st, with the company acquiring approximately 24 percent of GENM’s outstanding shares. This is planned to be financed mainly through debt by raising MYR3 billion ($750 million) in medium-term notes.
New York, New York
Additionally, Genting New York LLC (GENNY), an indirect subsidiary of Genting Berhad, was recommended by the New York Gaming Facility Location Board for one of the three downstate New York commercial casino licenses. The other two recommended companies are Bally’s Corporation and Queens Future LLC. The three will receive the final decision by December 31st.
Total investment for the New York property is $5.5 billion, with $1.1 billion already spent on existing capacity and a minimum $500 million license fee. A further $3.9 billion will be spent via phased capital expenditures, capitalized interest and community benefits. The group has already secured $925 million in committed debt financing, if it receives the casino license – to cover the licensing fee and initial costs.
Moody’s estimates that the New York subsidiary could double its GGR to around $2 billion annually by 2027, as it upgrades to 400 tables and 4,000 slots overall. The total slot number as well as 250 tables are expected to be operational by July 2026. Total capacity is expected to e 6,000 slots and 800 tables by January 2029, with a further 2,000 hotel rooms and a 7,000-seat arena to be completed by January of 2030.
GENNY is expected to be the only operating commercial casino in downstate New York until additional licensees open, ‘likely around 2030’.
GOHL and GENS
The group furthers that the downgrade of GOHL ‘mirrors that of GENB, given the close linkage and alignment of core operations’.
Moody’s analysts further that ‘GOHL has no other active businesses apart from its 53% holding in GENS and relies on dividends from GENS to service its interest expense’.
This means creditors at GOHL are ‘subordinated to liabilities at GENS’.
Looking to Genting Singapore, its downgrade ‘follows the action on its ultimate parent, GENB’, note the analysts.
Genting Singapore’s ratings are ‘constrained by the risks stemming from its parent, which has weaker credit quality’. While Genting Singapore retains a higher rating than its parent, ‘the gap between the two companies’ ratings could narrow if there is reduced independence in decision making at GENS, resulting in increased cash leakage from GENS to GENB in the form of dividends or through other measures’.
