Casino promoter Genting Malaysia Bhd said in a Friday filing it had agreed the previous day to subscribe for up to US$20 million of “Series L” preferred stock in United States-based casino operator Empire Resorts Inc.
Empire Resorts – the operating entity at Resorts World Catskills (pictured) in upstate New York – became in 2019 an associate of Genting Malaysia and vehicles held by Genting’s controlling Malaysian dynasty, the Lim family.
Genting Malaysia – promoter of resorts World Genting, Malaysia’s only licensed casino complex – said in its Friday filing to Bursa Malaysia, the proceeds from the subscription to Empire Resorts’ stock would be used to “close Empire’s short-term refinancing plan for its debts totalling US$350 million, maturing on 23 March 2021”.
Resorts World Catskills reopened to the public on September 9, having been shuttered since March 16, 2020, as a precaution against the spread of Covid-19.
Friday’s filing from Genting Malaysia stated: “The disruption to Empire’s operations caused by the pandemic resulted in a significant adverse impact on its liquidity.”
The firm added: “Empire has sought to mitigate the liquidity impact from the closure of its operations by aggressive cost control measures, including reducing employee costs through furloughs and deferment of non-essential capital expenditure.”
Friday’s statement reiterated that in March and September last year Genting Malaysia had announced subscription to, respectively, up to US$40-million of Empire Resorts’ “Series G” preferred stock, and up to US$150-million of Series L preferred stock.
The maturity date on the latest Series L exercise is December 31, 2038.
It involves 200 preferred shares “convertible at any time on or after December 31, 2030 and prior to the maturity date,” into 2 million units of common stock at a conversion price of US$10 per unit of common stock.
The exercise is to be via Genting ER II LLC, a Delaware, U.S. company that is an indirect wholly-owned subsidiary of Genting Malaysia.
Genting Malaysia’s share of losses in Empire Resorts for financial year 2020 was MYR285.1 million (US$69.2 million), according to a February 26 filing to Bursa Malaysia.
Banking group Nomura had said in a Wednesday note on the second-half business outlook for Genting Malaysia, that the “drag” on its performance, due to Empire Resorts, “needs to be resolved soon”.
The Nomura team had said it was “reasonable to assume further capital injections by Genting Malaysia will continue,” with casino operations at Resorts World Catskills “likely to remain loss-making for the immediate future; although the quantum of support by Genting Malaysia might be constrained until September 2021, in our view, due to related-party transaction thresholds, triggering a shareholder vote otherwise.”
The Resorts World Genting casino complex – Genting Malaysia’s main revenue generator – resumed operations on February 16, after being closed for more than three weeks as a Covid-19 countermeasure, due to a spike in infections in Malaysia.
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