Casino developer Genting Malaysia Bhd said in a Wednesday filing it had agreed to subscribe for up to US$100 million of “Series M” preferred stock in United States-based casino operator Empire Resorts Inc. The proposed equity injection “will be funded through internally generated funds,” stated Genting Malaysia.
The 1,000 “Series M” preferred stock can be converted at any time on or after December 31, 2030 – before the maturity date of December 31, 2038 – into 100 million common shares of Empire.
Empire Resorts became in 2019 an associate of Genting Malaysia and vehicles held by Genting’s controlling Malaysian dynasty, the Lim family.
Empire Resorts has several U.S. gaming businesses. They are: Resorts World Catskills (pictured), a casino resort approximately 90 miles (144.8 kilometres) from New York City, and which started full operation in January 2019; Resorts World Hudson Valley, described as a 90,000-square foot (8,361-sq metre) facility, with 1,200 video lottery terminals, a bar and a lounge, which opened in December 2022; and a mobile sports betting operation in New York state, which started in March 2022.
Genting Malaysia – promoter of resorts World Genting, Malaysia’s only licensed casino complex – said the proceeds from the “Series M” subscription will be utilised by Empire “for working capital purposes and to fully repay an existing bank facility of approximately US$58 million” held by Empire’s holding company, Genting Empire Resorts LLC.
According to the filing, the equity injection “will enable Empire to further optimise its capital structure by reducing financial leverage and correspondingly interest expense at Empire and/or Genting Empire Resorts”.
“This will allow quicker ramp up for Resorts World Hudson Valley and enable Empire to continue its focus on strengthening Resorts World Catskills’ operating performance to realise its full potential,” it added.
Genting Malaysia also said the exercise would allow the group “to reinforce its position and grow its market presence in the expanding New York state gaming market to compete effectively in the northeastern U.S. region”.
Genting Malaysia is said to be among the potential bidders for one of the three downstate New York gaming licences. A number of investment analysts has suggested that Genting group could be a front runner there.
In a Thursday memo, Maybank Investment Bank Bhd said it did “not look kindly” on the latest transaction involving Genting Malaysia and Empire.
“That said, it does appear to us that room for more related party transactions involving Empire is narrowing,” wrote analyst Samuel Yin Shao Yang.
According to Mr Yin, following the latest equity injection, Genting Malaysia’s effective shareholding in Empire “will rise to 90 percent from 76 percent and bring its total investment in Empire to US$724.4 million”.
But the analyst stated that the bank was cutting its earnings estimates for the casino firm “by circa MYR40 million [US$8.6 million] per annum”, as well as expanding the net debt forecast “by MYR465 million to reflect the subscription”.
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