Casino operator Genting Malaysia Bhd should be able to “deleverage in one or two years” thanks to “gradual” recovery in demand following the Covid-19 pandemic, and thanks to maintaining financial discipline and operating flexibility, coupled with moderating capital expenditure, says a Tuesday note from Fitch Ratings Inc.
Fitch expects Genting Malaysia’s earnings before interest, taxation, depreciation and amortisation (EBITDA) to return to pre-pandemic levels and net debt/EBITDA “to fall to below three times by end-2022 on healthy demand,” it stated.
On the outgoings side, “Genting Malaysia budgets MYR1 billion [US$242.0 million] of capital expenditure in 2021, and MYR500 million to MYR600 million annually thereafter, mainly for maintenance capex,” noted Fitch.
The institution noted Genting Malaysia was “on track” to open an outdoor theme park at its flagship property - Resorts World Genting, near the Malaysian capital Kuala Lumpur – as well as a hotel at Resorts World New York City, “in mid-2021”.
“Genting Malaysia expects the theme park to draw an additional 1.5 million to 2 million visitors per year to Resorts World Genting, and generate an additional MYR400 million to MYR500 million in revenue,” stated Fitch.
Fitch has issued a ‘BBB’ rating – investment grade – regarding some proposed U.S. dollar notes from Genting Malaysia. The institution also said Genting Malaysia’s long-term issuer default was ‘BBB’, with a ‘negative’ outlook.
The notes will be issued by Genting Malaysia Capital Labuan Ltd, a wholly-owned subsidiary of Genting Malaysia and guaranteed by Genting Malaysia.
The notes are rated at the same level as Genting Malaysia’s issuer default rating as they will constitute direct, unsecured and unsubordinated obligations of the company. The company plans to use the proceeds mainly to refinance debt, according to Fitch.
Genting Malaysia’s rating takes into consideration “its moderate linkage to its weaker parent, Genting Bhd… ‘BBB’/’negative’, and we rate Genting Malaysia based on Genting Bhd’s consolidated credit profile and the outlook is aligned with that of Genting Bhd”, said Fitch.
The institution said the ‘negative’ outlook “captures the risk of a slower gaming recovery from the coronavirus pandemic impact than we forecast, such that Genting Bhd’s leverage is elevated for an extended period.”
Fitch added: “This may result from recurring waves of infection, leading to sporadic lockdowns and continued strict social distancing.”
Resorts World Genting has had several periods of temporary shutdown recently due to the pandemic, the latest ending on February 16.
Genting Bhd’s indirect wholly-owned subsidiaries Resorts World Las Vegas LLC and Resorts World Las Vegas Capital Inc, which had last week priced their own offering of US$350-million of 4.625-percent senior notes, announced that these notes would be listed and quoted in the Singapore Exchange bond market with effect from 9am on Wednesday.
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