Moody’s Investors Service Inc says there is “risk stemming” from Genting Bhd’s “strong appetite for expanding its gaming franchise in the United States”. Malaysia-based Genting group operates casino resorts in Asia, the United States, the Bahamas, the United Kingdom and Egypt.
The New York State Gaming Commission in January launched a request for applications (RFA) process for three downstate New York gaming licences.
A number of investment analysts has suggested that Genting group could be a front runner for a downstate New York licence. The group already runs an electronic games facility called Resorts World Casino New York City; and has investment in Empire Resorts Inc, which runs the full-service casino, Resorts World Catskills, in upstate New York.
“Although Genting Bhd has a strong track record of execution,” if the group were to win a licence for downstate New York, “such a project could consume significant operating and financial resources,” stated Moody’s in a Tuesday report.
The update followed the confirmation on Monday of the ‘Baa2’ issuer ratings of Genting Bhd. Obligations rated ‘Baa2’ are subject to “moderate credit risk”.
In the latest memo, Moody’s said it expected Genting Bhd – via its subsidiary Genting New York LLC – “to bid for one of the three downstate New York gaming licences, which could result in significant cash outlay associated with license fees and development costs in the future”.
Some large gaming operators with Asia venues – including Las Vegas Sands Corp, MGM Resorts International, and Wynn Resorts Ltd – are among those that have announced plans to bid for a New York licence.
The RFA launched by the New York authorities outlined a US$1 billion minimum requirement for the licence fee and capital investment, with at least US$500 million payable within 30 days of the award of a licence. The relevant casino permits will be for a period of between 10 years and up to 30 years, depending on the size of investment pledged.
According to Moody’s, a “material increase in debt” related to a New York project would “derail” the institution’s expectation regarding Genting Bhd’s deleveraging. It would also indicate “an aggressive financial policy, thereby exerting downward pressure on Genting Bhd’s rating”.
In Tuesday’s update, Moody’s said it expected Genting Bhd’s consolidated earnings before interest, taxation, depreciation and amortisation (EBITDA) to increase to between MYR9 billion (US$2.1 billion) and MYR10 billion in 2023 and 2024, from MYR7.2 billion in the 12 months ended September 2022.
“The higher earnings reflect the ongoing recovery in the group’s leisure and hospitality businesses, particularly in Malaysia and Singapore, where pandemic and border restrictions eased last year,” stated the ratings agency.
The group runs a monopoly gaming operation in Malaysia, via Genting Malaysia Bhd, and controls half of Singapore’s duopoly, via Genting Singapore Ltd.
The group’s expected improvement in earnings will also “be supported by the contribution from Resorts World Las Vegas” in Nevada, in the U.S., which opened in June 2021, added the ratings agency.
Genting Bhd’s leverage, as measured by debt to EBITDA, is expected to “improve to around 4.5 times in 2023 and around 4.0 times in 2024, from 6.1 times in the 12 months ended 30 September 2022,” said Moody’s.
