Fitch downgrades GEN Bhd on likely slow pandemic recovery

Oct 19, 2020 Newsdesk Latest News, Rest of Asia, Singapore, Top of the deck, World  

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Fitch Ratings Inc has downgraded the long-term issuer default rating of Malaysian gambling and services conglomerate Genting Bhd to ‘BBB’ from BBB+’’, albeit with a ‘stable’ outlook.

It has given the same downgrade to Resorts World Las Vegas LLC, an entity associated with an under-construction casino resort in Las Vegas, Nevada, in the United States; and to Genting Overseas Holdings Ltd.

The downgrade reflected Fitch Ratings’ expectation that “recovery from the coronavirus pandemic will be slower than initially forecast, in particular for Singapore, which relies on international tourism, as borders are likely to remain shut for the rest of 2020 and continued social distancing measures constrain visitor volumes”.

Genting Bhd’s unit Genting Singapore Ltd runs the Resorts World Sentosa casino resort as one half of a casino duopoly in that city-state.

The ratings institution added regarding the Genting parent: “The slow recovery and high capital expenditure commitments will keep Genting’s consolidated net leverage above 2x until end-2024, which is no longer consistent with a ‘BBB+’ rating.”

Maybank IB Research said in a note last week it was “unsure” if Resorts World Las Vegas, which has been described by its promoters as a US$4.3 billion project, “will be profitable going forward”.

In late September, Standard & Poor’s Global Ratings said its assessment of management and corporate governance at Genting Bhd had been lowered to ‘fair’, from ‘satisfactory’.

It had added, referring to the Lim family, the Malaysian dynasty that started the Genting group: “In our assessment, the founding family’s controlling stake in Genting is negative to governance.”

At that time, Standard & Poor’s had affirmed a ‘BBB’ rating for Genting Bhd on its long-term issuer credit.

Fitch Ratings did note some positives regarding Genting Bhd in its Friday announcement. It stated: “Genting [Bhd's] rating reflects its position as the sole casino-licence holder in Malaysia and robust share in the Singapore duopolistic market.”

The rating agency dded: “Genting’s other businesses add diversification both in terms of geography and sectors, and the group has a history of maintaining a prudent balance sheet.”

The Genting group has exposure to casino business in the United States, the Bahamas, the United Kingdom and Egypt, via its Genting Malaysia unit, which derives its key earnings from its Malaysian casino monopoly licence for Resorts World Genting, near that nation’s capital, Kuala Lumpur.

Last week, Malaysia’s government said it was applying a so-called Conditional Movement Control Order in Kuala Lumpur and several other areas, amid an uptick in reported Covid-19 infections in the nation.

Resorts World Genting said in a Monday update on its website, that the complex “remains open as usual”.

Fitch Ratings said in its Friday memo that its ‘stable’ assessment on the outlook for Genting Bhd reflected the institution’s “expectation that the company will reduce leverage closer to 3x by end-2023, supported by a gradual recovery, operating ramp-up at Resorts World Las Vegas, and the company’s commitment to a strong capital structure”.

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