$1B Energy Project Genting To Hit Leverage

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asked Aug 31 in Electron Microscopy by bscnewscasinosite (280 points)

Moody's Ratings said the nearly $1.1 billion investment in energy-related projects by Genting Bhd, the parent company of a Malaysian-listed group of casino companies worldwide, was "credit negative" because it would "weaken" the group's "credit metrics" over the next 12 to 18 months.

The investment in energy assets "highlights Genting Bhd's ambitions for growth and expansion within and outside major leisure and hospitality businesses," the agency said.

Genting Bhd last week announced a total investment of about $1.03 billion to build a liquefied natural gas floating facility in Indonesia through some of its subsidiaries, with operations expected to begin by the third quarter of 2026.

The company said it plans to fund this and other smaller transactions by mixing cash and debt generated from within.

Separately, the group also announced that its indirect subsidiary has agreed to acquire a 49% stake in the Chinese energy sector company for about $14 million. Genting Bhd estimated an additional investment of about $46 million "with the aim of operating commercially in 2025."

The Malaysian conglomerate said the purchase price and equity investment would be "fully financed by funds generated from within."

"Given that these transactions are financed entirely by debt, we expect leverage to weaken to approximately 3.6 to 3.7 times, approximately 3.9 times over the next 12 to 18 months," Moody's said in a note on Friday

"This reduces headroom under Genting Bhd's leverage, with a downgrade threshold of 4.0x," it added

Resorts World Sentosa, a Singaporean gaming resort run by Genting Singapore, and Resorts World Genting, run by Genting Malaysia Bhd, are said to be the group's main assets.

Genting Malaysia also operates casinos in the United States, the Bahamas, the United Kingdom, and Egypt.

Moody's noted that Genting Group "has significant capital expenditure commitments and plans, especially for leisure and hospitality businesses."

"We are in the process of expanding our integrated resort in Singapore with a total project cost of S$6.8 billion ($5 billion) through our subsidiary, Genting Singapore," the credit rating agency said.

"In addition, Genting New York LLC, an indirect subsidiary of Genting Bhd, is bidding for one of three Downtown New York gaming licenses. The company has announced an investment plan of up to $5 billion if it secures the license."

"A significant increase in debt to fund Genting Bhd's capital expenditures and investments will further weaken leverage and indicate aggressive financial policies, putting pressure on the company's rating," Moody's predicted.

Maybank Investment Bank Bhd said in a recent note that Genting Bhd had a "positive start" to 2024, driven by the "luck" of its gaming operations run by Genting Malaysia and Genting Singapore.

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