S&P Global Ratings has cut its long-term issuer credit rating on Genting Bhd. to BBB-plus from A-minus and lowered the rating on its subsidiary, Resorts World Las Vegas, the ratings agency said in a statement Wednesday.
The ratings agency also said it lowered the long-term issue ratings on the company’s senior secured debt obligations and US$1 billion senior unsecured notes to BBB from BBB-plus.
“We downgraded Genting because we expect the company’s leverage and cash flow adequacy to weaken over the next 12-18 months, given its more aggressive expansion plans. We also believe the company’s risk appetite has increased,” the statement said.
“In the past year, Genting acquired 49 percent of Empire and privatized the company at a time of ongoing expansion at subsidiaries Genting Singapore (GENS) and RWLV. This has materially increased the group’s leverage and weakened its credit quality,” it added.
While Genting plans to restructure Empire’s debt and is negotiating with banks, this may not reduce Empire’s total debt, keeping it at US$640 million to US$670 million over 2019-20, S&P said.
S&P said it expected Genting Malaysia and GENS would remain Genting Bhd.’s major cash flow contributors and estimated its total earnings before interest, tax, depreciation and amortization (EBITDA) at 7.5 billion ringgit to 9.5 billion ringgit over 2019-21.
RWLV will contribute around US$190 million to US$200 million (or around 750 million ringgit to 800 million ringgit) once it opens in the summer of 2021, S&P estimated, adding it didn’t expect significant cash flow contribution from the GENS or Empire expansion over the next 12 to 18 months.
RWLV’s rating will follow Genting’s with a one-notch differential, S&P said.
S&P kept a stable outlook on Genting, expecting it will manage its leverage despite high capital expenditure.