[RAM] RAM Ratings: no immediate impact to ratings of Genting and GenM from GERL acquisition but cautious on continued financial support

RAM Ratings expects no immediate impact on the ratings of Genting Berhad (Genting or the Group) and Genting Malaysia Berhad (GenM) from its move to fully acquire Empire Resorts Inc. (Empire) via Genting Empire Resorts LLC (GERL). While the Group owns 49% in GERL, its effective interest in Empire stood at 89.6% as at end-Dec 2024 through investments in multiple series of preferred stocks issued by Empire. Given the effective interest and substantial management control, RAM’s assessment of the Group’s financial metrics already fully consolidated GERL’s cash, debts and funds from operations (FFO) from FY Dec 2020. Still, our concerns of repeated related party transactions and the possibility of further funding support (via GenM) required for the still loss-making Empire remain. Prior to this, the Group had invested approximately USD724.4 mil into Empire since 2019.

The proposed acquisition involves cash consideration of USD41 mil and will include an assignment of a USD39.7 mil intercompany loan receivable from Empire. As at end-December 2024, Genting’s gearing and net gearing ratios were higher at a respective 0.80 times and 0.36 times from a year ago (0.75 times and 0.32 times, respectively), while its FFO net debt coverage for fiscal 2024 was lower at 0.41 times from 0.47 times the previous year. These levels are currently supportive of the ratings, even after considering this proposed acquisition. Empire’s financial weakness and on-going losses – particularly any economic slowdown in the United States could dampen the casino business – in addition to rising capital expenditure, investment and debt funding requirements for both Genting and GenM, however, could strain the Group’s credit metrics.

Genting and GenM’s AA₁/Stable/P1 corporate credit ratings as well as AA₁(s)/Stable ratings of debt programmes guaranteed by them were affirmed on 1 October 2024. GenM’s ratings are aligned with the Group’s in view of their close relationship and anticipated parental support from the latter when required.



 

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