As part of the beginning of the institution’s coverage of the Malaysian conglomerate Genting Bhd and its unit, the global casino operator Genting Malaysia, which operates gaming businesses in Malaysia, the United States, the Bahamas, the United Kingdom, and Egypt, financial research firm CreditSights Inc. expressed concerns that an investor lawsuit in the United States filed against a unit of Genting Malaysia Bhd over its Resorts World Bimini casino operation in the Bahamas could “hurt” the Genting group’s chances of winning a downstate New York casino bid in the United States.
CreditSights noted that, “in a worst-case scenario of an unfavourable ruling demanding payment of millions of U.S. dollars, Genting Malaysia may likely have to fork up the full or partial amount, resulting in some pressure to its leverage metrics.” But the financial research firm claimed it did “not assign a high likelihood” to this eventuality.
However, the organization noted: “What we are more concerned about is the risk that the lawsuit hurts [Genting’s] chances of winning the downstate [New York] casino bid; [and] the hit to Genting Bhd’s and Genting Malaysia’s reputation and investors’ opinion of corporate governance in general.”
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Given its history of engaging in large-scale related party transactions, particularly with its financially precarious associate Empire Resorts Inc., and its debt default by Genting Hong Kong [Ltd] in 2020, CreditSights concluded that the Genting parent company had “higher exposure to governance risks.”
It referred to a now-liquidated, formerly Hong Kong-listed company that ran casino cruise ship operations but suffered greatly by the Covid-19 pandemic’s operational disruptions while also having to wait for the building of new cruise ships.
However, CreditSights stated that it did not “assign a large governance premium” for Genting Bhd, citing the current head of the Lim family in Malaysia who founded the Genting group, “because we are cognizant that Genting Hong Kong was an entity controlled by Lim Kok Thay with Genting Bhd having no stake in the company since 2016.”
“We also note that over the years, even when Genting Hong Kong faced financial stress and subsequently defaulted or liquidated, Genting Bhd and Genting Malaysia did not provide any funding support to Genting Hong Kong,” the institution continued.
Bond spread versus LVS
CreditSights said it considers as “unjustified” the circumstance that Genting Malaysia’s lone 2031-maturity bond trades at a higher spread than casino peers Las Vegas Sands Corp and Sands China Ltd.
Las Vegas Sands oversees, via a unit, the operations of the Marina Bay Sands casino resort in Singapore, and is also the parent of Macau casino group Sands China Ltd.
According to CreditSights’ Thursday update, “We believe that Genting Malaysia’s only 2031 bond is not justified because it trades 38 to 42 basis points wider than its casino peers’ similar maturity bonds from Sands China and Las Vegas Sands.”
When comparing the 2031-maturity bond issuance of Genting Malaysia to that of Las Vegas Sands, the institution provided some commentary.
When comparing the 2031-maturity bond issuance of Genting Malaysia to that of Las Vegas Sands, the institution provided some commentary.
However, CreditSights went on to say: “We see scope for Genting Malaysia 2031 [maturity bonds] to tighten approximately 5-plus basis points versus Las Vegas Sands’ 2029 [maturity bonds].”
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