Fitch Genting Bhd outlook shifts from stable to negative

Fitch Ratings, Inc. revised its outlook for Malaysia's Genting Bhd and its wholly-owned companies Genting Overseas Holdings and Resorts World Las Vegas LLC from "stable" to "negative." Genting Bhd is the parent of a casino and farm network founded by the Lim family.

The rating agency simultaneously identified Genting Bhd and its long-term issuer base rating (IDR) for the unit as "A-"

The revised outlook reflected Genting Bhd's view of "reducing the rating headroom as we believe the company is pursuing a more aggressive investment strategy," according to a credit rating agency note on Tuesday.

Fitch estimated Zenting Bhd's capital expenditure would reach MYR 13 billion ($3.09 billion) in 2019 and MYR 10 billion in 2020.

The ratings agency also noted the recent decision by Genting Malaysia Bhd, another Genting group unit that runs Resort World Genting with an exclusive single casino license in Malaysia and operates venues in the U.S. and Bahamas as well as the U.K. and Egypt, to "acquire up to 49% of the loss-making Empire Resort shares in the U.S."

Fitch estimates the acquisition will increase Genting Bhd's net leverage by "about 0.3 times" at a time when Genting Bhd is "committed simultaneously to other large capital expenditures in the next two to three years" against the backdrop of a possible "weak performance" from the group.

Fitch expected Genting Bhd's net leverage to "peak in 2020" and decline by 1.5 times in 2021 "from previous estimates of 1.6 times and 1.1 times respectively".

If Genting Group increases its financial support to Empire Resorts, "it could put additional pressure on Genting Bhd's leverage, especially as the planned acquisitions are consistent with the Group's large capital investments over the next two to three years in Las Vegas and Singapore," Fitch Ratings noted, later referring to Genting Singapore Ltd's position in Singapore's casino dual monopoly, where the Group operates the Resorts World Sentosa gaming complex.

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