The call redemption, which Genting Singapore (A3 stable) will fund using its cash and cash equivalents, is credit positive because it will substantially improve the company’s credit metrics over the next 12 to 18 months, it said on Thursday.
“We expect Genting Singapore's pro forma debt/earnings before interest, tax, depreciation and amortisation (Ebitda) to improve to around 1.2 times from 2.7 times for 2016, while pro forma retained cash flow (RCF)/debt will improve to around 42% from 20% over the same period.
“In assessing the company’s debt leverage, we treat half of the perpetual security as debt and the other half as equity,” it said.
Moody's said as at March 31, Genting Singapore had cash and cash equivalents of S$5.6bil and total adjusted debt (excluding its perpetual securities) of approximately S$1.1bil.
Hence, even after the repayment of S$1.8bil perpetual securities in September 2017 and S$500mil in October 2017, the company will have a net cash position of S$3.3bil.
“Despite the improved credit metrics, a ratings upgrade is unlikely because of the company’s smaller scale relative to its global peers and the concentration of its business in Singapore,” the ratings agency pointed out.
Genting Singapore is 52.8%-owned by Genting Overseas Holdings Ltd (Baa1 stable), an investment-holding company that in turn is a unit GENTING BHD (Baa1 stable).
Genting Singapore Genting Overseas Holdings’s only income-generating asset, is fully consolidated into Genting Overseas Holdings, which is consolidated into Genting Bhd.
Therefore, the call redemption of Genting Singapore’ perpetual securities will improve Genting Overseas Holdings’ and Genting Bhd’s credit metrics.
“Over the next 12-18 months, after taking into account $1 billion of bonds issued by Genting Overseas Holdings in January 2017, we expect Genting Bhd’s debt/Ebitda to improve to around 3.0 times from 3.2 times as of 2016, and its RCF/debt to reach approximately 21% from 19%.
“In assessing both Genting Overseas Holdings’ and Genting Bhd’s debt leverage, we consider all of Genting Singapore’ perpetual securities as debt,” it pointed out.
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