KUALA LUMPUR: S&P Global Ratings has assigned its 'BBB-' long-term issuer credit rating to Genting New York LLC (Genny) and with a negative oulook.
In a statement on Tuesday, it said the negative outlook on Genny reflects that on its ultimate parent, which is Genting Bhd (Gent).
“This is based on our view that Gent has limited rating headroom due to its elevated capital expenditure (capex) and a delayed recovery from the Covid-19 pandemic, ” it said.
S&P said the rating on Genny reflects the company's position as a highly strategic subsidiary of the Genting group.
“We believe it is highly unlikely that Genny will be sold, and the company should remain strategically important for the group's global standing and reputation. Accordingly, we expect the group to commit to long-term support for Genny. We therefore rate Genny one notch below our rating on Gent (BBB/Negative/--), ” it said.
Genny owns and operates a single-site casino near the John F. Kennedy International Airport in New York. The company offers lottery and electronic games, entertainment services, dining facilities, as well as luxury hotel rooms and suites. Genny is a unit of Genting Malaysia, which in turn is 49.5%-owned by Gent.
S&P said the negative outlook on Genny reflects that on Gent. This is based on our view that Gent has limited rating headroom over the next 12-18 months due to its elevated capex and delayed recovery from the Covid-19 pandemic. We expect Gent's ratios of debt to EBITDA and funds from operations to debt to recover in 2022.
It said it would lower the issuer credit rating on Genny if it downgraded Gent.
“We may also lower the rating if Genny's importance to Gent decreases. This would include a reduction in financial and managerial support to Genny in weakened market conditions.
“We would revise the outlook on Genny to stable if the group's debt leverage recovers as per our expectation, ” it said.
The rating agency expects Genny to receive strong support from Gent under almost all foreseeable circumstances. Genny operates as Resorts World Casino New York City (RWNY).
Since it began operations in 2011, the company has been an integral asset for the group's global expansion, considering its strategic position as the biggest single-asset casino operator in the metropolitan area of New York. Genny is the biggest taxpayer in the state of New York and has a dominant market share of slot machines in the city.
“As such, we expect the company to be a front-runner in bidding for potential casino licenses or other business opportunities, ” it said.
S&P expects a sharp recovery after Covid-19 shutdowns hit Genny's operations. Like other casinos, the company's operations completely closed for six months from March 2020 due to the pandemic.
However, with the resumption of normal operations from September to mid November 2020, Genny's business was already nearly back to pre-COVID-19 levels.
It expects Genny's operations to recover more strongly than for Genting's other gaming locations, such as Singapore and Malaysia. That's because the company is located at the heart of the metropolitan area of New York and has a low dependency on tourists for gaming revenue.
It noted the company's operating hours have been curtailed to 14 hours a day from 20 hours since mid-November 2020.
“Over the long term, we see opportunities for Genny to further expand its operations. As the biggest taxpayer in the state of New York, the company will be a front-runner in bidding for potential casino licences or other business opportunities, in our view.
“Casino or table gaming licences are in a lower tax bracket than Genny's current 'racino' gambling complex, which is taxed at about 65%. We therefore believe the company's revenue and earnings scale, as well as operating efficiency have the potential to increase, ” it said.
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