KUALA LUMPUR (Oct 16): Moody’s Ratings has placed Genting Bhd’s (KL:GENTING) Baa2 issuer rating on review for downgrade, following its planned RM6.3 billion debt-funded acquisition of the remaining 50.6% stake it doesn't own in Genting Malaysia Bhd (KL:GENM).
The trigger was Genting's conditional voluntary offer to buy the remaining Genting Malaysia shares for RM2.35 apiece, in cash. If fully accepted, the deal would cost Genting RM6.3 billion, and be primarily funded by new borrowings.
"The review for downgrade reflects our expectation that GENB's credit quality will weaken materially, depending on the level of acceptance of its proposed takeover offer for GENM, which will be largely debt-funded," said Moody's Ratings analyst Anthony Prayugo.
Moody's already considers Genting’s credit metrics "stretched", with its adjusted debt-to-Ebitda ratio having exceeded the 4.0 times downgrade threshold for several years.
With the acquisition, this leverage ratio is projected to climb to around 5.1 times in 2025, which would delay any meaningful debt reduction.
The rating agency's projections exclude a potential US$5.5 billion (RM23.2 billion) investment related to Genting’s uncertain bid for a New York casino licence, which, if successful, could further strain the company's balance sheet.
Review details and potential for multi-notch downgrade
The review, expected to conclude within 60 to 90 days, will focus on assessing the deal's final funding structure, Genting’s deleveraging plans and its post-transaction financial policy.
Moody’s issued a clear warning: Genting’s rating could face a multi-notch downgrade if its leverage increases without a credible debt-reduction strategy.
Specifically, a trigger for further negative action would be a sustained adjusted debt/Ebitda above 4.0 times or an adjusted retained cash flow/net debt below 20%–25%.
Implications on Genting Overseas Holdings and Genting Singapore
The ratings review extends beyond the parent company, Genting, to its key subsidiaries, Genting Overseas Holdings Ltd (GOHL), which carries a Baa2 rating, and Genting Singapore Ltd (SGX:G13), which has an A3 issuer rating. All ratings were previously given a stable outlook.
GOHL: The review on GOHL mirrors that of its parent's, given their close financial and operational ties. The Baa2-backed senior unsecured rating on notes issued by GOHL Capital Ltd (a wholly-owned GOHL subsidiary) is also under review.
GOHL, which owns 53% of Genting Singapore, relies on Genting Singapore's dividend income to service interest payments and redeem its US$1.5 billion notes due in 2027. “GOHL’s credit quality is capped by Genting, which can extract cash from GOHL and redeploy it within the group,” Moody's said.
Genting Singapore: Its stronger A3 issuer rating has been placed on review due to contagion risk from its parent. But it has strong standalone metrics, including S$3.3 billion in cash and minimal debt as of June 2025. But Moody’s warned that the rating gap could narrow if Genting Singapore's independence weakens, or if cash outflows to the parent increase.
Genting Singapore is currently undertaking a major expansion of Resorts World Sentosa in Singapore at a total cost of S$6.8 billion, with annual capital spending expected to peak at about S$1 billion in 2027–2028.
Meanwhile, Genting shares closed seven sen or 2.1% higher at RM3.47 on Thursday, valuing the group at RM13.45 billion, on improved prospects over a New York gaming licence being bid by Genting Malaysia. Genting has climbed over 20% since the acquisition was announced.
In a note earlier in the day, CIMB Securities said the downstate New York casino licence is "nearly in the bag" after MGM Empire City — one of the three contenders — withdrew its application. Among 15 analysts covering Genting, nine have "buy" calls and six have "hold" calls on the stock, with an average target price of RM3.48.