International rating agency Moody's has placed Genting Group's Baa2 issuer rating on its downgrade watch list, primarily because the group plans to voluntarily acquire the remaining 50.6% stake in Genting Malaysia that it does not yet own through debt financing, with a total transaction cost of up to $1.59 billion. Moody's warns that this move could cause the group's credit metrics to fall below the downgrade threshold, with the adjusted debt/EBITDA ratio expected to rise to 5.1 times by 2025, far exceeding the 4.0 times downgrade threshold. Also included in the watch list are Genting Overseas Holdings Limited (Baa2 rating), which holds a 53% stake in the group's Singapore business, and Singapore Genting's A3 rating. Moody's said it will complete the review within 60-90 days, focusing on the financing structure, deleveraging plans, and financial policies, and if debt increases significantly without corresponding improvement plans, the rating could face multiple downgrades.
Rating Actions and Reasons for Observation
Moody's has placed Genting Group's Baa2 issuer rating on its downgrade watch list because the group plans to acquire the remaining 50.6% stake in Genting Malaysia through debt financing. This voluntary acquisition agreement has a total cost of up to $1.59 billion, with the majority of funds raised through debt.
Moody's believes this move could lead to a deterioration in the group's credit metrics and fall below the downgrade threshold, hence the preemptive rating watch.
Transaction Details and Equity Structure
Genting Group currently holds 49.46% of Genting Malaysia, and this acquisition will involve the remaining 50.6% of the shares. The transaction is in the form of a conditional voluntary acquisition agreement, with the final cost depending on shareholder acceptance, up to a maximum of $1.59 billion.
This large-scale acquisition is primarily financed through debt, significantly increasing the group's financial leverage and interest burden.
Affected Entities and Related Ratings
In addition to Genting Group, the Baa2 issuer rating of Genting Overseas Holdings Limited (GOHL), which holds a 53% stake in the group's Singapore business, is also on the watch list. Similarly, the A3 issuer rating of Singapore Genting World operator Singapore Genting is also under observation.
Moody's points out that the rating adjustments of these entities are closely related to the condition of Genting Group, reflecting a high degree of business and financial interdependence.
Financial Impact and Metric Forecasts
Moody's analyst Anthony Prayugo stated that after the acquisition, Genting Group's adjusted debt/EBITDA ratio is expected to rise to about 5.1 times by 2025. This metric was already weak and has been above the 4.0 times downgrade threshold for the past several years.
The deterioration of credit metrics will delay any meaningful deleveraging process, having a long-term impact on financial health.
Review Focus and Time Frame
Moody's expects to complete the review of all related ratings within 60 to 90 days. The review will focus on the final financing structure of the proposed transaction, the company's deleveraging plans, and the financial policies after the transaction is completed.
The rating agency will assess whether the group has viable plans to address the financial pressures caused by the increase in debt.
Potential Outcomes and Downgrade Risks
Moody's explicitly warns that if debt increases significantly leading to a rise in leverage, and the company does not introduce corresponding deleveraging plans, Genting Group's rating could face multiple downgrades. The final outcome will depend on the details of the financing arrangements and financial policies.
A rating downgrade could increase financing costs, affecting the group's future investment capabilities and market confidence.
Related Entities and Business Synergies
GOHL is on the downgrade watch list because its core business is closely linked and consistent with Genting Group, and the parent company has the ability to draw on its cash and reallocate funds as needed. This close relationship makes its rating highly associated with the parent company.
Although the rating of Singapore Genting is two levels higher than that of the ultimate parent company, it is still affected by the overall condition of the group.
Potential Risks and Unconsidered Factors
Moody's points out that this rating observation does not consider another potential expenditure: if Genting Malaysia's subsidiary Genting New York LLC obtains a commercial casino license in New York State, it commits to an additional $5.5 billion investment to expand the New York Genting World Resort. This potential commitment could further exacerbate financial pressures.
The uncertainty of the New York project adds additional complexity to the rating assessment.
Singapore Business and Expansion Plans
Singapore Genting World is advancing a S$6.8 billion (about $5 billion) expansion plan of its own. Moody's points out that this expenditure will be paid over several years, expected to peak between 2027 and 2028, at about S$1 billion per year.
Although this capital expenditure plan is a long-term arrangement, its impact on the group's overall financial flexibility still needs to be considered.
Market Impact and Investor Concerns
The rating watch action has attracted market attention, and investors are assessing the long-term impact of Genting Group's financial strategy. Large-scale acquisitions through debt financing face greater challenges in a high-interest rate environment, potentially affecting shareholder returns and future investment plans.
The market response will depend on whether the group can present a convincing financial improvement plan.
