Fitch revises Genting’s outlook to ‘negative’ after Empire Resorts announcement

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MONTICELLO – Fitch Ratings Service has revised the outlook on the ratings of Genting Berhad to negative from stable, but at the same time, affirmed its A- rating.

The downgraded outlook follows Genting Malaysia’s (GENM) decision to acquire up to 49 percent of the loss-making Empire Resorts in Monticello, which operates Resorts World Catskills in Kiamesha Lake and Monticello Raceway in Monticello.

Fitch said the acquisition “comes at a time when Genting has concurrently committed to other large-scale capex (capital expenditures) in the next two to three years.

“The Negative Outlook captures the risk of Genting’s ability to deleverage to a level consistent with its current rating,” the report said. “Fitch believes that deleveraging ability depends on achieving a quick turnaround in operations at Empire and deriving adequate returns from its other capex. The company is confident of the earnings potential of its investments, while we think actual returns could be lower than expected due to competition and other pressures.”

Kien Huat Realty III is the majority shareholder in Empire, with an 84 percent interest. That company’s beneficiaries are also the largest shareholders of Genting and Genting Malaysia. Genting Malaysia has announced plans to acquire 46 percent of the common stock held by Kien Huat in Empire for $128.6 million and create a joint venture with Kien Huat to privatize Empire.

“GENM is confident of improving Empire’s performance, however there is limited public disclosure on the structure, valuation, and business plan at this state as the acquisition has not been completed,” Fitch wrote. “This risk is captured in our Negative Outlook, and Fitch will monitor GENM’s success in this respect is resolving the Outlook.”

Empire Resorts recently stated in a Securities and Exchange Commission filing that it would have to consider filing for bankruptcy if it could not reach an agreement to gain additional financing.