Posted on: January 26, 2021, 09:17h.
Last updated on: January 26, 2021, 10:15h.
Genting Malaysia (GenM) could step in to support its New York unit if that business encounters financial difficulty in the future, according to Fitch Ratings. GenM is the gaming company behind the Resorts World brand.
Genting New York LLC (GenNY), the operator of Resorts World New York City, is issuing new corporate bonds to refinance old debt. Fitch rates the new issue, as well as GenNY’s overall credit grade, BBB-. The outlook on that rating is “negative.”
Fitch says GenNY’s credit grade is tied to that of the stronger Malaysia-based parent, and that the Empire State venue is integral to Genting’s US growth aspirations.
This is due to Fitch’s view of the strong linkage between GenNY and GenM, considering the company’s strategic importance to GenM’s growth strategy and geographic diversification ambitions and, in turn, those of the ultimate parent, Genting Berhad,” said the ratings agency in a note.
Located in Queens near JFK International Airport, Resorts World New York City has over 6,500 slot machines and video table games. Last October, the operator revealed plans for a 400-room hotel at the venue to be run by Hyatt Regency.
From Las Vegas to New York
Currently, the New York property is Genting’s flagship gaming property in the US. That’s slated to change later this year when the $4.3 billion Resorts World Las Vegas opens. But there are important links between the two.
Not only is Genting looking to bolster its US profile, but it also views the Resorts World New York City as an important avenue to drive East Coast clients to the new Nevada integrated resort. Fitch calls the former an “important feeder market” for the latter.
“Fitch believes GenM is likely to provide support in times of distress, given the reputational risk associated with a default and large committed investments from GenM and Genting to establish the group’s presence in the US,” according to the ratings agency.
In GenM’s Best Interest
Multiple reasons confirm why it’s in the parent company’s interests to prop up the Queens venue if that support is needed. To date, GenM invested $535 million in the casino, and it’s the largest gaming venue in close proximity to New York City.
Additionally, it boasts “strong local market share and the longer-term potential of securing a table-game license after NY upstate casinos’ exclusivity period ends in 2023,” notes Fitch.
In 2019, the GenNY business accounted for 20 percent of Genting Malaysia’s earnings before interest, taxes, depreciation and amortization (EBITDA). Slot revenue at the property checked in at $900 million in that year.
Expansion plans and the eventual return to normal following the coronavirus pandemic position Resorts World New York City to be a more important profit driver for GenM in the future.
“We forecast GenNY will reach gross leverage of 3x by 2023 after the expansion,” said Fitch. “We expect it to generate a high single-digit free cash flow margin once operations are stabilized, supported by healthy gaming revenue, incremental returns from its expansion, and manageable maintenance capex.”