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Nomura Bank Group says casino

Nomura Bank Group says casino investor Genting Malaysia Bhd has "limited room" in the short term to realize "additional capital injections" for Empire Resorts Inc, an alliance that runs Resorts World Catskills (pictured) in upstate New York. However, the additional capital injections could come after September without a minority shareholder vote, the agency added.

Genting Malaysia Bhd said in a filing on Friday that it had agreed to buy Empire Resort's "Series L" preferred stock for up to US$20 million. The latter company became a coalition of vehicles owned by Genting Malaysia and the Lim family, Genting's dominant Malaysian dynasty, in 2019.

In a note on Monday, Nomura suggested that related party transactions such as Empire Resorts capital infusions "total more than 5% of Genting Malaysia's net book value, made cumulatively over 12 months," adding that "minority shareholder votes will be required."

"The total amount of Empire capital input (in September 2020 and March 2021) now amounts to 4.8% of casino operator book value," the brokerage said, due to "declining book value" in Genting Malaysia after losses in fiscal 2020.

This suggests that "there is limited room for additional capital input in the short term until September 2021 unless shareholder approval is sought," analysts Tushar Mohata and Alpha Aggarwal wrote.

Genting Malaysia, the promoter of Resorts World Genting, Malaysia's only licensed casino complex, said in a Friday filing that the proceeds from the Empire Resorts share subscription "will be used to close Empire's short-term refinancing plan for a total debt of US$350 million due March 23, 2021.

In a note on Monday, Nomura said he believed Empire Resorts would enter into a "refinancing" on its long-term borrowings from Resorts World Catskills "as its operational outlook improves with progress in the U.S. vaccination program."

"If refinancing is delayed until September 2021, there could theoretically be an additional $140 million capital injection into Empire via Malaysian genting without seeking minority votes around October 2021," the Nomura team added.

"In our view, if the empire is to regain profitability, it is essential that Genting Malaysia secure funds soon at attractive interest rates so that it does not bear additional capital re-financing," he added

Malaysia's main revenue generator, the Resort World Genting Casino complex, resumed operations on Feb. 16 after being shut down for more than three weeks due to COVID-19 measures due to a surge in infections in Malaysia.

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