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Genting's U.S. Project Credit Minus

Genting Bhd's Las Vegas casino project is negative for its credit because it raises the group's debt levels and carries execution risks, Moody's Investors Service said.

Malaysia's casino operator revealed details of the $4 billion resort World Las Vegas development last week, which would further boost the group's capital spending over the next two years, the credit agency wrote in its credit outlook.

The first phase of the project will include a 100,000 sq ft (9,290 sq m) gambling center, a 3,000-room hotel tower, and retail space. The second phase will include more space for gambling, a convention center, and more entertainment space.

Construction will begin in the second half of 2014, with the project expected to be completed between 24 and 36 months, the group said. Genting purchased the site from Void Gaming Inc in March 2013 for $350 million.

The Nevada Gaming Control Board has recommended a gaming license for the project, and final approval will be decided by the Nevada Gaming Board on May 22.

Moody's said the Las Vegas development is expected to increase Genting's annual facility investment from 7 billion ringgit ($2.2 billion) to 11 billion ringgit during 2014-16.

"The expected capital includes renovation of Malaysian Resorts World Genting, development of an integrated casino resort in Jeju Island, South Korea, development of other games across the U.S. and the U.K., expansion of non-gaming subsidiaries, and maintenance capital across the entire business," Moody's said.

"Increasing capital investment will result in negative free cash flow over the next two to three years and risk weakening the group's leverage," it added.

Moody's said it expects consolidated net debt/EBITDA (earnings before interest, tax, depreciation and amortization) to gradually approach the 1.0-1.5 times grade Baa1 parameter over the next three years, up from 0.3 times as of December 31, 2013, following the group's overall equity exercise.

Genting said it could exercise outstanding warrants that could raise up to 5.9 billion ringgit over five years.

The Las Vegas project also carries execution risks as it is Genting's first foray into Las Vegas, where "game growth has slowed compared to Asia over the past decade and there has been no major resort development."

The ratings agency also warned that a weakening of its credit profile due to its investment in Las Vegas could undermine Genting's ability to develop an integrated casino resort project in Japan through its subsidiary, Genting Singapore, which owns a 51% stake.

"However, if the bid is successful, we expect the project to begin in 2016 with significant capital expenditures expected to exceed Singapore Resorts World Sentosa's $5.6 billion development," it said.

It also added that the size of the project could "further increase Genting's leverage and extend the period in which credit metrics have weakened."

BY: 슬롯사이트 순위

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