KUALA LUMPUR:'' RAM Ratings' preliminary view on the proposed gaming venture by Genting Berhad's (Genting or the Group) indirect subsidiary, Genting New York LLC (Genting NY), in the State of New York is that it will have limited impact on the Group's credit profile.
Genting's respective long- and short-term corporate credit ratings currently stand at AAA and P1 while the RM1.60 billion Medium-Term Notes Programme (2009/2024) of its wholly owned GB Services Berhad carries an enhanced issue rating of AAA(s), backed by an unconditional and irrevocable corporate guarantee from its parent. Both long-term ratings have a stable outlook.
On Aug 3,'' 2010, the New York State Division of the Lottery Evaluation Committee announced it would recommend that Genting NY be awarded the rights to develop and operate a video lottery facility at the Aqueduct Racetrack. The concession will run 30 years, with an optional 10-year extension. Nevertheless, the project is still pending approval by the legislators.
Based on Genting NY's proposal, the gaming facility will be opened in phases and will be equipped with 4,525 video lottery terminals once completed.
The company's investment in the project could amount to around US$730 million (approximately RM2.3 billion), consisting of an upfront licensing fee of US$380 million and an initial capital expenditure of approximately US$300'US$350 million.
This project is envisaged to have minimal impact on Genting's credit profile given the latter's strong balance sheet; the Group is currently in a net-cash position. 'Genting's consolidated cash and cash equivalents of RM15.8 billion in total as at end-March 2010 are more than sufficient for the Group to finance this investment.
"Although we expect a portion of this to be debt-funded, the erosion in Genting's cashflow-protection measures is expected to be immaterial,' said Kevin Lim, RAM Ratings' Head of Consumer and Industrial Ratings.
Although this is Genting's first foray into the United States (US), RAM Ratings derives comfort from the Group's track record in commissioning new gaming facilities overseas. In February 2010, Genting opened the S$6.6 billion Resorts World Sentosa in Singapore, as scheduled.
'That said, the potential returns from Genting's American video-lottery venture are likely to be lower than those from its flagship Genting Highlands Resort, given the high tax rates and operating costs in the US. A clearer picture on the potential contributions from the project will emerge after we complete our current review of Genting's ratings,' Lim said.
Genting's respective long- and short-term corporate credit ratings currently stand at AAA and P1 while the RM1.60 billion Medium-Term Notes Programme (2009/2024) of its wholly owned GB Services Berhad carries an enhanced issue rating of AAA(s), backed by an unconditional and irrevocable corporate guarantee from its parent. Both long-term ratings have a stable outlook.
On Aug 3,'' 2010, the New York State Division of the Lottery Evaluation Committee announced it would recommend that Genting NY be awarded the rights to develop and operate a video lottery facility at the Aqueduct Racetrack. The concession will run 30 years, with an optional 10-year extension. Nevertheless, the project is still pending approval by the legislators.
Based on Genting NY's proposal, the gaming facility will be opened in phases and will be equipped with 4,525 video lottery terminals once completed.
The company's investment in the project could amount to around US$730 million (approximately RM2.3 billion), consisting of an upfront licensing fee of US$380 million and an initial capital expenditure of approximately US$300'US$350 million.
This project is envisaged to have minimal impact on Genting's credit profile given the latter's strong balance sheet; the Group is currently in a net-cash position. 'Genting's consolidated cash and cash equivalents of RM15.8 billion in total as at end-March 2010 are more than sufficient for the Group to finance this investment.
"Although we expect a portion of this to be debt-funded, the erosion in Genting's cashflow-protection measures is expected to be immaterial,' said Kevin Lim, RAM Ratings' Head of Consumer and Industrial Ratings.
Although this is Genting's first foray into the United States (US), RAM Ratings derives comfort from the Group's track record in commissioning new gaming facilities overseas. In February 2010, Genting opened the S$6.6 billion Resorts World Sentosa in Singapore, as scheduled.
'That said, the potential returns from Genting's American video-lottery venture are likely to be lower than those from its flagship Genting Highlands Resort, given the high tax rates and operating costs in the US. A clearer picture on the potential contributions from the project will emerge after we complete our current review of Genting's ratings,' Lim said.
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