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Genting Overseas Holdings Limited -- Moody's affirms Genting Berhad's and Genting Overseas Holdings' Baa2 ratings and Genting Singapore's A3 rating; outlook remains negative

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Rating Action: Moody's affirms Genting Berhad's and Genting Overseas Holdings' Baa2 ratings and Genting Singapore's A3 rating; outlook remains negativeGlobal Credit Research - 30 Mar 2021Singapore, March 30, 2021 -- Moody's Investors Service has affirmed the Baa2 issuer rating of Genting Berhad (GENB).Moody's has also affirmed the Baa2 issuer rating of Genting Overseas Holdings Limited (GOHL), a wholly-owned subsidiary of GENB. At the same time, Moody's has affirmed the Baa2 backed senior unsecured rating of the notes issued by GOHL Capital Limited, a wholly owned subsidiary of GOHL. The notes are guaranteed by GOHL.GOHL and GOHL Capital Limited are supported by a keepwell deed between GENB, GOHL, GOHL Capital Limited and the trustee of the guaranteed notes.Moody's has also affirmed the A3 issuer rating of Genting Singapore Limited (GENS).The outlook for all ratings remains negative."The rating affirmation reflects GENB's excellent liquidity and good access to funding, which provides sufficient cash runway despite continued dividend payouts amid weaker operating cash flow across all its integrated resorts worldwide," says Junling Tan, a Moody's Analyst.GENB's Baa2 rating also incorporates its strong business profile, which remain supported by its monopoly position in Malaysia through its 49.5% subsidiary Genting Malaysia Berhad's (GENM) ownership of Resorts World Genting (RWG) and duopoly position in Singapore through its 53% subsidiary, GENS' ownership of Resorts World Sentosa (RWS)."GOHL's rating mirrors that of GENB, given the close links between the two companies, and the alignment of GOHL's core operations with those of GENB," adds Tan. "The A3 rating of GENS incorporates Moody's expectation that GENS' strong balance sheet, supported by sizable cash holdings and minimal debt, and better-than-expected earnings recovery in the second half of 2020. However, given the linkages between GENS and its ultimate parent, GENB, GENS' rating will remain constrained at no more than two notches above that of GENB."The negative outlook reflects uncertainty regarding the operating environment and pace of recovery of the operating performance of Genting group's integrated resorts, including Resorts World Las Vegas (RWLV), which is targeted to open in summer 2021.RATINGS RATIONALE-- Genting BerhadMoody's expects GENB's credit metrics, as measured by debt/EBITDA, to improve to around 7.0x in 2021 from 13.6x in 2020, and around 5.2x and 4.8x in 2022 and 2023, respectively. However, the ratio remains weak compared with pre-pandemic levels. Moody's has incorporated 100% of the debt at Empire Resorts, Inc., a company in which GENM (a key subsidiary of GENB) holds 49% of the common stock, based on expectations that GENM will be called upon to shoulder Empire Resorts' debt burden if necessary.Moody's expects GENB to maintain excellent liquidity on a holding company basis, helped by its sizable cash position of MYR3.4 billion as of 31 December 2020, including that of GOHL, with no debt maturity until 2022.Environmental, social and governance (ESG) issues are material to the rating outcome and were assessed as follows:The group's power generation and oil and gas businesses operate in sectors that have been identified as having elevated environmental risk. Nevertheless, earnings contributions from these segments remain small, with the leisure and hospitality businesses contributing close to 90% of GENB's reported EBITDA prior to the pandemic.The group's leisure and hospitality segment is exposed to elevated social risks, particularly in terms of evolving demographic and societal trends, which could drive a demand shift away from traditional casino-style gaming. These risks are somewhat mitigated by the company's value proposition as a lifestyle destination, such as RWS, RWG and the development of RWLV, with significant nongaming attractions, including theme parks and various retail outlets.Moody's has also considered governance risk stemming from concentrated ownership, because GENB is ultimately controlled by the Lim family. Moody's views the 49% acquisition of Empire Resorts -- a related-party transaction -- as credit negative, because Empire Resorts has weak credit quality and requires debt restructuring.Nonetheless, governance risk is partially mitigated by the oversight exercised through GENB's eight-member board of directors, which includes five independent directors. In addition, GENB is subject to regulatory overview from relevant gaming authorities in the jurisdictions it operates in.-- Genting Overseas Holdings LimitedIn terms of ESG factors, Moody's has considered governance risk around GOHL's private-company status and concentrated ownership. As a private company, GOHL has limited corporate transparency and does not disclose quarterly financial statements. However, GOHL is a wholly owned subsidiary of GENB, which is publicly listed and regulated by Bursa Malaysia.GOHL is ultimately controlled by the Lim family, but Moody's believes this governance risk is partially mitigated by the regulatory oversight imposed by the Casino Regulatory Authority of Singapore on GOHL, GENS and GENB, as well as their respective board and key management personnel.-- Genting Singapore LimitedThe A3 rating also considered the relationship between GENS and GENB. GENS has a degree of independence as a listed company. At the same time, GENS only upstreams cash to its parent through dividend payouts, which have represented less than 40% of pre-pandemic operating cash flows. The two-notch differential between GENS and GENB reflects the stronger credit quality of GENS. The gap between the two companies' ratings could narrow if Moody's assesses that there is reduced independence in decision making at GENS, resulting in increased cash leakage from GENS to GENB in the form of dividends or through other measures.Moody's expects GENS to maintain excellent liquidity, helped by its sizable cash position of SGD4 billion compared to a gross balance-sheet debt of SGD267 million as of 31 December 2020. Although the cash position will decrease assuming continued capital spending for the expansion of RWS, the company will stay in a net cash position.In terms of ESG factors, Moody's has considered governance risk regarding the group's concentrated ownership. GENS is ultimately controlled by the Lim family through their holdings in GENB. Nonetheless, the risk is mitigated by the oversight exercised through GENS' six-member board, which includes four independent directors. In addition, the Casino Regulatory Authority of Singapore imposes regulatory oversight on GENS, and its respective board and key management personnel.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS-- Genting BerhadGiven the negative ratings outlook, an upgrade is unlikely over the next 12-18 months. Nonetheless, the outlook could return to stable if the operating performance of GENB's integrated resorts worldwide support a recovery of its earnings and credit metrics.Moody's could downgrade GENB if: (1) there is a deterioration in the cash flows coming from GENM and GENS, the latter via GOHL, to the holding company; (2) there is sign of excessive cash leakage via aggressive cash dividends or investments in businesses outside the group; (3) there is a material change in its disciplined financial management or the regulatory environments in which it operates; (4) its adjusted debt/EBITDA stays above 5.0x.-- Genting Overseas Holdings LimitedGiven the negative outlook, an upgrade is unlikely over the next 12-18 months. Nonetheless, the outlook could return to stable if GENB's outlook returns to stable.Moody's could downgrade GOHL if: (1) there is protracted weakness in the cash flow generation of RWS, resulting in lower dividend payouts, and in turn, decreased cash inflows for GOHL to meet its obligations; (2) there is a reduction of its ownership in GENS; and (3) GENB's rating comes under pressure.-- Genting Singapore LimitedGiven the negative outlook, an upgrade is unlikely over the next 12-18 months. Nonetheless, the outlook could return to stable if: (1) the operating performance of RWS supports a recovery of GENS' earnings and credit metrics; and (2) GENB's outlook reverts to stable.Moody's could downgrade GENS if: (1) there is a protracted weakness in its operating performance, such that its earnings and credit metrics do not gradually recover; (2) the company fails to maintain its 100% ownership of RWS; (3) it increases debt at Resorts World at Sentosa Pte Ltd., resulting in structural subordination risk; or (4) adjusted net debt/EBITDA exceeds 1.0x.In addition, any deterioration in its parent's credit quality or any signs of excessive cash leakage to support its parent could strain GENS' ratings.The principal methodology used in these ratings was Gaming Methodology published in October 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1244702. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Genting Berhad (GENB) is the investment holding and management company of a group of companies (collectively The Genting Group), which engages in various businesses, including gaming, leisure and hospitality, plantations, power, as well as oil and gas exploration. Tan Sri Lim Kok Thay, the Chairman and Chief Executive, has a deemed interest of around 43% in GENB through Kien Huat Realty Sdn. Bhd.Incorporated in the Isle of Man, Genting Overseas Holdings Limited (GOHL) is an investment holding company that holds a 53%-stake in GENS, which in turn, is a wholly-owned subsidiary of GENB.Listed on the Singapore Exchange in 2005, Genting Singapore Limited's (GENS) principal activities are the development of integrated resorts and the operation of casinos. It is best known for its flagship project, Resorts World Sentosa, which is one of the largest fully integrated destination resorts in Southeast Asia.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Junling Tan Analyst Corporate Finance Group Moody's Investors Service Singapore Pte. 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