Genting faces downgrade risk; CreditSights urges asset sales to cut debt

Genting Bhd faces a narrowing window to preserve its investment-grade credit rating, according to a fresh assessment from CreditSights that cuts through the company's recent fundraising announcement with a stark diagnosis: asset sales alone will determine whether the gaming and hospitality giant avoids a downgrade.

The credit research firm's warning arrives just days after Genting unveiled a RM1.25 billion rights issue intended to shore up its balance sheet and reduce reliance on borrowed money. While CreditSights acknowledged the move as a step in the right direction, it stopped short of calling it sufficient. The firm expects only modest improvement in the group's overall financial position—a measured assessment that underscores how deep the debt problem runs. To truly arrest the downgrade risk, CreditSights said, Genting will need to sell non-core assets, particularly unused land holdings, to materially reduce what the firm describes as a heavy debt burden.

The pressure points are concrete and immediate. A US$618 million bond matures in January 2027, a deadline now less than three months away. CreditSights expects Genting to manage the repayment through existing cash reserves and potentially fresh borrowing, but the looming maturity is a marker of how tightly the company's near-term obligations are clustered. Beyond that, Genting has committed substantial capital to expanding its Resorts World New York City casino—a bet that CreditSights flagged as risky if the spending fails to generate sufficient returns. The firm did note an earnings recovery at Resorts World Las Vegas in the first half of 2026, but sustaining that improvement remains uncertain and critical to the group's financial trajectory.

Genting's attempted takeover of its own subsidiary, Genting Malaysia Bhd, adds another layer of complexity. In October 2025, the parent company launched a RM6.7 billion offer at RM2.35 per share to acquire the remaining shares it did not own, with the stated aim of taking the subsidiary private. The offer closed in December without achieving privatisation, though Genting did increase its shareholding to 73.13% from the previous 73.8%. CreditSights has now advised Genting to avoid debt-funded attempts to increase that stake further over the next 12 to 18 months—a clear signal that the analyst sees such moves as financially reckless given the company's current position.

The rights issue itself, announced last Friday, is expected to secure shareholder approval, bolstered by the Lim family's commitment to subscribe for its full entitlement. The family collectively holds 45.1% of Genting, enough to ensure the capital raise proceeds. Yet the market's immediate reaction suggested skepticism about whether the measure goes far enough. Genting shares plunged nearly 23 percent to RM1.45 on Monday, marking their lowest point since April 2007—a sharp reproof from investors who appear to view the rights issue as a patch rather than a solution.

CreditSights identified several paths forward for Genting: dividend cuts, further fundraising rounds, and stronger earnings performance could all help improve the company's financial position. But the firm's emphasis on asset sales suggests that without concrete moves to shrink the debt load itself—not just manage it or refinance it—the investment-grade rating remains in jeopardy. The next 18 months will be telling: whether Genting can sustain the Las Vegas earnings recovery, whether the New York casino investment pays off, and whether management acts decisively on the asset sales front will largely determine whether the company keeps its rating or joins the ranks of fallen angels in the credit markets.