Genting shares plunge as debt-reduction plan draws criticism
The group plans to use US$195m to repay debt, but Maybank Investment Bank has downgraded its rating amid concerns over limited balance-sheet relief.
Key takeaways:
- Genting Berhad has proposed a MYR1.25bn (US$306m) rights issue to reduce debt and fund working capital. The company plans to allocate MYR800m (US$195m), or 64 per cent of the proceeds, to debt repayment over the next 12 months.
- Genting shares fell by over 22 per cent to MYR1.45 in trading today.
- Maybank Investment Bank downgraded Genting from Buy to Sell, citing limited balance-sheet relief and shareholder dilution.
Malaysia.- Genting Berhad’s proposed MYR1.25bn (US$306m) rights issue has sent its shares down by over 22 per cent today. The stock price fell to MYR1.45 as investors assess whether the capital raise will provide sufficient relief from the group’s debt burden.
Under the plan announced in a filing to Bursa Malaysia, Genting will allocate MYR800m (US$195m), 64 per cent of the proceeds, to pay down existing debt over the next 12 months, which the company estimates will generate MYR41.3m (US$10.1m) in annual interest savings. Another RM429.5m(US$105m) will support general working capital, with the remainder covering transaction costs.
Financial institutions responded cautiously to the announcement, questioning whether the planned debt repayment offers sufficient financial relief given the group’s total borrowings of MYR45.25bn ($11.07bn), which includes MYR9.68bn (US$2.63bn) in short-term debt due within the year. Maybank Investment Bank downgraded its rating on Genting from “Buy” to “Sell,” warning that the move provides only marginal relief to the group’s balance sheet while diluting shareholder value.
The capital raise highlights the growing financial pressure on Genting as it balances heavy capital expenditure against a large debt load. Major expansion commitments, including ongoing investments at Resorts World Sentosa in Singapore and the development of Resorts World New York City, have drawn recent scrutiny from rating agencies. Both Fitch Ratings and S&P Global Ratings previously cautioned that elevated spending and mixed operating results leave the group with minimal buffer to maintain its investment-grade status.
While key shareholders and major entities have committed to subscribe to 45.1 per cent of the target proceeds (MYR563.8m/ US$138m), the plan remains subject to shareholder approval at an extraordinary general meeting and regulatory approval from Bursa Malaysia. Genting targets completion of the rights issue by the first quarter of 2027.
Frequently asked questions (FAQs)
- Why is Genting launching a rights issue? Genting plans to use the proceeds primarily to reduce debt, with MYR800m earmarked for repayments over the next 12 months. The company expects this allocation to generate MYR41.3m in annual interest savings.
- Why did Genting shares fall today? Genting shares fell by over 22 per cent to MYR1.45 in trading today due to concerns that a proposed MYR1.25bn rights issue would provide only limited financial relief while diluting existing share value.
- How much debt does Genting have? Genting reported total borrowings of MYR45.25bn (US$11.07bn), including MYR9.68bn in short-term debt due within the year..
