Genting Perpetual Securities Rated Below Investment

Genting Overseas Holdings Limited’s planned issuance of perpetual securities has received sub-investment grade ratings from both Fitch Ratings and Moody’s, with each agency noting that the move may strengthen liquidity but offers only limited support against broader credit pressures at parent company Genting Berhad.

Fitch Assigns BB+ Rating
Fitch rated the proposed securities at ‘BB+’, positioning them two levels below GOHL’s ‘BBB’ Long-Term Issuer Default Rating. The lower rating reflects the instruments’ subordinated structure and higher potential loss severity compared to senior debt.

The issuance comes at a time when the group is undertaking several capital-intensive initiatives, including increasing its stake in Genting Malaysia, pursuing a casino licence in New York and advancing a US$5.5 billion expansion of Resorts World Sentosa in Singapore.

Fitch expects the securities to support liquidity and has assigned them 50% equity credit, citing their long maturity, optional coupon deferral and deeply subordinated nature.

Negative Outlook for Parent Company
Despite the expected improvement in certain credit metrics, Fitch maintained a negative outlook on Genting Berhad. The agency forecasts leverage could rise to around 5.5x before declining, contingent on earnings growth and effective deleveraging.

Execution risks tied to ongoing development projects, along with macroeconomic factors, may influence the pace of that improvement.

Moody’s Rates Ba2
Moody’s also placed the securities two notches below GOHL’s issuer rating, assigning a ‘Ba2’ rating to the US dollar-denominated instruments. The agency highlighted the hybrid and subordinated features as key factors behind the rating level.

Moody’s views the issuance primarily as a refinancing measure, linked to a planned tender offer for US$1.5 billion of notes due in 2027. The objective is to extend debt maturities and enhance liquidity, albeit with increased subordination risk. Similar to Fitch, Moody’s applies a 50% equity treatment in its analysis.

Leverage and Funding Structure
The group’s financial profile remains under pressure due to elevated capital expenditure, particularly related to its New York project. As a result, leverage is expected to stay relatively high in the near term, limiting prospects for a rating upgrade.

GOHL’s ability to meet debt obligations continues to rely significantly on dividend flows from Genting Singapore, with coverage expected to remain stable, though highlighting structural dependencies.

Outlook
The planned issuance reflects Genting’s broader strategy to manage its capital structure while pursuing expansion projects. While the transaction is expected to improve short-term liquidity, rating agencies have emphasised that long-term credit stability will depend on project execution and sustained earnings performance.