Genting Singapore to redeem outstanding $2.3b perpetual securities

This will improve the company’s credit metrics over the next 12-18 months.

Genting Singapore PLC recently announced that it is going to redeem its outstanding credit on their respective call dates later this year. GENS is said to fund this redemption using cash and cash equivalent credit.

Analysts report that this move will improve the company’s credit metrics over the next 12-18 months. This means that GENS’ pro forma retained cash flow (RCF)/debt will improve to around 42% from 20% over the same period.

Moody's Investors Service reported that GENS had cash and cash equivalents of SGD5.6 billion and total adjusted debt (excluding its perpetual securities) of approximately SGD1.1 billion. It added that even after the repayment of SGD1.8 billion perpetual securities in September 2017 and SGD500 million in October 2017, the company will have a net cash position of SGD3.3 billion.

Here’s more from Moody’s:

Despite the improved credit metrics, a ratings upgrade is unlikely because of the company’s smaller scale relative to its global peers and the concentration of its business in Singapore. GENS is 52.8%-owned by Genting Overseas Holdings Limited, an investment-holding company that in turn is a wholly owned subsidiary of Malaysia’s Genting Berhad.

GENS, GOHL’s only income-generating asset, is fully consolidated into GOHL, which is consolidated into Genting Berhad. Therefore, the call redemption of GENS’ perpetual securities will improve GOHL’s and Genting Berhad’s credit metrics.

Over the next 12-18 months, after taking into account $1 billion of bonds issued by GOHL in January 2017, we expect Genting Berhad’s debt/EBITDA to improve to around 3.0x from 3.2x as of 2016, and its RCF/debt to reach approximately 21% from 19%, as shown in Exhibit 2. In assessing both GOHL’s and Genting Berhad’s debt leverage, we consider all of GENS’ perpetual securities as debt.