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Friday, June 5, 2009

Don't Play Play: Fitch downgraded Genting Bhd’s outlook to negative

Fitch Ratings has today revised the outlook on Malaysia-based Genting Berhad’s (GENT.KL) (Genting) Issuer Default Rating (IDR) to negative from stable and affirmed the IDR at “A-”. At the same time, Fitch has affirmed the ratings on all senior unsecured debt issued or guaranteed by Genting at “A-”.Fitch says the outlook revision is driven primarily by the potential impact that the ongoing global economic crisis may have on visitor arrivals at Genting’s planned Integrated Resort (IR) in Singapore, which is scheduled to open in early 2010.
Fitch notes that tourists will form a significant target market for the IR, and that the Singaporean tourism sector has been affected by the economic crisis. Total visitor arrivals in Singapore for the first four months of 2009 were 11.8% lower compared to a year earlier.While Fitch acknowledges that the opening of the IR will attract more visitors to Singapore, the total may be lower than the level anticipated when the project was conceived.Genting’s negative outlook is also driven by the announcement of a 10% upward revision in the project cost of the Singapore IR to $6.6 billion and the significantly lower operating margins of its power division due to the inability of its Chinese operations to pass rising fuel costs on to its customers.Fitch says the outlook may be revised back to stable if the Singapore IR performs well and generates strong cashflow after opening and financial leverage looks set to remain below 1.0x.

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