Genting ... Jul10

Genting Bhd, owner of casinos in Singapore, the Philippines and the UK, is the only surviving bidder for an electronic slot-machine parlor at New York City’s Aqueduct Racetrack after two US-based firms were disqualified, the New York Lottery announced.

One excluded proposal was submitted by a group led by SL Green Realty Corp, Manhattan’s biggest office landlord, in a bid with partners Hard Rock International and Toronto-based Clairvest Group. The other was from Wyomissing, Pennsylvania-based Penn National Gaming Inc, which operates 19 casinos and racetracks.

The proposals did not conform with the requirements of the competition and, instead, attempted to negotiate for terms more favorable to the bidders. Neither New York-based SL Green nor Penn National will be eligible for reconsideration even if Genting isn’t approved.

The project, called a racino, would include more than 4,000 video slot machines plus a hotel and other facilities located at the racetrack for thoroughbred horses in the New York City borough of Queens. The developer of the project, which has been planned for nine years, would pay a minimum US$300 million up- front fee to the state, which would issue US$250 million of bonds to help finance the facility, according to budget documents.

The Lottery’s evaluation of Genting’s bid will continue, and it is not guaranteed the award, even though it is the only remaining bidder, said Jennifer Given, a state spokeswoman. The Lottery expects to announce its recommendation by Aug. 3 2010, she said. The winner must also be approved by the governor, the president of the state Senate and the speaker of the Assembly.

Meanwhile Fitch Ratings said Genting Bhd’s ratings are not affected by its bid for the development and operation of a video lottery facility at the Aqueduct Racetrack in New York City, and by the proposed transfer of the ownership of the group's United Kingdom gaming operations.

Genting announced on June 30, 2010 that it is one of three bidders for the development and operation of the only proposed video lottery operations in New York City.

The successful bidder is required to make a minimum upfront payment of US$300 million to the New York state government, in addition to the development costs of the facility which can house up to 4,500 video lottery terminals.

The total investment, including the upfront payment, will likely be significantly lower than Genting's S$6.6 billion (US$4.7 billion) investment in Singapore and relative to its balance sheet. As such, Fitch does not expect the investment, in itself, to lead to a negative rating action on Genting.

However, given the nature of operations and high taxes applicable, Fitch expects profitability of this venture, if Genting wins the bid, to be considerably lower compared to its highly profitable gaming operations in Malaysia.

Fitch will review Genting's ratings if the company is chosen as the successful bidder and once more details of the investment are available.

Separately, Genting Malaysia Bhd (48.6%-owned by Genting) has proposed to acquire the UK gaming operations of Genting Singapore Plc (51.8%-owned by Genting).

Financial performance of the UK operations has been weak due to difficult economic conditions in the UK and adverse developments in gaming-related taxes.

The transfer of ownership between Genting's subsidiaries is neutral on Genting's ratings. The agency however views that the more cash rich and operationally stronger Genting Malaysia Bhd can easily support the UK operations which face a challenging outlook.

Genting - with a foreign currency Issuer Default Rating (IDR) of 'A-' with a Negative Outlook and a senior unsecured debt of 'A-' - is the highest Fitch-rated gaming company globally primarily because of the strong and steady cash generation of its Malaysian gaming operations.

The outlook may be revised to Stable if its newly opened Singapore integrated resort generates steady free cash flows while the group continues to maintain its financial leverage comfortably below 1.0 times .Conversely, a negative rating action may be taken if the above factors are not met, and/or if the group makes any large investment in more competitive gaming markets.

At March 2010, Genting was in a net cash position and its interest coverage (fund flow from operations to gross interest) was strong at around 10 times.