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Standard & Poor's (S&P) Global Ratings lowered its valuation of Malaysian casino giant Genting Bhd's management and corporate governance to "fair" from "satisfactory" due to a possible conflict of interest between its founder Lim's family and other investors.

In a note on Monday, Standard & Poor's corporate governance situation at Genting Bhd reduced the scope of improvement at its current rating level.

"Our evaluation indicates that the founding family's controlling stake in Genting is negative for its governance structure," the agency said, referring to the Lim family, the Malaysian dynasty that created the Genting Group

"An example is Genting Bhd maintaining its interim 2020 dividend at 2019 levels despite casinos being closed amid the spread of COVID-19 in major operating countries," the agency said.

"In contrast, similar gaming rivals such as Las Vegas Sands [ Inc], Crown Resorts [ Inc] and Sky City Entertainment [Group] have suspended their dividend programs to maintain their cash and management leverage ratios," Standard & Poor's added, compared with other companies with casino operations in Asia-Pacific, including the parent of Macau operator Sands China and Singapore resort Marina Bay Sands

The rating agency also suggested that "this constraint from Genting [Bhd] has contributed in part to a worse short-term credit profile than similar peers."

Referring to a portfolio of investment vehicles controlled by the Lim family, a major investor in Genting Bhd, S&P said, "Given that the Lim family has board representatives in a number of Genting companies, the extensive ownership linkage of the Lim family, the beneficiary of Kien Huat, could create a potential conflict of interest."

According to recent media reports, Kien Huat holds a 43% stake in Genting Bhd.

Grading confirmed

S&P nonetheless confirmed its 'BBB' rating on Genting Bhd for long-term issuer credit in a note on Monday. For Resorts World Las Vegas LLC, an affiliate of the group, a new casino resort developer in gaming hub Nevada, the ratings agency confirmed its long-term issuer credit rating of 'BBB-'.

Senior secured liabilities and senior unsecured bonds of Resorts World Las Vegas companies were also identified in "BBB-".

Operations at Las Vegas properties, expected to begin in the summer of 2021, could boost 2022 group revenue "from 90% to 95% of pre-COVID-19 levels" before interest, taxation, depreciation and amortisation costs (EBITDA), Standard & Poor's suggested.

"We estimate Resort World Las Vegas will account for 10% to 15% of Genting's EBITDA in 2022," the agency said.

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