SINGAPORE (THE BUSINESS TIMES) - Moody's Investors Service has placed its A3 issuer rating on mainboard-listed Genting Singapore under review for a downgrade, the credit ratings agency said in a research note on Monday (March 16).

The review follows Malaysia's announcement that it is restricting movement nationwide for two weeks from March 18 to fight the Covid-19 pandemic.

Moody's noted that the review for downgrade of Genting Singapore reflects the weakening credit quality of Genting Berhad, which could pose downside risks to Genting Singapore's rating.

That said, while the ratings agency expects Genting Singapore's earnings to decline by around 35 per cent from that in 2019, it noted that the company's credit metrics will remain strong. Moody's also expects Genting Singapore to maintain "excellent liquidity", helped by its sizeable cash position of S$3.9 billion, compared to a gross balance sheet debt of $261 million, as at Dec 31, 2019.

Although Genting Singapore's cash position will deplete because of high capital spending for the expansion of Resorts World Sentosa, the company continues to stay in a net cash position, Moody's noted.

It added that the review will focus on the extent of the weakening in Genting Berhad's credit quality and the credit linkages between Genting Singapore and Genting Berhad.

In terms of environmental, social and governance (ESG) factors, Moody's has considered the governance risk around concentrated ownership, it said. "Genting Singapore is ultimately controlled by the Lim family through their holdings in Genting Berhad. Nonetheless, the risk is mitigated by the oversight exercised through Genting Singapore's six-member board, which includes four independent directors.

"In addition, the Casino Regulatory Authority of Singapore imposes regulatory overview on Genting Singapore, and its respective board and key management personnel," Moody's noted.

Overall, the credit ratings agency said that the rapid spread of Covid-19, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a "severe and extensive credit shock" across many sectors, regions and markets.

It added that the gaming sector is one of the most significantly affected, given its sensitivity to consumer demand and sentiment.

"The expected weakening in the Genting group of companies' credit profile, including its exposure to Singapore and Malaysia, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the group remains vulnerable to the outbreak continuing to spread," Moody's said.

It also noted that the review reflects the "impact of the breadth and severity of the shock on the Genting group of companies, and the broad deterioration in credit quality it has triggered".

Moody's has also placed under review for downgrade the Baa1 issuer rating of Genting Berhad, and its wholly-owned subsidiary, Genting Overseas Holdings.

Genting Singapore shares closed at $0.64 on Monday, down $0.04 or 5.9 per cent.