Genting Malaysia downplays Empire Resorts liquidity crunch

15 Aug 2019 / 21:41 H.

PETALING JAYA: Genting Malaysia Bhd (GenM) has given an assurance that the present liquidity challenges faced by loss-making Empire Resorts can be resolved following news that the latter may file for bankruptcy.

GenM has come under fire after it announced the acquisition of a 46% stake in Empire from Tan Sri Lim Kok Thay’s Kien Huat Realty Ltd (KH) for RM538.8 million.

“Empire stated that it believes that its current cash, cash equivalents, cash generated from operations and available funding pursuant to KH’s current commitments will provide sufficient liquidity to fund debt service requirements, Empire’s operations and the expected costs of developing the golf course adjacent to its casino, Resorts World Catskills (RWC), until the first quarter of 2020,” GenM said today in response to a query by Bursa Malaysia.

“Furthermore, based on our analysis from public filings, we believe that, with immediate improvements to Empire’s operations following an expeditious consummation of the proposed merger, Empire’s present liquidity challenges can be met,” it added.

GenM highlighted that Empire had identified multiple options to address its current liquidity challenges, including, seeking arrangements to provide additional liquidity, making reductions to its cost structure, restructuring of its and its subsidiaries existing debt terms and pursuing the joint non-binding proposal submitted by GenM and KH to acquire all outstanding shares of capital stock held by Empire stockholders unaffiliated with KH.

However, if these alternatives are unsuccessful, GenM said Empire had indicated that it may pursue a voluntary Chapter 11 bankruptcy proceeding in respect of its subsidiary that owns the Catskills casino operations.

“GenM strongly believes that the proposal is the best alternative available to Empire’s stockholders and that the proposal is also in the best interests of GenM’s shareholders.”

GenM said it has carefully evaluated the investment into Empire and has deemed it a worthwhile investment as RWC is one of the newest and highest quality gaming assets in the northeast US, with over US$900 million (RM3.77 billion) invested.

“RWC is also nestled in a scenic mountain range development that includes the third party US$200 million Kartrite Resort. The Kartrite Resort is one of the most modern and state of the art indoor water park developments in the US, with 324 brand-new all suite luxury rooms that offer a family attraction for all ages.”

Due to established management in New York, GenM said, the group is in a unique position to take advantage of synergies between its existing operations at Resorts World New York (RWNY) and the RWC.

“This will provide both RWNY and RWC with economies of scale resulting in a net cost reduction, thus improving earnings.”

GenM has been inovlved in the New York gaming market for almost a decade and currently operates RWNY.

GenM opined that the successful execution of the proposed merger would place the group in a position to more deeply access the New York market and provide both GenM and Empire the opportunity to compete more effectively in northeastern US’s competitive gaming landscape.

GenM shares have tumbled 15% since the acquisition was announced last week. Today, the stock was down 1.3% to RM3.07 on 26.61 million shares done.

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