Genting shares tumble most since 1998 on rights issue plan

Shares of Genting Bhd plummeted to their lowest level in 28 years following the announcement of a rights issue aimed at raising approximately RM1.25 billion (£306 million). The stock plummeted by up to 17%, closing at RM1.56, marking the steepest decline since 1998. The rights issue, with an issue price set at a discount between 25% and 30%, will be utilized to pay off existing borrowings and bolster working capital.

This move comes amidst Genting's ongoing struggle with substantial debt and dwindling profitability. In August, the company disclosed a net loss for the second quarter, and total borrowings reached RM45.3 billion by the end of June. Analyst Samuel Yin from Maybank Investment Bank warned that the rights issue could result in negligible interest savings, asset stripping, and substantial reductions in earnings per share and book value per share.

He also cautioned that Genting may resort to further equity fundraising or cut dividends, subsequently downgrading the stock to a "sell" recommendation. The exercise highlights Genting's potential difficulty in refinancing its current borrowings into longer-term debt, according to Yin. Genting Malaysia Bhd, the group's subsidiary, saw its shares dip by 8.1%, the highest decline in over a year.

Fitch Ratings reduced Genting's credit rating to BBB- in September, anticipating a slower pace of debt reduction due to the need for significant capital investment to develop properties abroad, including in Singapore and New York. The gaming giant recently secured a license to operate a casino in New York City, a venture projected to generate billions in revenue.