Genting Bhd. shares plunged after the leisure group controlled by Malaysian billionaire Lim Kok Thay announced plans to raise about 1.25 billion ringgit ($306 million) through a renounceable rights issue.
The stock on Monday fell 23% to 1.45 ringgit, the biggest decline on record. The issue price will be fixed at a discount ranging between 25% to 30%, Genting said in a bourse filing on Friday. Proceeds raised will be used to repay its borrowings and fund working capital.
The fundraising comes as Genting grapples with mounting debt and falling profitability. The gaming giant in August reported a net loss for the second quarter, while total borrowings rose to 45.3 billion ringgit as of end June.
“Our scenario analysis reveals not only minimal interest savings and de-gearing but also marked earnings-per-share and book value per share dilution,” Samuel Yin, an analyst at Maybank Investment Bank, wrote in a report. “We also cannot rule out more equity fundraising efforts or fewer dividends,” he said, downgrading the stock to sell from a buy recommendation.
The exercise is concerning as it signals that Genting may have limited success in trying to refinance its borrowings to longer dated-ones, Yin added.
The group’s unit Genting Malaysia Bhd. fell 17%, the most in more than a year.
Fitch Ratings Inc. downgraded Genting to ‘BBB-’ from ‘BBB’ in September on expectations of a slower pace of deleveraging due to substantial capital expenditure needed to expand key properties, including those in Singapore and New York. Last year, Genting’s Resorts World won a license to operate a casino in New York City that is expected to generate billions of dollars in revenue.