Standard & Poor’s (S&P) recently downgraded the credit rating of Genting Bhd from “stable” to “negative.” The firm owns Resorts World Las Vegas LLC. The S&P suggests that the coronavirus pandemic could hit the casino business significantly because of which it has revised its credit rating.

Why focus on Genting?

According to the S&P, the Malaysian casino company is highly likely to take a major hit as the coronavirus outbreak has hit the world. The impact of this illness is being felt by equity markets around the globe but the casino sector could be especially vulnerable to it. The agency expects a significant drop in the number of visitors to gaming properties across the globe. It suggests that the venues “owned by Genting group are no exception.”

It added that the Genting will breach the downgrade trigger in the next 12 to 24 months. It suggests that the credit profile of the company is expected to recover recovery which will take the debt/EBITDA to fall below 2.0 times in the next three years.

Now, Genting has a BBB+ rating from Genting because of which its debt issue is now considered investment-grade security. It suggests that the bonds issued by the company have adequate protections in place but adverse economic conditions have led to a weakening of the company’s capacity to meet its financial obligations. Changing business circumstances could also lead to a similar situation.

Asian problems at the helm of the issue

Genting operators Resorts World Sentosa Singapore, one of the two integrated resorts of the city-state. On Wednesday evening, the region reported 166 confirmed cases of the coronavirus. Singapore is already dealing with a slowdown in its economy because of which policymakers are providing tax breaks to ramp up tourism. The coronavirus outbreak there has stalled these programs. These tax breaks could help Resorts World Sentosa and its peer Marina Bay Sands save some money.

However, it wouldn’t protect the company from a revenue fall. According to the S&P, revenue could fall between 30% to 40% in 2020 alone because a majority of their customers come from North Asia. In Malaysia, the company will see a similar fate, as revenues decline by 20% to 25%. The fall here will be smaller because 3/4^th of the visitors in Malaysian casinos are day-trippers. The agency believes that consumer sentiment will continue to be weak.