Interest revealed and bid submitted
Genting Malaysia has announced interest in taking over the Resorts World Catskills casino in upstate New York. The facility has struggled since opening its doors in early 2018, with debts nearing the $400m mark.
Resorts World Catskills casino posted a loss of $36m for its most recent quarter. This brings its total losses in 2019 to the $74m mark.
A successful takeover could result in Genting Malaysia taking the Resorts World Catskills casino private.
According to a report on NYup.com, the company is looking to join forces with Kien Huat, the investment firm owned by Genting Malaysia’s owner, K.T. Lim, to take full control of the casino. They would make a significant cash injection to keep the casino afloat and attempt to make it profitable.?
A successful takeover could result in Genting Malaysia taking the Resorts World Catskills casino private and implementing it as part of its overall casino portfolio.
An offer has already been submitted to shareholders. If accepted, Genting Malaysia would purchase all of the equity and shares in the casino facility. This would be at a price of $9.74 per share. With the share price currently hovering around the $8.49 mark, this would be a good premium for investors.
Potential takeover details
To complete this buy over, the publicly traded operator of the casino, Empire Resorts would likely have to enact a pre-packaged bankruptcy. This would then allow the largest shareholder to buy out the company, which happens to be Genting Malaysia in this case.
A letter was sent to the shareholders of Empire Resorts from Kien Huat in July. It stated that the investment company would not be giving any more money to the casino facility if it remains public.
Details of this potential approach were outlined in an SEC filing. The other options for the company would be to look for new loans or to reorganize the existing loans by seeking Chapter 11 bankruptcy protection.
The president of Genting’s American operations Ed Farrell spoke about this potential takeover. He said:
We’re in a unique position where we can assist with the management of Resorts World Catskills through our Resorts World New York property at a low cost.”
Poor performance of the facility
There are four commercial casinos in upstate New York, with the Resorts World Catskills being the largest of them. The others are Tioga Downs, the Del Lago Resort and Casino, and the Rivers Casino and Resort.
Given its proximity to New York City, the Resorts World Catskills casino was hoping that its location would give it a major advantage over the competition.
Empire Resorts spent a total of $1.2bn on the development of the casino and they were hit with numerous warnings about their debt repayments since development came to an end.
All four of the upstate casinos have been struggling to hit revenue projections since opening. This is largely down to their facilities being somewhat remote and there being so much competition in the region.
Legal sports betting
One potential impetus for these casinos is the allowance for them to offer sports betting. Resorts World Catskills have yet to open their sportsbook, but Tioga Downs and Rivers Casino have both done so.
There is a 10% tax on sports betting revenues and no betting is allowed on college games.
There are hopes that mobile sports betting will soon be made legal. This would be a significant move that would greatly help the upstate casinos. It has been reported that over 80% of sports bets made in New Jersey are placed using mobile devices.