ASIA CREDIT-Genting's casino gamble, stake buys pressure bonds

By Umesh Desai

HONG KONG, June 6 (Reuters) - Malaysian casino operator Genting Bhd's bonds have performed poorly and are at risk of being downgraded, analysts say, as soaring costs and delays at its multi-billion dollar Singapore casino threaten its fortunes.

Genting (GENT.KL: Quote, Profile, Research) has reassured investors that building costs are under control but analysts are also worried the cash-rich company could acquire new companies and enlarge gaming stakes in the United States and Britain, further straining its finances.

A unit of the company is building a casino on Singapore's resort island of Sentosa and costs have escalated by 15 percent to around S$6 billion ($4.4 billion), due mainly to higher building expenses amid a booming construction sector.

"The Singapore capex overhang may continue to cause the cash bonds to underperform despite overall stable credit quality expected," said Brayan Lai, credit analyst with Calyon Corporate & Investment Bank.

This week, Lai cut his recommendation on Genting's 2014 bond <MY020056118=RRPS> to underperform from market perform. The bonds are trading at around 340 basis points above U.S. Treasuries.

Spreads on Genting's 2014 bonds have risen sharply since it reported the S$800 million cost overrun in November last year.

Spreads jumped up from around 150 basis points over U.S. Treasuries.

Analysts say there could be further cost increases and a possible delay beyond its original schedule in 2010.