Unless Genting Malaysia acquires a controlling stake in Empire Resorts with plans to take the parent company of New York’s struggling Resorts World Catskills private, Empire has informed the Securities and Exchange Commission that it may have to declare bankruptcy.
Genting Group already exercises indirect control over publicly traded Empire (Nasdaq: NYNY) through Kien Huat Realty III, a family trust headed by Genting Chairman and CEO Lim Kok Thay and Empire’s majority shareholder.
The acquisition appears to signal that the global resort conglomerate has decided to take a direct role in managing the fortunes of Resorts World Catskills, which opened in February 2018 as the largest and most expensive of New York’s four new commercial casinos. It has failed to live up to its billing as the market’s category-killer and has lost millions of dollars every quarter.
Genting Malaysia, the group’s Kuala Lumpur-traded subsidiary, has proposed to invest US$128.6 million in cash through its Genting USA subsidiary to buy 13.2 million of Kien Huat’s Empire shares, representing roughly a 33.5 percent of Empire’s equity.
Genting USA and Kien Huat also propose to acquire the outstanding shares held by Empire’s minority shareholders for $9.74 a share, which will lead to Empire’s privatization as a joint venture between Kien Huat and Genting USA.
With 332 rooms and suites, 1,600 machine games and 150 live table games, Resorts World Catskills is, for all intents and purposes, Empire’s sole meaningful asset. The company closed its 1,100-machine racino at nearby Monticello Casino and Raceway earlier this year, and the ailing harness track that remains also faces an uncertain future.
Empire, meanwhile, has been losing money for years—2018’s net loss exceeded $138 million—and Resorts World has been its biggest disappointment. Despite being the closest of the commercial casinos to New York City, about 90 miles north of the metropolis in Sullivan County, its daily slot win is the lowest of the group, and earlier this year, it was granted approval from state regulators to slash its machine gaming inventory by 550 units from the 2,150 it opened with.
Kien Huat says the company is “unable to become financially self-sustaining” and stands at a “critical juncture”—thus the move by Genting Malaysia to take the operational reins.
Genting Malaysia said the acquisition will “better position” the Resorts World brand in the Northeast gaming market “through more effective cross-marketing” with Resorts World New York City, the mega-racino at Aqueduct Racetrack in Queens that is owned by another Genting Group subsidiary.
Genting said also that it plans to save money “by eliminating duplicative costs at Empire and RWNYC.”
