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Aerial view of the World Dream cruise ship at the Kai Tak Cruise Terminalin Hong Kong on 5 February 2020. Photo: Martin Chan

Malaysian tycoon’s Genting Hong Kong halts paying creditors as global coronavirus pandemic stalls cruise business

  • Genting Hong Kong said it will use its available funds to maintain critical services for the company’s operations and asked creditors to form a steering committee to evaluate a planned restructuring proposal
  • The company owed a total of US$3.4 billion as of July 31, according to a statement to the stock exchange
A cruise ship operator controlled by Malaysian tycoon Lim Kok Thay suspended all payments to creditors, triggering a 36 per cent drop in the company’s shares and denting investor confidence in Lim’s wider business empire.

Genting Hong Kong said it will use its available funds to maintain critical services for the company’s operations and asked creditors to form a steering committee to evaluate a planned restructuring proposal, according to a statement to the Hong Kong stock exchange late Wednesday. The company owed a total of US$3.4 billion as of July 31, it said.

The firm blamed the cash crunch on the coronavirus pandemic and said the payment halt is likely to result in default. Lim owned 69 per cent of the Hong Kong unit’s shares as of April 3, according to data compiled by Bloomberg. Malaysia’s casino-to-hospitality conglomerate Genting and its units previously imposed its first group-wide salary cut since its founding in 1965.

“For Genting, the financial stress may push the owner to sell the asset, or liquidate the entire firm,” said Banny Lam, the head of research at CEB International Investment. “Liquidation is not very likely, but there is such a possibility if Lim doesn’t have money and cannot find a buyer for its assets. In that case, equity holders rank behind bond holders to get compensated.”

Genting Hong Kong shares were down 39 per cent to HK$0.30 at 3.40pm local time. Genting shares were untraded due to a public holiday in Malaysia. Genting Singapore fell 2.1 per cent.

Malayan Banking and RHB Bank were the biggest contributors to Genting Hong Kong’s syndicated loans, according to data compiled by Bloomberg based on disclosed allocations at signing.

Genting Hong Kong was formerly known as Star Cruises, and operates the Star Cruises, Dream Cruises and Crystal Cruises lines. Back in February, passengers on the World Dream vessel were quarantined in Hong Kong after positive coronavirus cases were found on the ship.

Cruise ships lose value as coronavirus pandemic idles global industry

The industry has been battered by lockdown measures and travel curbs across the globe. Hong Kong has barred non-residents from entering the city since March, while residents returning from abroad have to quarantine for two weeks.

Lim’s Genting operates casinos and resorts in Las Vegas and Singapore. It’s had to scale back operations as countries impose lockdowns, while consumers shun cruises after a few ships became sites of coronavirus outbreaks. The conglomerate, founded in Malaysia in 1965, is also involved in property, plantation and energy sectors as well as life sciences.

The Resorts World Las Vegas US$1 billion 2029 bonds dropped 6.4 cents to 93.5 cents on the dollar, poised for the largest decline since April, according to Bloomberg-compiled prices. Resorts World Las Vegas is a wholly-owned indirect subsidiary of Genting and the latter is the keepwell provider for the securities.

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