Genting Hong Kong faces debt payment of US$2.78b

Genting Hong Kong faces an immediate debt payment of US$2.78 billion after its shipyard in northeastern Germany filed for bankruptcy this week, as a bailout by the German government fell through.

Genting’s MV Werften shipyard filed for insolvency on Monday as it ran out of cash during the construction of the Global Dream, a cruise ship with a capacity for 5,000 people.

The company failed to secure a ¤600 million (HK$5.3 billion) government bailout that required Genting to put up 10 per cent of its capital. The cross-default triggered would cause a material adverse effect on its business operations, prospects and financial condition, Genting said in a statement to the Hong Kong stock exchange, where its shares are traded.

The board, headed by Malaysian billionaire Lim Kok Thay, was discussing with bankers and professional advisers “to evaluate options available to the company,” Genting added.

Trading in Genting was suspended from Friday for the announcement when it fell 6.4 per cent to 73 Hong Kong cents. The stock has lost half its value since 2018, with US$766 million of capitalisation wiped out, as the global cruise and tourism industry became the biggest casualty of the Covid-19 pandemic.

“Cruise lines, related to the tourism businesses, were hard hit by the coronavirus outbreak and many of them cannot survive without financial support from the authorities or their shareholder,” said Lu Ming, an agent at Shanghai Ocean Shipping Agency. “It is not a surprise to see a builder of cruise ships become insolvent.”

Global Dream was originally expected to set sail in 2021 but its construction stalled at 80 per cent completion due to the onset of the pandemic, MV Werften said.

The insolvency filing in Germany would trigger crossdefault events under certain financing arrangements of the Genting group, involving an aggregate principal amount of US$2.78 billion, the company said in its exchange filing. That leaves it at the mercy of creditors, who now have the right to demand or sue for immediate repayment.

Besides the MV Werften shipyard, Genting Hong Kong operates three cruise lines – Dream Cruises, Crystal Cruises and Star Cruises. It also owns and operates the Resorts World Manila casino and resort in the Philippines.

Genting Hong Kong reported a US$283.3 million loss in the first half of 2021, in addition to a US$1.72 billion setback in 2020.