Genting HK blames the cash crunch on the Covid-19 and said the payment halt will likely result in default
HONG KONG • A cruise ship operator controlled by Malaysian tycoon Tan Sri Lim Kok Thay suspended all payments to creditors, triggering a 36% drop in the company’s shares and denting investor confidence in Lim’s wider business empire.
Genting Hong Kong Ltd (Genting HK) 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 on Wednesday night. The company owed a total of US$3.4 billion (RM14.28 billion) as of July 31, it said.
The firm blamed the cash crunch on the coronavirus pandemic and said the payment halt will likely result in default. Lim owned 69% of the Hong Kong unit’s shares as of April 3, according to data compiled by Bloomberg. Malaysia’s casino-to-hospitality conglomerate Gen- ting Bhd 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 Corp. “Liquidation is not very likely, but there is such a possibility if Lim doesn’t have money and can’t find a buyer for its assets. In that case, equity holders rank behind bondholders to get compensated.” Genting HK shares were down 33% at 2:31pm local time yesterday, after falling a record 36%. Genting shares were untraded due to a holiday in Malaysia yesterday. Genting Singapore Ltd fell 2.8%.
Genting HK shares tumble after company halts payments to creditors Malayan Banking Bhd and RHB Bank Bhd were the biggest contributors to Genting HK’s syndicated loans, according to data compiled by Bloomberg based on disclosed allocations at signing.
Genting HK was formerly known as Star Cruises Ltd, 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 Covid-19 cases were found on the ship.
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 (LV), US, and Singapore. It’s had to scale back operations as countries impose lockdowns, while consumers shun cruises after a few ships became sites of Covid-19 outbreaks. The conglomerate, founded in Malaysia in 1965, is also involved in property, plantation and energy sectors as well as life sciences.
“Still early days and much will hinge on the outcome of 678 HK’s fundraising exercise and the restructuring of existing indebtedness,” said Jin Rui Oh, a director at United First Partners LLP said. “If this is resolved, then likelier than not to have a positive bearing on the other entities but otherwise, there will be a need to dispose assets to raise cash.”
The Resorts World LV US$1 billion 2029 bonds dropped 6.2 cents to 93.5 cents on the dollar, poised for the largest decline since April, according to Bloomberg-compiled prices. Resorts World LV is a wholly-owned indirect subsidiary of Genting and the latter is the keep- well provider for the securities.
Genting is also the keep-well provider for Genting Overseas Holdings Ltd’s US$1.5 billion 2027 bonds, which fell 2.3 cents to 99.6 cents on the dollar, the prices showed. — Bloomberg