Lim’s Genting empire pressured by cruise unit’s debt woes

by BLOOMBERG/ pic by TMR FILE

SHARES of Tan Sri Lim Kok Thay’s Genting Bhd fell last Friday, adding pressure on the Malaysian tycoon to shore up a cruise ship operator whose debt woes have rattled investor confidence in the SouthEast Asian conglomerate.

Genting’s stock fell 6.1%, its biggest drop in five months. Malaysian markets were shut for a holiday last Thursday, when shares of cruise operator Genting Hong Kong Ltd (Genting HK) plunged by a record 38%. That was after the Hong Kong-listed company announced late last Wednesday it would suspend all payments to creditors.

The hospitality, gambling, palm oil and energy conglomerate has embarked on pay cuts and workforce reductions as the coronavirus pandemic halted demand for cruises, while national movement restrictions kept people out of casinos and resorts. The Hong Kong cruise firm is linked to Genting through its chairman Lim, who owned 69% of the Hong Kong unit’s shares as of April 3.

“The likelihood of other units being asked to help out Genting HK is low as each listed entity is closely regulated by its respective regulator,” said Tushar Mohata, head of research at Nomura Malaysia Sdn Bhd.

Investor concern about the effects on other companies in the group will remain because of the Covid-19 pandemic and a history of related-party transactions in the group, he said.

Genting HK will have a conference call with some of its lenders today, people familiar with the plan said. An investor relations representative at the company did not immediately return a call or respond to an email seeking comment.

In an industry battered by travel curbs across the globe, the company operates the Star Cruises, Dream Cruises and Crystal Cruises lines. Back in February, passengers on its ship, World Dream, were quarantined in Hong Kong after positive coronavirus cases were found.

Genting HK said late last Wednesday that 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 US$3.4 billion (RM14.21 billion) as of July 31, it said in the statement.

UOB Kay Hian Holdings Ltd expects Genting HK to reach a pragmatic deal with creditors and get additional financing to stay afloat in interim, analysts Vincent Khoo and Jack Goh wrote in a note. The cruise operator would eventually be able to issue new debt or equity at high interest costs or significant discounts, they said.

The cruise operator’s syndicated debt includes loans by Malayan Banking Bhd, which fell 1.2% last Friday and RHB Bank Bhd, which slid 1.6%. Genting Malaysia Bhd, which operates a casino and resort outside of Kuala Lumpur, slumped 3.5%.

Citigroup Inc sees low risk of Genting group companies bailing out the Hong Kong cruise firm, though there’s “some reputational damage”, according to a note.

Shares of Genting HK recovered some of their losses last Friday, ending 5% higher.