Cruise operator Genting Hong Kong plunges 56% on fears of more default

[HONG KONG] Troubled cruise operator Genting Hong Kong plunged by a record Thursday (Jan 13) after shares resumed trading, following warnings from the company in recent days of more defaults due to the insolvency of its German shipbuilding subsidiary.

Part of Malaysian tycoon Lim Kok Thay's sprawling casino-to-hospitality Genting empire, the Hong Kong cruise firm's shares slid as much as 56 per cent in the city and were down 53 per cent as of 1.34 pm local time. They had been suspended since last week.

The company said in a filing to the Hong Kong stock exchange on Thursday that legal proceedings involving a US$88 million loan facility related to its German shipbuilding unit are still pending a German court ruling set for Jan 17. The outcome is crucial amid its broader debt crisis, after the firm already halted payments to creditors totalling US$3.4 billion in August 2020 and was in default of that amount as of Dec 31 that year.

Genting Hong Kong's indirect wholly-owned subsidiary MV Werften filed for insolvency on Monday to a local court in Germany, as salvage talks between the local governments and the firm came to a dead end.

Genting warned investors earlier this week that cross defaults amounting to US$2.8 billion may follow. The cruise operator's financial health rapidly deteriorated after the Covid-19 pandemic prompted a string of restrictions that have led to restructurings and insolvencies at travel industry companies around the world.

The company, which has offered "seacations" amid a global cruise-to-nowhere trend, reported a record loss of US$1.7 billion last May.

The latest developments come just as Hong Kong reimposes some of its stricest virus curbs since the pandemic began. "Its cruise business has been heavily impacted by the Hong Kong government's Covid-19 restrictions," said Stevan Tam, research director at Fulbright Securities.

Genting has also been embroiled in a dispute with German federal and local governments, as both parties blamed the other for MV Werften's collapse and the potential loss of 1,900 jobs.

Genting Hong Kong said that as of the time of its filing Thurday it hadn't received notice from creditors demanding repayment or commencing action against the company related to their financial arrangements. It is unclear whether any of the relevant creditors will choose to do so, it added.

The Hong Kong cruise firm is linked to Genting Bhd through its chairman Lim, who owned 76 per cent of the Hong Kong unit's shares as of June 2021, according to Genting Hong Kong's interim report.

BLOOMBERG