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

[KUALA LUMPUR] Shares of Lim Kok Thay's Genting Bhd fell Friday, adding pressure on the Malaysian tycoon to shore up a cruise ship operator whose debt woes have rattled investor confidence in the South-east Asian conglomerate.

Genting Bhd's stock was down 4.5 per cent as of 12.59pm in Kuala Lumpur, set for its biggest drop in more than two months. Malaysian markets were shut for a holiday on Thursday, when shares of cruise operator Genting Hong Kong plunged by a record 38 per cent. That was after the Hong Kong-listed company announced late 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 Bhd through its chairman Mr Lim, who owned 69 per cent of the Hong Kong unit's shares as of April 3.

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

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 Hong Kong said late Wednesday 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 as of July 31, it said in the statement.

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UOB Kay Hian expects Genting Hong Kong 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, which fell as much as 1.8 per cent on Friday and RHB Bank, which slid 1.6 per cent. Genting Malaysia Bhd, which operates a casino and resort outside of Kuala Lumpur, slumped as much as 6.1 per cent.

Citigroup 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 Hong Kong recovered some of their losses on Friday, rising as much as 8.3 per cent.

BLOOMBERG