Genting Hong Kong files for provisional liquidation

Genting Hong Kong has filed for the provisional liquidation of2020 the company after reporting that it had exhausted its negotiations and had no further access to liquidity.
The company also said in a range of media reports that it expects its cash balances to “run out” by the end of January and that it was taking these steps to protect against possible defaults and claims by creditors.
Genting Hong Kong advised shareholders, “As the company and the group have no access to any further liquidity under any of group’s debt documents,”  “the Board considers that the company will imminently be unable to pay its debts as they fall due”, including that this includes ongoing operational expenditure and potentially required payments of certain liabilities that are expected to be due this month.
Tan Sri Lim Kok Thay, Chairman and Chief Executive Officer, announced that the filing was imminent in order to maximize the chance of success of the financial restructuring and to provide a moratorium on claims while seeking to avoid a disorderly liquidation of the company by any of its creditors and that all the company’s independent directors had resigned and asked for a suspension in trading of its stock.
The filing made with the Supreme Court of Bermuda, which is where Genting Hong Kong is incorporated, calls for the “winding up of the company.”, with in a hearing scheduled for January 20, the company is asking the court to approve the appointment of provisional liquidators who will be charged with developing and proposing any restructuring proposal in respect of the company’s debts and liabilities.
The company said that management have been asked to retain their positions for the day-to-day operations saying that “certain business activities of the group, including but not limited to the operations of cruise lines by Dream Cruises Holding Limited, shall continue, however it is anticipated that majority of the group’s existing operations will cease to operate.”
Genting Hong Kong is also the parent company of based Crystal Cruises as well as Dream Cruises and Star Cruises headquartered in Asia.
Reports say that Genting Hong Kong’s financial troubles started in 2020 when the pandemic forced the suspension of global cruise operations and later led to stopping work at the company’s shipyard MV Werften.
The company was able to restart Dream Cruises in Asia in 2020 and 2021 and Crystal in mid-2021 and the German state provided bridge loans to resume work at the shipyard, with an agreement announced in June 2021 for a larger rescue loan from Germany’s Federal Economic Stabilization Fund (WSF).
The fund required 20% participation from Genting and in late 2021 renewed negotiations over the package after a report indicated Genting’s declining financial strength and the potential inability to repay the loans.
This week, a court in Germany refused Genting Hong Kong’s efforts to force the release of funds from a “backstop loan” set up in an agreement last summer with the state of Mecklenburg-Western Pomerania where the company’s MV Werften shipyard was headquartered and the company also attempted to access funds held in reserve and a progress payment related to the construction of the Global Dream cruise ship in Germany.
Last week, Genting Hong Kong warned after the insolvency filing for the German shipyards that it could in turn trigger cross-default under certain financing arrangements for its debts totaling approximately $2.777 billion.
The company started in the cruise industry in the early 1990s establishing Star Cruises based in Hong Kong and despite several missteps and frequent changes in the operations, Star was viewed as a leader in the development of Asia’s modern cruise industry. Star surprised the cruise industry in 1999 making a bid that was ultimately successful to buy the U.S.-based Norwegian Cruise Line. Using a new approach to cruising similar to resort hotels, Star successfully contributed to the revival of Norwegian, which had been faltering. Star sold its investments in Norwegian after the company went public, acquiring Crystal Cruises in 2015, starting MV Werften in 2016, and launching the premium cruise brand Dream Cruises in 2016.
In a filing to the Hong Kong stock exchange, Genting said the company will “imminently be unable to pay its debts as they fall due,” as liquidity dries up.
Genting Hong Kong is part of a bigger conglomerate that also includes Genting Malaysia and Genting Singapore, with among its assets, are the Resorts World leisure park chain, which includes those in Singapore, New York City, and the United Kingdom and it also has 30 casinos across the U.K.
Genting said it said it has applied to the court to appoint provisional liquidators, and has also sought to authorize the liquidators to undertake the firm’s debt restructuring.
The company reported a $238 million net loss for the period ending June 2021, as compared to a $742.6 loss million for the same period in 2020.
Genting Hong Kong halted payments on debts of almost $3.4 billion in 2020, according to news reports.
Edited by John Alwyn-Jones, Cruise Editor