HONG KONG (BLOOMBERG) - A cruise ship operator controlled by Malaysian tycoon Lim Kok Thay suspended all payments to creditors, triggering a 36 per cent drop in the company's shares and denting investor confidence in Lim's wider business empire.
Genting Hong Kong 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 (Aug 19). The company owed a total of US$3.4 billion (S$4.66 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. Mr Lim owned 69 per cent of the Hong Kong unit's shares as of April 3, according to data compiled by Bloomberg. Malaysia's casino-to-hospitality conglomerate Genting 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 bond holders to get compensated."
Genting Hong Kong shares were down 33 per cent at 2:31pm local time, after falling a record 36 per cent. Genting Bhd shares were untraded due to a holiday in Malaysia. Shares of Genting Singapore, which operates Resorts World Sentosa, fell 2.8 per cent.
Malayan Banking and RHB Bank were the biggest contributors to Genting Hong Kong's syndicated loans, according to data compiled by Bloomberg based on disclosed allocations at signing.
Genting Hong Kong was formerly known as Star Cruises, 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 coronavirus 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.
Mr Lim's Genting Bhd. operates casinos and resorts in Las Vegas and Singapore. It's had to scale back operations as countries impose lockdowns, while consumers shun cruises after a few ships became sites of coronavirus 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 fund raising exercise and the restructuring of existing indebtedness," said Rui Oh, a director at United First Partners 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 Las Vegas 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 Las Vegas is a wholly-owned indirect subsidiary of Genting Bhd. and the latter is the keepwell provider for the securities.
Genting Bhd is also the keepwell 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.