A cruise ship operator controlled by Malaysian tycoon Lim Kok Thay suspended all payments to creditors, triggering a 36% drop in the company’s shares and denting investor confidence in Lim’s wider business empire.
Genting Hong Kong Ltd. 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. The company owed a total of $3.4 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. Lim owned 69% 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 35% at 11:32 a.m. local time, after falling a record 36%. Genting Bhd. shares were untraded due to a holiday in Malaysia. Genting Singapore Ltd. fell 2.1%.
Malayan Banking Bhd. and RHB Bank Bhd. 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.
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.
The Resorts World Las Vegas $1 billion 2029 bonds dropped 6.4 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.
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