Genting Defaults and Suspends Payments as it Seeks to Refinance
Genting Hong Kong, the owners of three cruise lines and entertainment/leisure businesses, announced that it is in technical default on two shipbuilding loans and was suspending payments to its financial creditors to preserve liquidity while it seeks to refinance the company. The actions came two weeks after the company issued profit warnings saying it was experiencing growing losses as a result of the impact of the pandemic on its businesses.
The company reported that it had been working with its funding advisors seeking to conduct a fund raising but on August 19 was advised that the potential interested parties required more time to assess the provision of additional funding. The company cautions that it may or may not be able to complete a fund raising.
Two days before that on August 17, subsidiaries of Genting related to the 2016 and 2017 construction of the Genting Dream and World Dream cruise ships at Meyer Werft in Germany had been due to make payments totaling 3.7 million euros ($4.4 million). Genting also guaranties those obligations. Having failed to make those payments constitutes a default.
On advice from its financial and legal advisers, Genting “concluded that in order to preserve as much liquidity of the group as possible and to fulfill the board’s fiduciary duties and to treat all its financial creditors fairly and equitably, the company should temporarily suspend all payments to the group’s financial creditors (including interest and charter payments).” The company reports that its total outstanding financial debt as of July 31 was $3.37 billion. It anticipates that the temporary suspension of payments will cause additional defaults.
The company is asking its creditors to refrain from further actions will forming a steering committee and appointing legal and financial advisers to begin reviewing restructuring and refinancing options.
Genting had warned earlier in August of mounting losses due to the suspension of its global cruise and shipbuilding operations and restricted operations and revenues from its Resorts World entertainment business in Manila and Zouk Singapore. Genting owns Dream and Star Cruises, which operate primarily in Asia, and Crystal Cruises which has two global cruise ships, a smaller yacht-style cruise ship, charter airplanes, and riverboats in Europe. Two of Star’s ships had been chartered as accommodation ships in Singapore and Dream Cruises recently began operating one cruise ship from Taiwan. The company’s other ships were idled beginning in March.
Genting also established a shipyard in Germany, MV Werften, which was building an expedition cruise ship for Crystal Cruises as well as two of the world’s largest cruise ships for Dream Cruises. Work was suspended at the shipyard and it was recently seeking Germany government-backed loans.
Genting reported to investors that it anticipated at least a $300 million operating loss and at least a $600 million consolidated net loss for the six months ended June 30. The company outlined a series of cost-saving measures it planned to implement including reducing employee headcount and salary reductions, laying up its ships, suspending capital expenditures, and delaying ship construction for about one year.
Concern in the travel community from Genting’s announcement of its default and suspend payments prompted Crystal Cruises to issue a brief statement. “It is important to understand that the company is not going out of business. Whatever option our parent company pursues, it will allow Crystal to operate its business. Additionally, we have always been committed to honoring our contractual obligations with guests and travel partners, including the processing of refunds.”
Crystal Crises had previously announced that it was suspending its operations until the end of 2020.