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Genting Hong Kong Reaches Terms for $2.6 Billion Recapitalization

Genting Hong Kong recapitalization
Star Pieces will resume cruising this week from Malaysia

Published May 10, 2021 5:59 PM by The Maritime Executive

Genting Hong Kong, the owners of three cruise lines, German shipyards, and entertainment/leisure businesses, announced that it has completed terms for a $2.6 billion recapitalization of the business that will keep its shipyards operating and return the company to financial stability. In August 2020, citing the material impact on its financial positions and results from operations due to the pandemic, Genting Hong Kong announced that it was suspending payments to its financial creditors to preserve liquidity while it sought to refinance the company.

The company said that it was entering into intensive negotiations with its stakeholders to achieve a holistic solution that would permit a restatement of the company’s financial debt while also permitting it to undertake recapitalizing transactions. In addition to the expenses of maintaining its three cruise lines, Crystal Cruises, Dream Cruises, and Star Cruises, Genting is building a new expedition cruise ship and two large 208,000 gross ton cruise ships at its shipyard company MV Werften in Germany.  For its fiscal 2020 year, Genting Hong Kong reported a loss of over $1.7 billion.

On May 7, the company’s board of directors announced that it had obtained written agreements for terms sheets with its relevant financial creditors, partners, and other stakeholders. These agreements are part of a broader financial plan that the company began to implement in April 2021 to improve its liquidity. They are, however, subject to completion of the documentation and certain conditions. The company expects that they will be completed within the coming months, but it still has an end of 2021 deadline to raise additional liquidity.

To continue the operations at the MV Werften shipyards in Germany, Genting will enter into a new $364 million funding agreement as part of the German Economic Stabilization Fund that provides for the completion of Crystal Endeavor, an expedition cruise ship, as well as the two large Global Dream cruise ships. German authorities had previously provided bridge loans to complete the Crystal Endeavor and maintain work at reduced levels at the shipyards. The new agreement finalizes $260 million in a secured loan facility as well as a $103 million investment in the yard by Germany.

 In addition, the creditors have agreed to an extension of maturity and reduced interest for 24 months on Genting Hong Kong’s $981 million of existing debt. They are also suspending for two years amortization payments under a separate $1.5 billion of financing agreements for the three cruise lines. Lenders have also agreed to provide an additional $340 million in post-delivery financing tied to the Crystal Endeavor, which is due to enter service this summer.

To further improve liquidity, Genting Hong Kong in April 2021 announced that it had completed a subscription offering for Dream Cruises that raised $59 million of new cash and offsetting $248 million of intercompany loans.

The final piece of the package calls for Genting Hong Kong to raise an additional $154 million of liquidity by the end of the year. This includes $30 million of equity financing and a further $124 million of loans from the State of Mecklenburg Vorponmern where MV Werften is located.

The refinancing comes as Genting Hong Kong has also made progress in restarting its cruise ship operations. One of Dream Cruises’ vessels has been operating from Taiwan since last summer and a second cruise ship is sailing from Singapore. Star Cruises is scheduled to restart its first cruise ship this week sailing from Malaysia while Crystal Cruises has announced plans to resume sailing this summer with three ships based in the Bahamas, Caribbean, and Iceland.