Genting Hong Kong faces an immediate debt payment of US$2.78 billion after the unit filed for bankruptcy this week, as a bailout by the German government fell through.
Genting Hong Kong’s MV Werften shipyard filed for insolvency on Monday as it ran out of cash during the construction of the Global Dream, a cruise ship with the capacity for 5,000 people. A €600 million (US$678 million) bailout plan that required Genting Hong Kong to put up 10 per cent of the capital fell through.
The cross-default triggered would cause a material adverse effect on its business operations, prospects, and financial condition, Genting said in a statement to the Hong Kong stock exchange, where its shares are traded. The board, headed by Malaysian billionaire Lim Kok Thay, is discussing with bankers and professional advisers “to evaluate options available to the company,” Genting added.
Trading in Genting was suspended from Friday for the announcement when it fell 6.4 per cent to 73 Hong Kong cents. The stock has lost half its value since 2018, with US$766 million of capitalisation wiped out, as the global cruise and tourism industry became the biggest casualty of the Covid-19 pandemic.
Genting Hong Kong reported a US$283.3 million loss in the first half of 2021, in addition to a US$1.72 billion setback in 2020 the global travel and tourism industry came to an abrupt halt because of Covid-19 restrictions.
The bankruptcy filing in Germany stemmed from a legal proceeding under which German creditors including the Economic Stabilisation Fund required the shipyard to meet certain milestones before drawing down a US$88 million loan to ease its liquidity crunch.
Authorities in Germany blamed Genting and senior executives for the shipyard’s collapse, according to a report by the Associated Press. Genting Hong Kong said that it had offered to increase its funding from US$30 million to US$42 million, but was still unable to access new funds to bail out the shipbuilding subsidiary.
Genting Hong Kong chairman and chief executive officer Lim Kok Thay has resigned
Genting Hong Kong chairman and chief executive officer Lim Kok Thay has resigned, days after the company filed to wind up its business in one of the biggest stumbles by a cruise operator since the pandemic began.
Lim, who owns 76% of Genting Hong Kong, stepped down with effect from Jan 21, the company said in a stock exchange filing.
Au Fook Yew also resigned as deputy CEO and president. Neither man has any disagreement with the board, the company said.
More than two years into the global health crisis, Lim’s company is headed for liquidation – and there are signs that operations are unravelling.
US authorities stand ready to seize a Genting ship in Miami over unpaid fuel bills, while online bookings for some cruises have been suspended. The company’s shares are halted in Hong Kong.
Source : FMT
Genting Hong Kong could cause major financial trouble for three Malaysian banks
Three Malaysian bank’s profits are set to take a major hit as trouble looms over cruise operator Genting Hong Kong — a major Asian corporate casualty of the Covid-19 pandemic.
A report by Singapore’s Straits Times said that how Malayan Banking (Maybank), CIMB and RHB — among some the chief unsecured creditors of Genting Hong Kong, with a combined exposure of US$600 million (RM2.5 billion) — decide to move forward in dealing with the group would determine if the cruise operator sinks or swims.
“The ball is now in the court of the Malaysian unsecured creditors, because they must show the commitment to bring additional funds to the table before the secured creditors decide what to do next,” said a Singapore-based fund manager who has holdings in Genting Hong Kong.
The report said that a senior banker from one of the three institutions acknowledged that Genting Hong Kong’s troubles were worrisome after it announced this week that it had filed to wind up the company after it failed to secure financial lifelines for its businesses.
“This is going to be painful, particularly after most banks had a good (financial year) in 2021,” he said, adding that all three banks will have to make full provisions on their exposure to the Hong Kong company.
The report said that the three Malaysian banks — who all have regional presence in South-east Asia — are well capitalised, but a hit from Genting Hong Kong is set to have serious consequences.
Maybank is majority-owned by Permodalan Nasional, which is the premier state-owned fund management company, designed to spur corporate ownership among the country’s politically dominant Malay community.
Khazanah Nasional, the country’s top sovereign wealth fund, is the controlling shareholder at CIMB, while the Employees Provident Fund (EPF) has a majority interest in RHB.
The report said that the banks are a major source of dividend income for the three state-owned entities, and huge provisions because of the troubles at Genting Hong Kong could have a serious impact on profits, as well as the share prices of the financial institutions.
Genting Hong Kong’s liquidation filing came just a week after its German shipbuilding subsidiary MV Werften went into insolvency, a development that triggered cross-defaults for the entire group’s various financing arrangements amounting to more than US$2.7 billion.
The troubles at Genting Hong Kong are not expected to pose any serious problems for gaming tycoon Tan Sri Lim Kok Thay’s other businesses in Malaysia and Singapore.
Several investment analysts have speculated that Lim — who owns a 76 per cent interest in Genting Hong Kong — could turn to his more profitable entities to bail out the Hong Kong operations, but private equity executives with ownership in the Genting Group said that it was unlikely.
Trouble started brewing at Genting Hong Kong when MV Werften US$688 million lifeline was pulled back by the German government, forcing it into insolvency.
“The breakdown was because the Germans wanted (Lim) Kok Thay to provide a personal guarantee on the loans, and that was not part of the original plan,” Straits Times quoted one senior private equity executive close to the situation.
Source : Malay Mail
Maybank says it’s not in trouble over Genting HK
Malayan Banking Bhd (Maybank) has refuted allegations that it will face major financial trouble owing to exposure to failed cruise business Genting Hong Kong.
“With regard to your query on recent news articles suggesting that Maybank is one of the three Malaysian banks that will face major financial trouble owing to exposure to Genting Hong Kong, Maybank would like to state vehemently that these allegations are baseless,” it said in a written reply to a query on the issue.
It was reported that the profits of three Malaysian banks, including Maybank, are set to take a major hit as trouble looms over cruise operator Genting Hong Kong – a major Asian corporate casualty of the Covid-19 pandemic. The other two banks are CIMB and RHB Bank Bhd.
The report by Singapore’s Straits Times said the three banks are among some of the chief unsecured creditors of Genting Hong Kong, with a combined exposure of US$600 million (RM2.5 billion).
Genting Hong Kong’s liquidation filing came just a week after its German shipbuilding subsidiary, MV Werften, went into insolvency, a development that triggered cross-defaults for the entire group’s various financing arrangements amounting to more than US$2.7 billion, it reported.
“While we do not comment on our exposure to customers or alleged customers owing to confidentiality obligations, Maybank would like to re-enforce (its position) that it observes strict accounting treatment related to provisioning and impairment of loans, as per International Financial Reporting Standards (IFRS) and Malaysian Financial Reporting Standards (MFRS) requirements, and the accounting treatment is also subject to comprehensive reviews by our external auditors and regulators,” the statement said.
Maybank has “a rigorous asset quality monitoring process”, whereby vulnerable borrowers are identified and managed accordingly from the onset of any potential asset quality weakness.
“As such, loan provisioning will be proactively made from the beginning of any such asset quality weakness based on the borrower’s risk rating with the bank.
“Therefore, Maybank would like to state that our current net credit charge of guidance for loan provisioning remains unchanged and we can confirm that our financial position remains strong,” it said.