Genting Hong Kong, the owner of Crystal Cruises, Star Cruises and Dream Cruises, is facing an immediate debt payment of US$2.78 billion after its German shipyard filed for bankruptcy this week.
Genting Hong Kong's MV Werften shipyard filed for insolvency on Monday as it ran out of cash during the construction of the 5,000-passenger Global Dream. A US$678 million bailout plan from the German government that required Genting Hong Kong to put up 10% of the capital fell through.
The company's board says the 'cross-default' triggered by the shipyard insolvency would cause a material adverse effect on its business operations, prospects, and financial condition. Headed by Malaysian billionaire Lim Kok Thay, the board is discussing "options available to the company."
The company's stock has lost half its value since 2018, with US$766 million of capitalization wiped out, as the global cruise and tourism industry was kneecapped by the Covid-19 pandemic.
"Cruise lines, related to the tourism businesses, were hard hit by the coronavirus outbreak and many of them cannot survive without financial support from the authorities or their shareholder," Lu Ming, an agent at Shanghai Ocean Shipping Agency told the South China Morning Post. "It is not a surprise to see a builder of cruise ships become insolvent."
Global Dream was originally expected to set sail in 2021 but construction stalled at the onset of the pandemic, with the ship 80% complete.
The insolvency filing in Germany will trigger cross-default events under certain financing arrangements of the Genting group, involving an aggregate principal amount of US$2.78 billion, the company said in its exchange filing. Creditors now have the right to demand or sue for immediate repayment.
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