Genting Hong Kong Reaches Terms of $ 2.6 Billion Recapitalization
Genting Hong Kong, owner of three cruise lines, German shipyards and entertainment / leisure companies, announced it has reached terms of a $ 2.6 billion recapitalization of the company that will maintain its shipyards in operation and bring the company back to financial stability. In August 2020, citing the significant impact on its financial condition and operating results due to the pandemic, Genting Hong Kong announced that it was suspending payments to its financial creditors to preserve liquidity while seeking to refinance the society.
The company said it was entering intensive negotiations with its stakeholders to reach a holistic solution that would allow a restatement of the company’s financial debt while also allowing it to undertake recapitalization transactions. In addition to the maintenance costs of 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 tonne cruise ships at its MV Werften shipyard in Germany. For its fiscal year 2020, Genting Hong Kong recorded a loss of more than $ 1.7 billion.
On May 7, the company’s board of directors announced that it had obtained written agreements for terms and conditions with its creditors, partners and other stakeholders. These agreements are part of a larger financial plan that the company began to implement in April 2021 to improve its liquidity. They are, however, subject to the completion of the documentation and to certain conditions. The company expects them to be completed in the coming months, but it still has a 2021 end date to raise additional cash.
To continue operations at the MV Werften shipyards in Germany, Genting will enter into a new $ 364 million financing agreement under the German Economic Stabilization Fund which provides for the completion of Crystal Endeavor, an expedition cruise ship, as well as the two major Global Dream cruise ships. The German authorities had previously granted bridging loans to complete the Crystal Endeavor and keep work at reduced levels in 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 agreed to a maturity extension and a 24-month interest reduction on Genting Hong Kong’s existing $ 981 million debt. They are also suspending amortization payments for two years under separate $ 1.5 billion funding agreements for the three cruise lines. The lenders also agreed to provide additional financing of $ 340 million after delivery related to the Crystal Endeavor, which is due to enter service this summer.
To further improve its liquidity, Genting Hong Kong announced in April 2021 that it had finalized a subscription offer to Dream Cruises, which had raised $ 59 million in new cash and cleared $ 248 million in intercompany loans.
The final piece of the package calls on Genting Hong Kong to raise an additional $ 154 million in cash by the end of the year. This includes $ 30 million in equity financing and an additional $ 124 million in 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 operations. One of the Dream Cruises ships has been operating from Taiwan since last summer and a second cruise ship departs from Singapore. Star Cruises is expected to restart its first cruise ship this week from Malaysia, while Crystal Cruises has announced plans to resume sailing this summer with three ships based in the Bahamas, the Caribbean and Iceland.