Genting Hong Kong, the Hong Kong-listed cruise ship arm of Malaysia’s Genting Group, says there is a good chance it will eventually sell off its entire remaining stake in a Macau hotel and casino development as it fights to keep its troubled cruise business afloat.
The company announced in November that it had reached an agreement to sell 50% of its stake in Genting Macau, a then wholly-owned subsidiary that is developing a hotel alongside Macau’s Nam Van Lake, to prominent local real estate investor Ao Mio Leong. The sale, coming three months after the company suspended all payments to its financial creditors in order to preserve liquidity, netted Genting HK$750 million (US$96 million).
In a Thursday filing, Genting HK said that transaction was completed on 2 December 2020 but suggested the sale of its remaining 50% stake remains highly likely based on Put and Call options that formed part of the original sale agreement.
Under the agreement, Ms Ao has 12 months from completion of the sale to exercise a Call Option that would see her purchase Genting HK’s remaining 50% stake in Genting Macau, while Genting HK has another 12 months from 2 December 2021 to require the sale via a Put Option.
Notably, the company stated Thursday that it retained no control or influence over Genting Macau and that the disposal of 50% shall be treated as a 100% disposal for accounting purposes, due to the likelihood of the options being exercised. Genting Macau, it added, has ceased to be a subsidiary of the company with the group’s assets considered to have decreased by US$507.1 million as a result.
Genting HK also confirmed it had been forced to sell off its Macau assets in order to keep its primary cruise ship business afloat – essentially scrapping its dream of bidding for a lucrative Macau casino license for the new lakeside development.
With future development costs expected to reach another HK$2.72 billion (US$350 million), the company said this would “no doubt divert the resources of the Group at a time when the Group needs to focus on the cruise and shipyard operations.
“The Transaction will increase the liquidity of the Group … thereby enabling layup of the cruise ships in its fleet which are not in operation as well as the ongoing operation of those cruise ships that continue to sail, in addition to funding the Group’s cruise-related and other operations,” it said.
“In particular, in November 2020 at the time when the Sale and Purchase Agreement was signed, the Group was recommencing the flagship deployment of World Dream in Singapore. The fund derived from the Transaction provided additional working capital to enhance onboard facilities for infection prevention CruiseSafe certification and re- activation of the vessel, while also catering to the burn rate of other ships under layup.”
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