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Genting Hong Kong outlines cost reduction, capital raising measures on dire 1H20 net loss predictions

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4 hours ago, BWIVince said:

 

All of the commitments that I saw to save Crystal and GHK were made a lot higher than Lim Keong Hui, the CEO that resigned. (IIRC, most of the commitment came from the chairman of Genting.)

 

Interestingly, the person with the most involvement with Crystal, Colin Au (Tom Wolber's boss) seems to be one of the ones being most advanced in the reorg, if I read it correctly.

 

Vince

I am getting confused with this changes and with the similar names... I understand  former deputy CEO Lim Keong Hui has resigned and his father (?), Lim Kok Thay (the one who committed billions to save Genting Hongkong) has stepped down from Chairman to deputy Chairman.

Now, who knows what this all means...
Ivi

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7 hours ago, travelberlin said:

I am getting confused with this changes and with the similar names... I understand  former deputy CEO Lim Keong Hui has resigned and his father (?), Lim Kok Thay (the one who committed billions to save Genting Hongkong) has stepped down from Chairman to deputy Chairman.

Now, who knows what this all means...
Ivi


That’s my take too, Ivi — I think we have that right.  I don’t think the CEO’s resignation changes any previously pledged resources.  I appreciate the reminder of how the Malaysian titles and Chinese surnames work from fellow forum members every time we get into discussions about Genting officials, because I always forget those details over time!

 

Vince

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18 hours ago, Jim9310 said:

Good question!  Haven’t read about results of first meeting.  Unless a lot of groundwork was already laid, I’d imagine the meeting addressed a broad range of restructuring issues and explored feasible options for resolving major ones.  Perhaps more work and more meetings are still required.

 

Inside Asia Gaming reports that creditor response at the Aug 24 meeting was positive and they  “have been supportive and a number of the Group’s long term financial creditors have agreed to join an ad hoc group to extend their support to the Group.”   It's not much but it does looks promising. 

Genting Hong Kong says creditor response positive despite US$743 million net loss in 1H20 net loss

https://www.asgam.com/index.php/2020/08/29/genting-hong-kong-says-creditor-response-positive-despite-us743-million-net-loss-in-1h20-net-loss/

 

Asian cruise ship operator Genting Hong Kong has described its creditors as being supportive of efforts to restructure its debt coverage following the suspension of all loan repayments due to growing financial pressures brought about by COVID-19.

 

The company met with creditors in a virtual meeting last Monday at which it had stated its intention to provide further information on the current status of the Group’s operations and finances, along with restructuring and refinancing options.

 

Providing an update on Friday following publication of its 1H20 financial results, which saw it fall to a consolidated net loss of US$742.6 million, Genting HK revealed it has engaged strategic advisory group PJT Partners and law firm Linklaters to “work with its financial creditors to agree and implement a consensual solvent restructuring solution, which preserves as much value as possible for lenders while restoring the Group’s viability once COVID-19 has been brought under control.”

 

While offering little detail of the outcome of last week’s creditors’ meeting, the company added that its financial creditors “have been supportive and a number of the Group’s long term financial creditors have agreed to join an ad hoc group to extend their support to the Group.”

 

Genting HK had previously investigated other fund raising options but said it needed more time to assess potential opportunities.

 

The company operates three global cruise lines in Dream Cruises, Crystal Cruises and Star Cruises, a shipbuilding operation in Germany and is a joint venture partner in Philippines IR Resorts World Manila.

 

With most cruise ship operations suspended since the start of the COVID-19 pandemic, Genting HK recorded a net loss of US$742.6 million in 1H20 compared with a loss of US$56.5 million over the same period last year, and an EBITDA loss of US$204.1 million versus EBITDA of US$76.9 million in 1H19. The share of loss from Resorts World Manila, which has been closed to the public since 15 March, was US$37.4 million, while group-wide revenue fell 69.0% to US$226.2 million.

 

The company said its net debt position at 30 June 2020 was US$2.86 billion compared with US$2.14 billion on 31 December 2019.

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More good news reported in Seatrade.  Genting HK believes it has sufficient working capital and cash flow to meet their financial commitments until June 2021.  That's on par with the "runway" timeline that some larger cruise companies have already announced:

https://www.seatrade-cruise.com/finance/genting-hk-first-half-loss-widens-7426m


Adequate working capital/cash flow until June 2021

Genting HK believes that by reining in capital expenditure and cutting other costs, it has adequate working capital and cash flow to meet financial obligations until June 2021. The directors said bookings for cruises starting in 2021 are 'gradually improving' as travel restrictions ease and cruise operations are expected to resume in January.

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https://www.cruiseindustrynews.com/cruise-news/23442-genting-seeking-equity-partner-for-brand.html

Genting Seeking Equity Partner for Brand

 
August 29, 2020
rsz_crystal_unknown_newbuilds_2-fill-800

Reporting results for the first half of 2020, Genting Hong Kong stated it is in the process of seeking additional equity or debt funding from private investors and has received letters from investors, expressing an interest to invest in one of the company’s cruise brands (believed to be Crystal Cruises). Such funding is furthermore expected to be in place within the next 12 months. Meanwhile, Genting also stated that it believes it has sufficient working capital and cash flow to meet its financial obligations through June 2021

Having suspended cruise operations since February and MV Werften’s shipyard operations since March, Genting posted a loss of US$742.6 million for the first six months of 2020, compared to a loss of US$56.5 million for the same period last year. As of June 30, Genting reported cash and cash equivalents of US$397.50 and total debt of US$3,261.2 million.

Genting said in its report that it is seeing positive developments and expects cruise operations to start in January 2021 and that it is considering alternative deployment plans in countries where restrictions have been lifted or relaxed.

Genting also announced that it has received approval from Chinese authorities to operate domestic cruises from Sanya, and said it is in the process of negotiating with other regional governments to start domestic cruises. It said these initiatives provide more visibility in the future of the company and its leadership role to restart cruising after COVID-19.

All but three ships are presently laid up; the Explorer Dream launched service from Taiwan in late July, and the Superstar Aquarius and Gemini serve as accommodation ships in Singapore for foreign workers recovering from the virus.

Shipyard operations are expected to resume in October (2020). The company said it is in the process of applying for long-term funding from the German Federal Government.

The deliveries of the Crystal Endeavor and Global Dream, currently under construction, have been rescheduled, while the construction of the second Global-class cruise ship has been postponed, and the construction of the second Endeavor class ship for Crystal has been suspended.

In managing its cash flow, Genting said it has significantly reduced the onboard crew, imposed a company-wide recruitment freeze and restricted all non-essential expenses.

Genting owns and operates Crystal Cruises, Dream Cruises and Star Cruises.

Photo: Artist’s rendering of yet-to-be-ordered next generation large cruise ship for Crystal.

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32 minutes ago, TER777 said:

https://www.cruiseindustrynews.com/cruise-news/23442-genting-seeking-equity-partner-for-brand.html

Genting Seeking Equity Partner for Brand

 
August 29, 2020
rsz_crystal_unknown_newbuilds_2-fill-800

As of June 30, Genting reported cash and cash equivalents of US$397.50 and total debt of US$3,261.2 million.

 

 

I am guessing the omission of the word "million" after the US$397.50 was merely a typo?? I don't see how they could stretch less than $400 all the way to June 2021!!😁 

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35 minutes ago, Roland4 said:

 

I am guessing the omission of the word "million" after the US$397.50 was merely a typo?? I don't see how they could stretch less than $400 all the way to June 2021!!😁 

 

LOL...  I suspect you're correct...  The meetings would have gone entirely differently if that was the case.  😀

 

From the articles posted so far, these sound like positive developments.

 

Vince

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2 hours ago, FlyerTalker said:

You mean the sky isn't falling??

 

Now what will the Chicken Littles have to cry about????😉

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So they’ve restructured their debt

Like they said they were going to do

Just like many other companies have done 
 

Back to complaining about refunds I guess 

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Posted (edited)
21 minutes ago, Roland4 said:

 

Now what will the Chicken Littles have to cry about????😉

He who laughs last, laughs best. Don’t count your chickens......etc,etc

Let’s hope you’ll be laughing when this is over and not crying and that all your eggs hatch..

Edited by Paulchili

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2 hours ago, Paulchili said:

He who laughs last, laughs best. Don’t count your chickens......etc,etc

Let’s hope you’ll be laughing when this is over and not crying and that all your eggs hatch..

 

Does the word "tiresome" mean anything to you?? Probably not, since you keep posting here for no apparent reason other than to see your own words in print.

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2 minutes ago, Roland4 said:

 

Does the word "tiresome" mean anything to you?? Probably not, since you keep posting here for no apparent reason other than to see your own words in print.

Are you familiar with the ignore function on these boards?

Feel free to use it.

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2 minutes ago, Paulchili said:

Are you familiar with the ignore function on these boards?

Feel free to use it.

 

Trust me, I did that a while ago.

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As the saying goes, "seek and ye shall find".  Let's hope so and end all the Crystal uncertainty.:classic_biggrin:

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9 minutes ago, Roland4 said:

Trust me, I did that a while ago.

and yet you seem to read and reply to my posts. Is that the definition of "ignore"? 😀

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and yet you seem to read and reply to my posts. Is that the definition of "ignore"? 

Roland seems kinda the rude angry passenger we ignore on a cruise. Kinda like a wilted rose

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1 hour ago, Roland4 said:

Does the word "tiresome" mean anything to you?? Probably not, since you keep posting here for no apparent reason other than to see your own words in print.

 

You also left out "and to keep stirring the pot with doom and gloom".

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I just read that Genting Hong Kong sold its Zouk nightclub in Singapore to Tulipa Group (owned by Mr. Lim Keong Hui, son of Lim Kok Thay.  Mr. Lim Keong Hui just resigned from his position with Genting Hong Kong last week) for $14 million dollars (USD?  HKD?)

 

https://www.straitstimes.com/business/companies-markets/zouk-group-sold-for-14-million-as-genting-hong-kong-seeks-liquidity

 

The article says that this will be a gain of $6.7 million HKD for Genting Hong Kong.  That, I think, is about 860K USD.  I'm not sure what that would do for the company, but I'm not a money guy.

Edited by Psoque

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Long time lurker as one other poster noted.  First post ever but thought i would dive in with some thoughts.  The sale of Zouk was for $14 million Singapore dollars which translates to about $10.291 million US.  So that will give them a little extra cash  but I doubt that it will last a long time.

 

Another thought on the interest of an "equity partner" in one of their cruise brands.  According to posted information on the Hong Kong Exchange for Genting HK, they sold a 35% interest in Dream Cruises to for almost $454 million US in October of 2019.  Those dollars have already flowed into the financials for year end 2019.  So they already have an "equity partner" for one of their brands.  And it is the brand with the newest ships and the likely the most active current market.  So, maybe that "equity partner" is thinking about an additional purchase.  This is pure speculation so please take it as such!

 

35% Stock Sale Final.pdf

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Another report from IAG suggests that the sale of non-core asset Zouk is positive for Genting HK.

https://www.asgam.com/index.php/2020/09/04/lim-keong-hui-to-maintain-zouk-partnership-with-genting-hong-kong-but-taking-vice-president-with-him/

 

Lim Keong Hui to maintain Zouk partnership with Genting Hong Kong but taking Vice President with him

Friday 4 September 2020 at 04:54

 

Zouk Group will continue its partnership with various Genting projects, despite Lim Keong Hui, son of Genting Group patriarch Lim Kok Thay, this week purchasing the nightclub brand from Genting Hong Kong.

 

That purchase came just days after Lim stepped down as Deputy CEO and Executive Director of the troubled cruise ship operator, with revelations on Thursday that Genting Hong Kong Vice President Andrew Li was departing with him to focus on his role as Zouk Group CEO.

 

However, according to an interview with Li in The Straits Times, Lim’s decision to purchase Zouk from Genting Hong Kong was aimed at helping both brands with the 35-year-old heir to the Genting throne keen to expand on Zouk’s 17 outlets globally. Those outlets include two Zouk at Sea day clubs on cruise ships Genting Dream and World Dream, plus the Empire Club at Malaysia’s Resorts World Genting.

 

“Given the challenges Genting Hong Kong is facing during the pandemic, we thought it would make more sense to take Zouk out since it’s not a core asset, and continue to build the brand,” Li told The Straits Times.

 

“It was always our vision to build this global lifestyle platform, and over the last four years we’ve made huge strides.”

Originally just a single nightclub in Singapore, Zouk was purchased by Genting Hong Kong in 2015 at the prompting of the junior Lim and has since grown into a diverse lifestyle group whose 17 outlets includes not only nightclubs and day lounges but restaurants and burger bars.

 

Associate Professor of the National University of Singapore (NUS) Business School Removing, Lawrence Loh, told The Straits Times that removing Zouk from Genting HK – which last week reported a US$743 million half-year loss and suspended all debt repayments – was positive news for all involved.

 

“While the Zouk sale (for US$10.3 million) will not be able to solve the large debt problem, the proceeds will buy time for Genting Hong Kong to hold on in terms of working capital,” he said.

 

“And being out of the Genting umbrella, Zouk will be ring-fenced from the restructuring, including even possible creditor actions.”

 

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3 hours ago, MightyQuinn said:

Another report from IAG suggests that the sale of non-core asset Zouk is positive for Genting HK.

https://www.asgam.com/index.php/2020/09/04/lim-keong-hui-to-maintain-zouk-partnership-with-genting-hong-kong-but-taking-vice-president-with-him/

 

Lim Keong Hui to maintain Zouk partnership with Genting Hong Kong but taking Vice President with him

Friday 4 September 2020 at 04:54

 

Zouk Group will continue its partnership with various Genting projects, despite Lim Keong Hui, son of Genting Group patriarch Lim Kok Thay, this week purchasing the nightclub brand from Genting Hong Kong.

 

That purchase came just days after Lim stepped down as Deputy CEO and Executive Director of the troubled cruise ship operator, with revelations on Thursday that Genting Hong Kong Vice President Andrew Li was departing with him to focus on his role as Zouk Group CEO.

 

However, according to an interview with Li in The Straits Times, Lim’s decision to purchase Zouk from Genting Hong Kong was aimed at helping both brands with the 35-year-old heir to the Genting throne keen to expand on Zouk’s 17 outlets globally. Those outlets include two Zouk at Sea day clubs on cruise ships Genting Dream and World Dream, plus the Empire Club at Malaysia’s Resorts World Genting.

 

“Given the challenges Genting Hong Kong is facing during the pandemic, we thought it would make more sense to take Zouk out since it’s not a core asset, and continue to build the brand,” Li told The Straits Times.

 

“It was always our vision to build this global lifestyle platform, and over the last four years we’ve made huge strides.”

Originally just a single nightclub in Singapore, Zouk was purchased by Genting Hong Kong in 2015 at the prompting of the junior Lim and has since grown into a diverse lifestyle group whose 17 outlets includes not only nightclubs and day lounges but restaurants and burger bars.

 

Associate Professor of the National University of Singapore (NUS) Business School Removing, Lawrence Loh, told The Straits Times that removing Zouk from Genting HK – which last week reported a US$743 million half-year loss and suspended all debt repayments – was positive news for all involved.

 

“While the Zouk sale (for US$10.3 million) will not be able to solve the large debt problem, the proceeds will buy time for Genting Hong Kong to hold on in terms of working capital,” he said.

 

“And being out of the Genting umbrella, Zouk will be ring-fenced from the restructuring, including even possible creditor actions.”

 

If I read this correctly, especially the last sentence, some people are speculating that Genting HK shifted the Zouk assets to Tulipa so that it does not sink with the cruise ship industry.

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Just a couple of points:

  • The sale raises about $10.3 million US that Genting HK can use to cover operations cost so that is a good thing.
  • The report notes that of the 17 "outlets", "Those outlets include two Zouk at Sea day clubs on cruise ships Genting Dream and World Dream, plus the Empire Club at Malaysia’s Resorts World Genting."  So to the extent that the overall Genting enterprise was getting some income from those two Sea day clubs on their ships, that income is now gone but I suspect that it was not a big number anyway in terms of the Zouk operation as they are only three of 17.  There is likely still some income stream left from those Sea day clubs whether it is for rental space or some percentage of income stream but no one has a clue on that.
  • In terms of operational focus, this was a minor operation which probably took some management time and moving away from it allows more intense focus on what is really important.
  • So, the son escapes with the asset that he was most interested in and it is protected from the travails of Genting HK.  Not a bad move for the son who will still have something left to focus upon if all goes poorly and it is clear he is distancing himself from Genting HK by his withdrawal as Deputy CEO. So, Posque's comment that the shift of the assets to Tilipa (effectively the son) seems to make sense.
  • The discussion in the "Going Concern" of the six month financials states both that "The directors of the Company (the “Directors”) have reviewed the Group’s cash flow forecast, which covers a period of twelve months from 30 June 2020. The Directors are of the opinion that, taking into account the following plans and measures in place, there is a reasonable prospect that the Group will have sufficient working capital and cash flows to meet its financial obligations as and when they fall due within the next twelve months from 30 June 2020:" and "In the opinion of the Directors, in light of the above plans and measures, there is a reasonable prospect that the Group will have sufficient working capital to fulfill its financial obligations as and when they fall due in the coming twelve months from 30 June 2020 on the basis of their successful implementation of the plans and measures taken above."
  • So survival on a "reasonable prospect" basis requires that some and probably more likely most of the "plans and measures" need to be implemented in some way.
  • The items outlined to allow things to work until June 30, 2020 (i.e. their game plan) are :
    • Optimization of its capital structure and debt structure and liquidity position by reducing its capital expenditures
    • Approval of 'long term funding" from the German Federal Government in September so that the money will flow in October to cover working capital at the shipyards and the ongoing construction of the Group's new cruise ships
    • Deferring the materials supply contracts for Global II and cancelling the materials supply contracts for
      Endeavor II cruise ships which had been committed reducing those capital commitments
    • Positive development of cruise bookings in 2021 with sailings expected to resume in January 2021
    • Additional equity or debt funding with interest being expressed in one of the company's cruise lines
    • Loan deferments (apparently not a forgiveness or renegotiation at this point but merely a deferment which delays the day of reckoning) of two loans totaling $182 million US which has been accomplished.
  • So this is effectively their (and our) "checklist " for survival of Genting to June 30, 2021 (and not later) and even if it does survive there is no picture about whether or how Crystal comes out of this.  I am hopeful that it all works out well.  We can only see the game plan and see how they play it out.  I would note that sale of subsidiaries is not a focus but then again they did sell Zouk but again it does not make a major dent.

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1 hour ago, Psoque said:

If I read this correctly, especially the last sentence, some people are speculating that Genting HK shifted the Zouk assets to Tulipa so that it does not sink with the cruise ship industry.

That is exactly how I read it also.  It will safeguard the owner's son's pet project.  It also sounds like it will remove a potential revenue generator from GHK.  It makes me wonder how they arrived at the price, and if the price was truly a fair one.  Probably not a big deal in the overall scheme of things, but still....

 

I certainly hope that Crystal survives beyond June 2021.  Probably that will hinge in no small part on whether or not they are successfully sailing by then.

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To SusieQft's question about valuation there are a few things in the filing with the Hong Kong stock exchange notice.  First as a transaction between related parties, it is subject to more scrutiny that an arms length deal.  The filing notes that the values was established by an " arms length negotiation" (that hardly gives one a lot of comfort) with reference to a recent valuation by an independent chartered valuer and appraiser.  The financials in the filing indicated that Zouk as a subsidiary was a losing operation. 

 

A summary of the unaudited consolidated results of Zouk Group for each of the two years ended 31 December 2018 and 2019, and for the seven-month period ended 31 July 2020 prepared in accordance with Hong Kong Financial Reporting Standards issued by Hong Kong Institute of Certified Public Accountants indicated that for the year ended 31 December 2018 the loss was about$3.3 million HK, for the year ended 31 December 2019 the loss was about $11.6 million HK and for the seven-month period ende 31 July2020 the loss was about $79.6 million HK.  From 12/31/18 to 6/30/20 the net assests of Zouk dropped from about $162.8 million HK to $72.6 million HK which is quite a hit.

 

The asset value on the books was $72.6 million HK and Genting got $79.3 million HK ($14,000 million Singapore) which generated a $6.7 million HK gain (profit) for Genting.  so Susie is right about it not being a big deal and if the numbers are not "cooked" they actually got rid of a losing operation.

 

 

 

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