How a billionaire ‘s cruise empire fell apart in Hong Kong Business and economics

Lim Kok Thay started a business with cruise ferries and gambling boats in the 1990s in Hong Kong and made it one of the largest cruise operators in Asia.

It was a work of love, as well as a way to diversify the casino business set up by his father, Lim Go Tong, in Malaysia. Under the leadership of 70-year-old Kok Tai, Genting Hong Kong Ltd. expanded its fleet of ships, bought other cruise lines, and even added a series of German shipyards to build its ships.

Now, more than two years after the coronavirus pandemic, Kok Thai’s company is heading for liquidation. Genting Hong Kong filed a petition last week to shut down its business in one of the biggest hurdles for a cruise operator since the pathogen shattered the industry. This is a clear example of how the coronavirus has brought to its knees once thriving businesses, which has the potential to affect cruise customers across the region.

“I felt so upset when I heard the news,” said Chloe Then Sheau Newk, who boarded the company’s cruises at Penang in Malaysia and traveled to Phuket and Krabi in Thailand. She said one of the things she likes most is waking up with her husband at 6 a.m. to be able to see the sunrise from the upper deck.

A Genting spokeswoman rejected Bloomberg’s request to interview Kok Thai. A Genting Hong Kong spokesman did not comment immediately.

Kok Tai founded the company, which would become Genting Hong Kong in 1993, buying ferries from a bankrupt cruise company to operate under the Star Cruises brand. His first ships were second-hand, and it was not until the Asian financial crisis in the late 1990s that he began buying new ones.

Over the years, Genting Hong Kong has expanded its business beyond Star Cruises, in part by acquiring other cruise lines. She bought the Crystal Cruises brand in the United States and created high-end Dream Cruises in Asia.

It was a time when cruise giants such as Carnival Corp. prospered as the sector continued to set new records for travelers.

The company has also bought several shipyards in Germany since 2015 to build its own ships.

Lim Kok Tai Lim Kok Thay started its cruise and gambling business in Hong Kong in the 1990s [File: Nicky Loh/Bloomberg] (Bloomberg)

But as the pandemic forced cruise companies to suspend operations, Kok Thai’s long-term stakes in the industry – and the prospect of growing demand from China and the rest of Asia – began to fall apart. Although the company is offering “seats” as part of a broader cruise trend to nowhere, it still reported a record loss of $ 1.7 billion in May. The inscription was on the wall.

Earlier this month, her wholly owned subsidiary, MV Werften, filed for bankruptcy in a local court in Germany.

And last week, Genting Hong Kong, which is 76% owned by Kok Thay, filed a petition in Bermuda to liquidate the company and appoint temporary liquidators. He said his money is expected to run out around the end of January and there is no access to additional funding.

The company has “exhausted all reasonable efforts” to negotiate with its creditors and stakeholders, a statement from the Hong Kong Stock Exchange said. Shares of Genting Hong Kong fell more than 60% from their peak in November before stopping on January 18.

Peninsula Petroleum Far East Pte. has filed a lawsuit in the United States seeking reimbursement of $ 4.6 million in total unpaid bunker fuel fees it has delivered to three of Genting’s ships since 2017. Crystal Symphony, a luxury cruise ship operated by Genting Hong Kong, was to be confiscated if he had landed in Miami on schedule, according to J. Stephen Sims, chief attorney representing Peninsula Petroleum Far East, said he had been told about the plan. Ship tracking data shows that the ship docked in the Bahamas on Saturday night, where the US arrest warrant could not be carried out.

There are still reservations on the Genting Hong Kong website for cruises to anywhere from Hong Kong and Singapore. The cruises of Dream Cruises, which are already scheduled, will continue, according to a company representative.

“Living with the virus”

Hong Kong’s difficulties reflect its focus on Asia, where major markets such as China and Hong Kong are still closed and pursuing Covid-Zero strategies. Other cruise operators, such as Carnival and Royal Caribbean Cruises Ltd., are recovering as markets such as the US, America and Europe are now “living with the virus”.

Although Kok Thai was hit in the cruise business, it was only part of his large group, which his father started with a hilltop casino resort now called Resorts World Genting, more than an hour’s drive from Kuala Lumpur. It is the only licensed casino resort in a Muslim-majority country that does not give up gambling.

Kok Tai, who is restrained, and his father have worked to expand and diversify their business outside of Malaysia, making it one of the largest gaming and entertainment conglomerates in the world. Today, Genting also operates casino resorts in the United Kingdom, Singapore and the United States, where the $ 4.3 billion Resorts World Las Vegas resort opened in June.

His father, who was born in China and moved to Malaysia when it was still a British colony, died in 2007 after a short illness. A little less than four years earlier, Kok Tai had already taken the helm of the group.

One question is whether Kok Tai can try to save Genting Hong Kong with the help of other companies in the group. The sister company Genting Malaysia Bhd., Which manages the country’s casino resort, invested in Genting Hong Kong more than two decades ago. It sold its 17% stake for $ 415 million in 2016.

However, analysts say Genting Hong Kong’s woes will not thwart Kok Thay’s ambitions for the Genting Group.

Bartender on the ship Genting Hong KongGenting Hong Kong reported a record loss of $ 1.7 billion in May [File: Lam Yik/Bloomberg]

Genting Malaysia, which bought the Equanimity superyacht confiscated by the Malaysian government from fugitive financier Joe Lowe for $ 126 million in 2019, is preparing to open a new $ 800 million open-air theme park in the country. Genting Singapore Ltd. is expanding S $ 4.5 billion ($ 3.3 billion) at its Resorts World Sentosa, one of the largest casino resorts in Southeast Asia.

None of the companies have cross-stakes with Genting Hong Kong, with the exception of Kok Thay, which holds stakes in each.

“Plans to expand other Genting companies should not be negatively affected,” said Samuel Ying Shao Yang, an analyst at Maybank Investment Bank Bhd. in Kuala Lumpur. “Every company’s debt is limited,” he said.

Preventing Hong Kong’s problems can help competitors choose to focus more on the Asian cruise market, said Jaime Katz, senior stock analyst at Morningstar Inc. in Chicago.

But Rick Munariz, an analyst at Motley Fool, said he expects more cruise companies to follow suit.

“Genting Hong Kong will not be the last cruise operator to run out of money,” he said. “Creditors and stakeholders are tired of throwing good money after bad.”

Source link