Genting hit by shipyard insolvencies

2022-01-14T19:29:13+00:00 January 14th, 2022|Finance|

Beleaguered cruise operator Genting Hong Kong’s shares plunged by more than 50% on Thursday after trading in its shares had resumed on the Hong Kong Stock Exchange following a three week halt.

This followed warnings in a stock exchange filing, of more defaults, due to the insolvency of its German shipbuilding and repair subsidiaries, MV Weften and Lloyd-Werft.

Genting said in its filing that legal proceedings involving a $88 mill loan facility related to its German shipbuilding unit are still pending. A German court ruling is set for 17th January.

The leisure group had already halted payments to creditors totalling $3.4 bill in August, 2020 and was in default of that amount as of 31st December last year, Bloomberg reported.

Wholly-owned subsidiary MV Werften filed for insolvency last Monday to a local court in Germany, as did Lloyd-Werft. As a result, Genting warned investors earlier this week that cross defaults amounting to $2.78 bill may follow.

Addressing the German shipyard situation, German shipbuilding and equipment manufacturers association VSM said that as a result, worries about the future have intensified again.

Genting’s entry into German shipbuilding in 2016 was a godsend for the country. The number of employees rose sharply and major investments in all three Baltic Sea locations (where MV Werften had shipbuilding facilities) were initiated and implemented, VSM said.

Nevertheless, this project was a great challenge from the start: to create a successful entry into the market for one of the most complex products in the manufacturing maritime industry.

With the delivery of the ‘Crystal Endeavor’, it was proven that the development of the necessary skills was well underway, but the pandemic pulled the rug from under Genting’s feet.

For two years everything was tried to get through the crisis and get back on track. It was understandable that the focus was always on the cruise market – as Genting is an entertainment company, VSM said.

However, in the end, the parent company’s enormous loss of income eroded the leeway that would have been required to implement its ambitious plans.

The attitude of those responsible at the Federal and State levels is understandable, VSM added. With considerable effort, the company was given more time to find workable solutions. In an acute situation, however, the owner’s financial situation did not allow sufficient confidence in its future prospects.

From the VSM’s point of view, it is now crucial for the four locations on the Baltic Sea and in Bremerhaven to be retained, as part of a change of ownership.

The German shipbuilding industry can no longer afford a further loss on this scale, as the maritime industry is facing a major upheaval. The entire fleet must be converted to climate neutrality, the production of renewable energy offshore must be massively expanded and the infrastructure for sustainable fuels and carbon capture and storage must be built.

This will require extensive production capacities in the maritime industry in the coming years. Against this background, bankruptcy can also prove to be an opportunity, as the way is now free for other market segments and business models, the organisation said.

VSM appealed to politicians to quickly create the conditions to enable the German economy to actively seize these opportunities. “We had an initial discussion on this in Berlin with the new Federal Government’s Maritime Co-ordinator, Ms Claudia Müller MdB,“ VSM said.

German media claimed that Genting had not paid the December salaries of about 2,000 employees and also said that there was a liquidity gap of around €148 mill, while state aid might not cover a bailout.

MV Werften was building two large cruise ships for Dream Cruises, the first of which is the ‘Global Dream’, which is thought to be around 75% complete.

It was also reported that shipbuilder and repairer Lloyd-Werft had filed for insolvency at the Bremerhaven District Court.