The risk of Genting’s group of companies taking part in any sort of bailout of troubled cruise ship operator Genting Hong Kong appears to be low according to Nomura Research, as shares in Genting Berhad, Genting Malaysia and Genting Singapore all took a dive last week.
Genting Berhad shares fell 6.1%, Genting Malaysia by 3.5% and Genting Singapore by 2.1% last week on the news that Genting HK had temporarily suspended all payments to the group’s financial creditors, including interest and charter payments, in order to preserve liquidity amid growing COVID-19 pressures.
Those falls were largely on the back of investor concerns that Genting HK’s woes could spread throughout the group and particularly that the other listed firms could be involved in some sort of bailout at the behest of Chairman and CEO Kim Kok Thay. As reported before, Lim has pledged almost his entire Genting HK stake and around one-third of his Genting Berhad shares as collateral against Genting HK loans.
While Nomura research analysts Tushar Mohata and Alpa Aggarwal said some form of rescue couldn’t be entirely ruled out based on Genting’s track record on related-party transactions – most notably the acquisition of Empire Resorts by Genting Malaysia – they suggested chances were low given all subsidiaries are in their own cash conservation modes.
“Further, each entity’s regulator closely monitors the corporate structure of the firm that has the casino license, which means material transactions such as these might need to pass the regulator’s scrutiny as well,” they said.
“For example, the Singapore regulator monitors Genting Singapore’s operations and Genting Singapore will be evaluated by the Japan regulator should it choose to bid for a Japan-based casino, thus having a stake in Genting HK will complicate the regulatory approval process.
“Finally, minority shareholders’ votes might be needed if any financial rescue crosses a certain threshold, and this could be a difficult hurdle.
“In view of the above, we believe a direct bailout through an M&A transaction is unlikely. Overall, we believe [Genting HK] creditors are likely to have to accept a debt restructuring program at a minimum.”
Genting HK issued a statement early Monday morning confirming that its “First Creditors’ Meeting” will be held at 5pm (on Monday 24 August) in the form of a virtual meeting, at which the company “will present and discuss an orderly process for reaching agreement with respect to a solvent, consensual and inter-conditional restructuring solution for the Group.”