Genting Hong Kong Waves the White Flag, Files for Bankruptcy Protection

Genting Hong Kong has been denied its only hope. The company, a division of Genting Group, was ruled out by a German court as the cruise operator sought funding from the State of Mecklenburg Vorpommern in the amount of $88 million. Now, the company is being forced to file for bankruptcy protection.

Genting Hong Kong Rejected in Germany

Seatrade Cruise News, an industry media outlet, reported that Mecklenburg Vorpommern was not required to make the loan as part of a prior agreement aimed at supporting Genting Hong Kong’s German shipbuilding company, MV Werften Holdings Ltd. (MVWH). The company warned last week that filing for insolvency would also trigger default events under the various financing arrangements it had made with creditors in 2021, in relation to debts exceeding $2.8 billion.

The company has not yet released a statement about the court’s recent finding, or whether it intends to appeal.

The cruise ship company launched legal proceedings after Euler Hermes, the German government’s export credit agency, stopped the drawdown of $88 million in December. Euler Hermes refused to allow the insurance coverage.

Genting Hong Kong stated in a filing that it had received last Thursday from the relevant counterparties that their failure to fulfill their binding contractual obligations has created a significant liquidity gap for the company. However, the court ruling supported Mecklenburg’s assertion that the company doesn’t need financial assistance.

Genting Hong Kong Prepares Bankruptcy Paperwork

Genting Hong Kong is now planning to file a provisional bankruptcy in Bermuda. The cruise ship giant claimed that, in addition to the financial assistance in Germany, it tried to access $81 million of its own money. These funds are currently held in a liquidity reserve account by lenders under a facility agreement. However, participating banks denied the request.

As such, the company had “exhausted all reasonable efforts to negotiate with the relevant counterparties under its financing arrangements.” It is now preparing legal procedures to file provisional liquidation due inability to fulfill its financial obligations under its financing agreements. The company’s board explained in a notice:

“The Board believes that the appointment of provisional liquidators is essential and in the interests of the Company, its shareholders and its creditors in order to maximize the chance of success of the financial restructuring and to provide a moratorium on claims and to seek to avoid a disorderly liquidation of the Company by any of its creditors.”

Genting Hong Kong

As of 9 AM on Tuesday, trading in Genting Hong Kong shares had been suspended on the Hong Kong Stock Exchange. That suspension was preempted by the announcement that three independent non-executive directors of the company, Ambrose Lam Wai Hon, Justin Tan Wah Joo, and Alan Smith, had resigned.