HONG KONG -- Investors dumped shares of Genting's Hong Kong-listed cruise business on Thursday after the unit froze payments to creditors and said it was seeking a debt restructuring.
The cruise industry has been among the sectors worst hit by the coronavirus pandemic, with large-scale outbreaks on several ships early in the pandemic and controls on international travel sending ticket sales plummeting. Hundreds of liners have been kept in dry dock.
Genting Hong Kong, operator of the Star Cruises, Dream Cruises and Crystal Cruises lines, has been no exception. In the absence of customer demand, the company leased two cruise ships to the Singapore government to house migrant workers recovering from COVID-19.
Genting HK's stock fell 37.5% on Thursday to 30 Hong Kong cents after the company's premarket notice that it had failed to make a 3.7 million euros ($4.41 million) financing payment related to construction of a new ship.
"In order to preserve as much liquidity of the group as possible and to fulfill the board's fiduciary duties and to treat all its financial creditors fairly and equitably, the company (concluded it) should temporarily suspend all payments to the group's financial creditors," it said in the exchange filing.
It added that "remaining available cash will be reserved to maintain critical services for the group's operations."
While the company's financial advisers seek to raise funds, Genting HK said it will hold a virtual meeting with creditors to discuss a debt restructuring.
It said it had a debt level of $3.37 billion as of July 31, as compared with loans and borrowings as of Dec. 31 of $2.52 billion. On Aug. 3, it had said it would seek to defer loan repayments of $220 million by up to a year.
Genting, the biggest Asian cruise operator, has issued profit warnings twice in the past six months during which nearly none of its ships sailed. On Aug. 7, it said it expected to record a net loss of at least $600 million for the first half of the year.
The company has slashed costs by cutting salaries for middle managers and senior executives by up to 50% and suspending operations at its shipyards in Germany, grouped under MV Werften, among other measures.
It said this month that delivery of two ships under construction at MV Werften, one of which had been set to reach Asia this year, would be delayed "about a year." Work on a third ship is also underway there.
MV Weften announced last week that it was also working on a restructuring plan with workers' representatives and financial advisers. The business is expected to receive 570 million euros from Germany's coronavirus stabilization fund by next month. The government earlier allowed the company to draw down a 175 million euro contingency reserve.
Genting's woes extend beyond cruising. Its Singapore casino resort reopened only last month after a three-month COVID closure while its Manila one remains closed. The Malaysian conglomerate's domestic operations and other overseas casinos have also been badly affected.
The good news for Genting HK is that its cruise business is slowly stirring. Its Explorer Dream premium liner began sailing two-to-four night routes connecting different ports in Taiwan and its outlying islands in late July.
Additional reporting by contributing writer Jens Kastner in Hamburg, Germany