Tuesday, January 11, 2022
Loans are not serviced
Shipyard bankruptcy brings Genting group into distress
With the bankruptcy of MV Werften several sources of money dry up for the Genting Group. A credit insurer terminates its commitment. As a result, banks turn off the tap. The group can no longer pay off its creditors. In court he is now fighting for a state loan.
The bankruptcy of the shipbuilding group MV Werften in Mecklenburg-Western Pomerania is also causing its Asian owner Genting Hong Kong to tailspin. The cruise company announced that it could no longer service loans of just under $ 2.8 billion as a result of the bankruptcy in Germany. Genting Hong Kong blames its lenders, but above all the federal government and the state of Mecklenburg-Western Pomerania, for the bottleneck. They withheld a total of $ 336 million from the company, which it should actually be entitled to, according to the company. In view of the gloomy prospects for the cruise industry, the credit insurer Euler Hermes terminated the export credit insurance, which was essential for the construction of the cruise ship “Global 1” at the shipyard in Wismar.
As a result, the Genting shares will not be traded on the Hong Kong Stock Exchange until further notice. “The trading of the shares will remain suspended until further internal information is published,” it said. This includes, in particular, the outcome of legal proceedings at the Schwerin Regional Court.
Exchange of blows in court
In the proceedings, Genting is suing the state of Mecklenburg-Western Pomerania for the disbursement of a loan of 88 million US dollars (78 million euros). Schwerin granted the loan in June 2021 to close a possible later liquidity gap at Genting. At an appointment lasting several hours on Tuesday, the country and the company exchanged their arguments. The court wants to announce its decision next Monday.
During the trial, the Genting attorney accused the state government of not having paid out funds that had been promised. In the negotiations on further financing, a “construct was presented that was supposed to conceal the political motivation,” he said. Accordingly, the country attaches the payment to conditions that are not in the contract. This includes the demand for the owners to double their own contribution to 60 million euros and aid from the federal government.
A lawyer from the state of Mecklenburg-Western Pomerania rejected the allegation. Budget law alone dictates that the payout should be critically examined. In addition, the contract was concluded for a possible liquidity application in the amount of 148 million euros. In the meantime, however, there is a funding gap of around 600 million euros. The Genting side pointed out that this contract had been concluded with Genting, but not with the meanwhile insolvent MV Werften. Genting Hong Kong is not over-indebted.
Banks refuse to pay after Euler-Hermes withdrawal
MV Werften filed for bankruptcy on Monday after the federal and state governments and Genting had not found a solution about further financing. According to its own account, the federal government was ready to provide 600 million euros so that the ship could be completed. In return, the Corona rescue fund WSF demanded 60 million euros of fresh equity from the owner. Because of this, the negotiations ultimately failed.
Behind the branched group, which is mainly active in the tourism industry, stands the Malaysian billionaire Lim Kok Thay, the owner of the tourism group Genting Bhd. Genting Hong Kong had already gone through a restructuring in the summer of 2020 in view of the business that was almost idle during the Corona crisis.
In view of Euler Hermes’ withdrawal, the banks refused to make a promised milestone payment of 108 million euros for the construction of “Global 1” and the release of 81 million dollars belonging to Genting, the company said in a mandatory announcement on the Hong Kong stock exchange. This led to an “immediate and substantial liquidity gap”. Genting admitted that the company “still has no access to significant new sources of liquidity.” The board of directors is currently talking to the banks, the co-owner of the subsidiary Dream Cruises and consultants about a way out of the crisis.