Shares of Genting Hong Kong plunged more than 50% after the company said it may not be able to pay its debts and other obligations, CNBC reported. Trade resumed on Thursday following a four-day halt1.
Genting said in a filing to the Hong Kong stock exchange that there is "no guarantee that the Group will be able to meet its financial obligations… as and when they fall due"1. The warning followed the insolvency filing of its German shipbuilding subsidiary MV Werften, which Genting said could trigger potential cross-defaults on financing arrangements worth $2.8 billion1.
"If the Group is unable to meet its obligations to repay any debts as they fall due or to agree with its relevant creditors on the renewal or extension of its borrowings or any related alternative arrangements, there may be a material adverse effect on the Group's business, prospects, financial condition and operating results."
The company is in the middle of a court battle with a regional government in Germany over the drawdown of an $88 million backstop facility related to MV Werften. Genting stated in its filing that the German federal state of Mecklenburg-Vorpommern had withheld those funds, pending a ruling due on Monday1.
Genting Hong Kong, a subsidiary of the Genting Group controlled by Malaysian tycoon Lim Kok Thay, halted payments on debts of almost $3.4 billion in 2020, according to news reports cited by CNBC1. It reported a $238 million net loss for the period ending June 2021, compared with a $742.6 million loss for the same period in 20201.
Genting Hong Kong is part of a larger conglomerate that also includes Genting Malaysia and Genting Singapore. Among its assets, the conglomerate owns the Resorts World leisure park chain, including properties in Singapore, New York City and the United Kingdom, and has 30 casinos across the U.K.1.
What it means for players
The financial trouble described here sits with Genting Hong Kong, the cruise and shipbuilding arm, not with the group's casino operations. The casinos and integrated resorts run under Genting Malaysia and Genting Singapore are separate listed companies within the same conglomerate, and the CNBC report does not say their operations, licenses or patron services are affected1.
For anyone gambling in Singapore, where the group's Resorts World Sentosa sits, or in Malaysia, where Genting Malaysia operates, no change to entry rules, games or operations has been reported1. The same applies to the group's U.K. casinos1. Visitors to Hong Kong are not affected either: the company's Hong Kong listing is a financial matter, and the territory's own gambling rules are unchanged1.
What the filing does show is that a parent group can carry debt problems in one subsidiary while other parts keep trading. Whether any of that debt pressure reaches the casino businesses has not been reported1.
What happens next
A German court ruling on the withheld $88 million backstop facility was expected on Monday, according to the filing1. The outcome of that ruling, and any move by creditors on the $2.8 billion in financing arrangements, had not been reported at the time of publication1.
