Genting Fighting For Survival in Wake of Huge Losses
It’s without question that the first 6 months of 2020 have been particularly difficult for the gaming industry, with casinos closed across the worlds many firms are struggling financially. A firm that is truly on the rocks this month is Genting, the Malaysian-based casino conglomerate has halted payments to its creditors and is seeking a major debt-restructuring to ensure its long-term solvency and survival.
Shares in Genting Barhard fell by over 6% this week as the markets reacted to the news of a major liquidity scare. The multi-faceted conglomerate with interests spanning hospitality, fossil fuels, palm oil, and gambling has initiated a series of containment measures including pay cuts, pulling out of the Osaka integrated resort project, and widespread layoffs as the coronavirus pandemic weakened the demand for many of its core business products and services.
Chairman Lim is confident that the firm can charter itself back to calmer waters. Finding a solution with its creditors is the first point of immediate concern for all those associated with Genting. Investor relations at Genting have been strong in the past, and backed by several leading creditors – the firm has a strong reputation for competence and prudence in the face of financial adversity. They will need to draw on this goodwill going forward and hope that external faith in the Genting leadership will remain steadfast and unequivocally supportive.
Another company within the Genting Group based in Hong Kong, Genting Hong Kong, said last week that it will now prioritize its critical services, with core company operations being allocated the small quantity of liquid funds available. In light of this statement, the company appealed to its creditors to work constructively towards a restructuring proposal. As of July 31st, the Genting Group’s debt stood at approximately $3.4bn.
Genting Chairman Determined to Save the Firm
The Chief Executive Officer and Chairman of Genting have expressed his determination to save the firm and has pledged an enormous stake (72% to be exact) of his cruise ship operator Genting Hong Kong as collateral for the loans to the rest of the Genting Group. This risky and quite desperate effort could have severe consequences should Genting default on its debt.
The personal wealth of Lim has been gradually falling at the same trajectory of his companies over the past 6 months. Since the start of 2020 analysts estimate that his net worth has roughly halved from $1.5bn to $750 million. With his entire equity stake of 76% in Genting Hong Kong now committed as collateral for the group’s debts, the group is particularly vulnerable to the faith of its creditors to extend more debt under increasingly flexible conditions.
The concern is growing within the Genting hierarchy that the banks could force a margin call, which would force Genting to commit further cash or securities to cover the eventuality of increased future losses. If this does happen Genting may be forced to liquidate more of its assets at heavily depressed prices, which in itself does not favor the long-term outlook of the firm.
The firm is already treading on thin-ice, calling in favors from all areas to cover debts, shore up liquidity, and preserve critical operations. Underpinning the faith being placed in Genting’s solvency is a historic past of strong financial performance, creditors will be hoping that if they can aid in the group’s recovery what will follow is an extended period of prosperity.
Last week, Genting cashed in on this faith and halted all payments to its creditors along with a request to not take any enforcement action while the firm negotiates with banks and its investors to reshape and reorganize the interest payment structures of its outstanding debt owed.
Lim has been in charge of Genting since 2003, after taking over from his father who founded the company. After building a luxury resort on a mountaintop in Malaysia he founded the Genting company and became one of the richest businessmen in Asia. Now, in 2020 the firm is on the brink of liquidation, with hopes of survival resting on the ideals this brand established many decades ago.