Genting Hong Kong (Genting HK) is busy trying to conquer hurdles that blocking its hopes of advancing. Most notably, the COVID-19 pandemic led to unforeseen losses that culminated in the chairman of the group, Lim Lok Thay, using his stake to keep things running as collateral.
The Genting Group subsidiary was involved in a project to add a casino resort to Macau in addition to its cruise ship business, but Genting HK gave up half of its place last November to pick up some cash. Now, it plans to sell the remaining 50 percent, probably by the end of this year, to the same buyer.
White Supreme Corp
On Thursday, Genting HK announced that the 50 percent stake was successfully handed over to White Supreme Corp. as scheduled on December 2, 2020. White Supreme has a call option as part of that agreement that will allow it to agree to buy the other 50 percent, with the stipulation that it would make its decision within 12 months of the signing of that agreement. Genting HK has a Put clause in the contract that it can use to compel White Supreme to purchase it if it does not decide or prefers not to buy the stake. The choice for Put is in place until 1 December 2022.
Losses to the organisation
At least for now, the sale gives Genting HK a little breathing space. Since it started nearly four years ago, the Macau project has already cost the organisation about $136.7 million, and still needs more than $350 million invested to bring it to life. However, due to the ‘consolidated net liability value of the target group of approximately US$51.8 million’ and about $304.7 million due to a loss on the allocation of a selling loan and other impairments, the sale also cost Genting HK about $156.7 million in total.
Other companies struggling
Genting is not the only business that is struggling right now because of COVID-19 with operations in Macau. According to Lucror Analytics, Studio City Co., a subsidiary of Studio City International (SCI), can not thrive as it stands right now, and will have to find a way to produce cash by next year so that it can meet its “liquidity needs.” SCI is managed by Melco Resorts and Entertainment, which faces its own problems.
Leonard Law from Lucror points out that Studio City is going through between $1.25 billion and $1.30 billion to bring to life the second phase of the Macau Studio City complex. Law added that as a result, the firm is in a “high cash-burn” exercise and that its cash balance “could be drained by operating cash burn, as well as US$525 million of planned capex in fiscal year 2021.” He added, “Hence, we foresee that the company would have to raise more funds in fiscal-year 2022 to fulfill its liquidity needs.”
The good news is that, to help things out, Studio City was able to complete some financial juggling. “The cash balance should be further bolstered by circa US$150 million from the January 2021 refinancing,” the law explains. The company also had credit facilities totalling HKD234 million (US$30 million), which were fully available for drawdown.” That gives Law a boost of hope for the rebound of Studio City, and better performance as 2020 closed out.