Genting Hong Kong May Get Rid of the Macau Resort Stake Completely

Article by : Helen Feb 11, 2021

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In the light of financial troubles, Genting Hong Kong previously decided to call it quits on building a resort in Macau, China’s special administrative region, back in November 2020. The Genting Group’s subsidiary found a buyer for its 50% stake in White Supreme Corporation, a company based in the Republic of the Marshall Islands.

Now that the deal has gone through, White Supreme has until December 1, 2021, to decide whether the rest of the stake belonging to Genting Hong Kong (another 50%) is worth acquiring. In case the buyer doesn’t go through with it, Genting Hong Kong can require the company to purchase the other 50% – this option comes into play on December 2, 2021, and will be available until December 1, 2022.

The initial deal between Genting Hong Kong and White Supreme brought the vendor HK$750 million ($96.76 million), but the transaction itself resulted in a loss of $159 million, according to the estimate in the sale agreement. As another result of the deal, Genting Macau is no longer a Genting Group subsidiary.

It remains to be seen whether White Supreme will purchase Genting’s remaining stake in the Macanese resort project; however, it is safe to say this would be in Genting’s interests. Genting Hong Kong reported a loss of $742.6 million in the first half of 2020 (latest available data), while its parent company, the Genting Berhad, finished 3Q2020 with a loss of $421.35 million.

Besides, as it is put in the sale agreement between Genting Hong Kong and White Supreme, the deal was “aligned with the Group’s objective to sell non-core assets and reduce the Group’s financial burden in meeting future funding requirements in relation to Genting Macau’s business.”

Apart from that, the sale would “increase the liquidity of the Group, with the proceeds being used for general working capital for the Group, thereby enabling layup of the cruise ships in its fleet which are not in operation as well as the ongoing operation of those cruise ships that continue to sail, in addition to funding the Group’s cruise-related and other operations.”

The Macanese resort is currently under construction near Nam Vam Lake and is expected to open in June 2022. The site’s development has been paused several times because of the pandemic. The project is estimated to cost its developers HK$4.6 billion ($593 million).

Genting is not the only one chasing after “fresh liquidity” – Studio City Co. is expected to join the company in this endeavor in 2022, provided that it is still determined to go through with its expansion plans in Macau.

Studio City Co.’s Macanese project, the Studio City complex, is under construction at the moment, with the completion date set to May 31, 2022. The second phase of the development is estimated to cost the company US$1.25 billion to US$1.3 billion, according to Lucror Analytics.

Whether or not Studio City finishes construction on time will depend on how successful the company will be in securing more cash to fund the project. According to Lucror Analytics’ debt specialist, that’s not likely: Studio City may need to “request an extension of the development period from the Macau government, owing to construction delays caused by COVID-19” while managing to get out of the “high cash-burn cycle.”

As Lucror Analytics’ credit analyst Leonard Law put it, “Studio City Co has barely adequate liquidity,” adding “Studio City’s cash balance … could be drained by the operating cash-burn, as well as US$525-million of planned capex in the fiscal year 2021. Hence, we foresee that the company would have to raise more funds in fiscal-year 2022 to fulfill its liquidity needs.”

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