GGRAsia – Genting HK in sale-leaseback deal on casino cruise vessel

Genting HK in sale-leaseback deal on casino cruise vessel

Sep 26, 2019 Newsdesk Latest News, Rest of Asia, Top of the deck

Genting Hong Kong Ltd, an operator of casino cruise ships and investor in Asian land-based casinos, says one of its units has agreed to sell and lease back one of the vessels of the Dream Cruises business.

Genting Dream Ltd, an indirect subsidiary of Genting Hong Kong, is selling the Genting Dream vessel (pictured) for a total consideration of US$900 million or 80 percent of the closing market value – whichever is lower – at the time of completion, the parent company said in a Wednesday filing to the Hong Kong Stock Exchange.

The filing identified the purchasers as units of three mainland China-based banks: BCLC SPV, an investment holding company controlled ultimately by the Bank of Communications Ltd; CMBFL SPV, a subsidiary of China Merchants Bank Co Ltd; and CCBFL SPV, an indirect wholly-owned subsidiary of China Construction Bank Corp.

Genting Hong Kong said also that its unit had signed a “bareboat charter agreement” under which the suitors agreed to lease back the vessel to Genting Dream Ltd for a period of 12 years, commencing from the date the ship is delivered to the purchasers.

In Wednesday’s filing, Genting Hong Kong said its board considered the transactions “to be beneficial” to the group. The company said the deal would provide additional working capital “on reasonable terms” to support its business activities and capital expenditure, “while at the same time maintaining the appropriate rights over the vessel, which will strengthen the cash flow of the group”.

It added: “The proceeds will also be used for working capital for future operations of the … vessels and providing liquidity to our shipyards.”

Under the agreement, Genting Hong Kong shall purchase back the vessel once the 12-year charter period ends. The agreement also states that Genting Hong Kong can exercise a purchase option during the leasing period or that an agent acting on behalf of the purchasers can exercise a put option, allowing it to sell the vessel under certain conditions.

Genting Hong Kong has been seeking funds to finance the expansion of its cruise business. The company has developed a three-brand cruise portfolio with focus on different market segments: Crystal Cruises for what it terms the ultra-luxury segment; Dream Cruises for what it describes as the premium segment; and Star Cruises for what it defines as the contemporary segment.

Genting Dream, the first ship of the Dream Cruises brand, made its maiden voyage in April 2017. The vessel is one of the three existing cruise ships operated under the Dream Cruises business. As at June 30, the unaudited net asset value of the vessel was approximately US$862.5 million, according to Wednesday’s filing.

On August 6, Genting Hong Kong had announced the sale of up to 35 percent of the equity interest in its unit Dream Cruises Holding Ltd for up to US$489 million.

The Hong Kong-listed firm said earlier this month that it had started construction of a second Global Class ship, “intended for the fast-growing Asian market” and likely to be delivered by 2022. The company is already building a first Global Class ship, due to be delivered in 2021.

Genting Hong Kong has eight cruise ships – in its three different segments – containing casinos run by its Resorts World at Sea business, which have table games and slot machines. The company also has a stake in the Resorts World Manila casino resort in the Philippines.