Fleet Financing

Buyer wanted as soon as possible for the largest cruise ship in the world

By K. Oanh Ha and Arne Delfs (Bloomberg) A number of potential buyers are lining up for Genting Hong Kong Ltd’s Global Dream. will be signed by the summer when the company’s shuttered German shipbuilder runs out of cash, said the liquidator overseeing the sale.

Still, the ship will not be sold in a hurry despite being unfinished at a German shipyard that has filed for bankruptcy, according to Christoph Morgen, the German court-appointed temporary insolvency administrator for MV Werften, l struggling shipbuilding unit belonging to Genting. The sale of the ship, which started with three potential buyers, has now attracted a “significant number” of interested parties, including investors who want to buy her as part of a larger purchase including operator Dream Cruises, Morgen told Bloomberg News.

“We’ll have a quick process, but there’s no need for a fire sale,” Morgen said in an interview Thursday from Berlin. “Our goal is to get the highest price.”

The Global Dream would have cost $1.8 billion to build and lenders had financed around 1.4 billion euros ($1.6 billion) for the ship’s construction. Morgen declined to give a price for how much it would cost to complete the ship, but said he wanted interested buyers to bid for the full value of the completed ship and not just “completion costs plus a little in addition”. Henning Groskreutz, a union leader from the local IG Metall, said the shipyard would still need 500-600 million euros to complete it.

Because Global Dream is so heavily funded — credit was provided by a consortium of more than a dozen lenders and four collateral providers — a sale won’t do much to change Genting Hong Kong’s financial woes. MV Werften’s interim insolvency in early January was a watershed moment for the company, which became the world’s largest cruise operator to seek court assistance to protect its assets during the pandemic when it filed a motion for liquidation a few days later. Genting reported a record loss of $1.7 billion in May as the pandemic ravaged the cruise industry.

Morgen says his priorities include finding buyers for the shipyards under MV Werften and the vessel Global Dream. He is optimistic that a deal will be reached before or before the summer when the shipyard in Wismar, Germany, which is building the mega Global Dream, runs out of money. Once that happens, it will be more difficult for the shipyard to resume normal operations, Morgen said.

The 342-meter liner, designed to carry 9,500 passengers, was heralded as ushering in a new era of mega-ships that could tap into Asia’s growing cruise market. While some potential buyers just want to buy the Global Dream to add to their fleet, others want a Genting package that gives them access to the Asian market, Morgen said.

Most interested parties are cruise lines or operators backed by private capital, he said. Some serious investors have already signed non-disclosure agreements to start talks.

“There are potential buyers considering an entry package to enter the Asian cruise ship market by purchasing Dream Cruises as a business, as well as ships currently operated by Dream Cruises, as well as Global One and potentially Global Two,” Morgen said, referring to the mega ships by their original generic names.

Billionaire Lim Kok Thay, the recently resigned chairman and chief executive of Genting Hong Kong, expressed an interest in buying the vessel early on, Morgen said, adding that he felt Lim wanted to buy it on the cheap. price to complete its construction elsewhere. If Lim makes the best offer, he’ll be welcomed like any other buyer, Morgen said. The sale is not conditional on the buyer completing construction of the vessel at the Wismar shipyard where it is currently located, he added.

Representatives for Genting Hong Kong did not respond to a request for comment. Lim still owns about 75% of Genting Hong Kong shares and runs other Genting businesses, although there are no cross-shareholdings.

The ship was about 72% complete when the German government and Genting could not agree in December on $620 million financing plans to help complete it and keep the shipyard running, according to a letter Lim wrote to creditors in January that blamed the government for MV Werften’s insolvency.

Genting, in fact, had a written plan by mid-2021 to liquidate MV Werften and place it in “solvent liquidation,” including an agreement with the union for the process, Morgen said. The fully funded plan detailed how MV Werften would pay all of its creditors as part of the liquidation process, and the plan had been analyzed by an independent auditor. It was decided that the Global Dream would be the last ship built by the shipbuilder and the company had stopped taking on new customers, Morgen said.

Although there was still hope that alternative scenarios could be developed in order to continue operations, there was “no permanent continuation of MV Werften activity”, in the plan, Morgen said.

The liquidation plan called for the Global Dream to be supplemented by the more than $600 million in public funding that Lim said had been negotiated with the previous administration. “MV Werften planned to complete the construction of the ship, pay off all debts, repay the state and retain some net worth,” Morgen said.

German Economy Minister Robert Habeck said his government had done everything in its power to save MV Werften, saying the state had offered a 600 million euro loan on the condition that Genting provide Another €60 million plus guarantees for federal funds. Genting refused, Habeck said.

Habeck said on Monday that the government would be willing to subsidize the final construction of the Global Dream with a “reliable new investor”. If a buyer for the Global Dream contributes 10% of the construction costs – which the German government expected Genting to contribute and would likely ask a new buyer – there is a “real chance” of securing the financing. of the construction from the existing construction finance lender and getting the state to guarantee it, Morgen said.

Genting’s Crystal Cruises brand closed its US office and laid off employees last week. The closure of Crystal Cruises’ Miami operations came after two of its ships were seized in the Bahamas after a fuel supplier sought action over $4.6 million in unpaid fuel bills.

Dream Cruises Holding Ltd., an indirect unit not wholly owned by Genting Hong Kong which has also filed for liquidation, will continue to operate its fleet in the region, the company said.

By K. Oanh Ha and Arne Delfs © 2022 Bloomberg LP