Genting warns that shipbuilder's insolvency could lead to defaults

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Shipbuilder MV Werften, which filed for insolvency Monday, was slated to build Crystal Cruises' Diamond class ships.
Shipbuilder MV Werften, which filed for insolvency Monday, was slated to build Crystal Cruises' Diamond class ships.

After Genting Group's shipbuilding company in Germany, MV Werften, filed for insolvency proceedings on Monday, the company warned on Tuesday that it is at risk of defaulting on financing arrangements totaling about $2.78 billion.

Genting Hong Kong is the parent of luxury line Crystal Cruises and Asian line Dream Cruises.

In a filing with the Stock Exchange of Hong Kong on Tuesday, Genting Hong Kong said MV Werften's insolvency led to a default on its "Global 1" facility arrangement, which "will in turn trigger cross default events under certain financing arrangements of the group that have an aggregate principal amount of approximately US$2,777,000,000."

Genting also said in the filing that MV Werften had no choice but to file for insolvency because the German state of Mecklenburg Vorpommer didn't allow Genting to draw down $88 million from that state's facility, and that the German government refused to confirm the insurance coverage required to allow Genting to draw down from other facilities, including the Economic Stabilisation Funds.

Germany established the Economic Stabilisation Funds to protect its economy, stabilizing companies whose operations are impacted by the pandemic.

Genting said Germany's refusal to allow Genting to draw down funds was based on a business review into the company's five-year outlook that "considered various stress scenarios affecting the group, including a persistent and sustained reduction in business activities as a result of Covid-19."

MV Werften had been scheduled to deliver the world's biggest cruise ship for Dream Cruises this year. The 2,500-cabin Global Dream, slated to serve the Asian market, will have a total capacity for more than 9,000 passengers.

MV Werften also was scheduled to build Crystal's new Diamond class of ocean ships. It recently delivered Crystal's first expedition ship, the Crystal Endeavor.

Trading in Genting's shares on the Hong Kong exchange was suspended on Jan. 7.

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