Genting empire keeps dividends even as casino, resorts stung

By Denise Wee, K. Oanh Ha and Yantoultra Ngui

(Bloomberg) -- Genting Bhd. and Genting Malaysia Bhd. are keeping their interim dividend payments of 6.5 sen and 6 sen a share, respectively, the same as in 2019, according to stock exchange filings. Genting Bhd. reported its worst quarter in records going back to 1999, while Genting Malaysia’s net loss was the biggest since 2000.

For the rest of the year, the group “remains pessimistic on the overall financial performance as global travel remains highly restrictive,” it said in a statement.

Cracks were already starting to show even before cruise operator Genting Hong Kong Ltd. said it would suspend payments to creditors. The group had to shut casinos and resorts around the world as countries imposed lockdowns to curb the spread of the coronavirus.

Genting adds to a growing list of global business empires whose reliance on travel and leisure made them vulnerable to border closures and restrictions imposed by countries seeking to curb the spread of the coronavirus. The conglomerate has resorted to unprecedented moves to adapt, including embarking on its first group-wide pay cuts and shrinking its workforce at its Malaysian unit.

“There’s a risk of course of a related party transaction with one of the Genting group bailing out Genting HK and if that happens, then clearly the group can be hurt,” said Mak Yuen Teen, associate professor at the National University of Singapore Business School, who specialises in corporate governance.

While Genting Hong Kong is a separate entity and defaults at that level won’t trigger cross defaults on the group’s debt, Group Chairman Lim Kok Thay’s role as a common shareholder has sent jitters across the conglomerate.

It’s likely that Lim will be able to work out a deal with creditors considering the family name and their reputation, said Banny Lam, head of research at CEB International Investment Corp. The cruise operator may have deliberately slipped into a technical default to force creditors to work with them, he added.

“The message to creditors is clear: If you insist on a default, we may declare bankruptcy and you lose everything,” Lam said. “They’re pushing creditors and banks for a restructuring and more time.”

© 2020 Bloomberg L.P.