A general view of the cruise liner Global Dream, which is still under construction at the shipbuilding hall of the MV Werften shipyards which are insolvent, in Wismar, Germany January 13, 2022. REUTERS/Annegret Hilse

Buyer Needed ASAP For World’s Biggest Cruise Ship

Bloomberg
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February 19, 2022

By K. Oanh Ha and Arne Delfs (Bloomberg) A number of potential buyers are lining up for Genting Hong Kong Ltd.’s Global Dream — the unfinished mega-liner set to be the world’s biggest cruise ship by capacity — and a deal needs to be inked by summer when the company’s shuttered German shipbuilder will run out of cash, said the liquidator overseeing the sale.

Still, the ship won’t be sold in a rush despite it sitting unfinished in a German shipyard that’s filed for insolvency, according to Christoph Morgen, the German court-appointed provisional insolvency administrator for MV Werften, the troubled shipbuilding unit owned by Genting. The vessel’s sale, which began with three potential buyers, has now attracted a “significant number” of interested parties, including investors who are keen on it as part of a larger purchase that includes operator Dream Cruises, Morgen told Bloomberg News.

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

The Global Dream was reported to cost $1.8 billion to build and lenders had financed about 1.4 billion euros ($1.6 billion) for the ship’s construction. Morgen declined to give a price for how much it will cost to complete the ship but said he wants interested buyers to bid for the whole value of the completed vessel and not just “completion costs plus a little on top.” Henning Groskreutz, a union leader from the local IG Metall chapter, said the shipyard will still need between 500 million euros and 600 million euros to finish it.

Because Global Dream is so heavily financed — credit was provided by a consortium of more than a dozen lenders and four guarantee providers — a sale won’t make much difference to the financial woes of Genting Hong Kong. MV Werften’s provisional insolvency in early January was a critical turning point for the company, which became the world’s biggest cruise operator to seek court assistance to safeguard its assets during the pandemic when it filed a windup petition days later. Genting reported a record loss of $1.7 billion in May as the pandemic ravaged the cruising industry.

Morgen says his priorities include finding buyers for the shipyards under MV Werften and the Global Dream vessel. He’s optimistic a deal will be struck before or by summer when the shipyard in Wismar, Germany that’s building the mega Global Dream runs out of money. Once that happens, it will be harder for the shipyard to return to normal operations, said Morgen. 

The 342-meter liner is designed to carry 9,500 passengers, was heralded as ushering in a new era of mega-ships that could tap Asia’s growing cruising market. Though some potential buyers are interested in just purchasing the Global Dream to add to their fleet, others are keen on a Genting package that gives them access to the Asian market, said Morgen. 

Most of the interested parties are cruise ship companies or operators backed by private equity, he said. Some serious investors have already signed non-disclosure agreements to engage in talks.

“There are potential buyers looking at an entry package to enter the Asian cruise ship market by buying Dream cruises as a business plus vessels currently operated by Dream cruises, plus Global One and potentially Global Two,” said Morgen, referring to the mega ships by their original generic names.

Billionaire Lim Kok Thay, Genting Hong Kong’s recently resigned chairman and chief executive officer, expressed early interest in purchasing the ship, said Morgen, adding that he had the impression Lim wanted to buy it cheaply to finish its construction elsewhere. If Lim makes the best offer, he would be welcomed as any other buyer, Morgen said. The sale isn’t contingent on the buyer completing the ship’s construction at the Wismar shipyard where it now sits, he added.

Representatives for Genting Hong Kong didn’t respond to a request for comment. Lim still holds about 75% of shares in Genting Hong Kong and heads other Genting businesses, although there are no cross shareholdings.

The ship was about 72% finished when the German government and Genting couldn’t agree in December on plans to finance $620 million to help complete it and keep the shipyard in business, 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 wind up MV Werften and place it in a “solvent liquidation,” including an agreement with the union for the process, said Morgen. The fully financed plan detailed how MV Werften would pay all its creditors in the liquidation process, and the plan had been analyzed by an independent auditor. It was decided the Global Dream would be the last vessel built by the shipbuilder and the company had stopped taking in any new customers, Morgen said. 

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

The liquidation plan called for the Global Dream to be completed with the more than $600 million in state financing that Lim said had been negotiated with the previous administration. “MV Werften planned to finish construction of the vessel, repay all debt, repay the state and have some equity value left,” said Morgen.

German Economy Minister Robert Habeck said his government did everything in its power to save MV Werften, saying the state had offered a loan of 600 million euros on the condition that Genting provide an additional 60 million euros plus guarantees for the federal funds. Genting turned that down, Habeck said.

Habeck said Monday that the government would be willing to subsidize the final construction of the Global Dream with a “new reliable investor.” If a buyer for the Global Dream contributes 10% of construction costs — what the German government expected Genting to contribute and would likely ask of a new buyer — there’s a “real chance” to secure the construction financing from the existing construction financing lender and get the state to guarantee it, said Morgen. 

Genting’s Crystal Cruises brand shut its U.S. office and terminated employees last week. The closing of Crystal Cruises’ operation in Miami came after two of its ships were seized in the Bahamas after a fuel supplier sought the action for $4.6 million in unpaid fuel bills. 

Dream Cruises Holding Ltd., an indirect non-wholly owned unit of Genting Hong Kong that has also filed a winding up petition, will continue to operate its fleet in the region, the company said.

By K. Oanh Ha and Arne Delfs © 2022 Bloomberg L.P.

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