KUALA LUMPUR (BLOOMBERG) – Lim Kok Thay started a cruise ferry and gambling boat business in 1990s Hong Kong and turned it into one of Asia’s biggest cruise operators.
It was a labour of love, as well as a way to diversify the casino business set up by his father, Lim Goh Tong, in Malaysia. Under the now 70-year-old Kok Thay, Genting Hong Kong expanded its fleet of ships, bought other cruise lines and even added a string of German shipyards to build its vessels.
Now, more than two years into the Covid-19 pandemic, his company is headed for liquidation. Genting Hong Kong filed a petition last week to wind up its business in one of the biggest stumbles by a cruise operator since the pathogen pummeled the industry. It’s a stark example of how the pandemic brought once-thriving businesses to their knees, which has the potential to impact cruise customers across the region.
Mr Lim founded the company that would become Genting Hong Kong in 1993, buying ferries from a bankrupt cruise firm to operate them under the Star Cruises brand. Its first ships were all second-hand, and it was only during the Asian Financial Crisis in the late 1990s that it started purchasing new ones.
Over the years, Genting Hong Kong extended its business beyond Star Cruises, partly by acquiring other cruise lines. It bought the Crystal Cruises brand in the United States and set up the high-end Dream Cruises in Asia.
It was a time when the giants of the cruise world, such as Carnival Corp, were prospering as the sector continued to set new records for people traveling.
The company also snapped up several shipyards in Germany starting in 2015 to build its own vessels.
But as the pandemic forced cruise companies to halt operations, Mr Lim’s long-term bet on the industry – and the prospect of growing demand from China and the rest of Asia – started to unravel. While the company offered “seacations” as part of a broader trend of cruises to nowhere, it still reported a record US$1.7 billion (S$2.3 billion) loss in May. The writing was on the wall.
Then earlier this month, its wholly-owned shipbuilding subsidiary, MV Werften, filed for insolvency in a local court in Germany.
And last week, Genting Hong Kong, which is 76 per cent owned by Mr Lim, filed its petition in Bermuda to wind up the company and appoint provisional liquidators. It said its cash was expected to run out around the end of January and it had no access to further funding.
The firm “exhausted all reasonable efforts” to negotiate with its creditors and stakeholders, it said in a statement to the Hong Kong exchange. Genting Hong Kong’s shares had plunged more than 60 per cent from a November high before they were suspended on Jan 18.
Genting Hong Kong’s difficulties reflect its focus on Asia, where big markets such as China and Hong Kong are still shut down and pursuing Covid-Zero strategies. Other cruise operators, such as Carnival and Royal Caribbean Cruises, are rebounding as markets such as the US, the Americas and Europe are now “living with the virus.”
Even though Mr Lim has been dealt a blow in the cruise business, it’s just one part of his sprawling group, which his father started with the hilltop casino resort now called Resorts World Genting more than an hour by car outside Kuala Lumpur. It’s the only licensed casino resort in a Muslim-majority country that frowns on gambling.