KUALA LUMPUR (Dec 30): Genting Hong Kong Ltd’s wholly-owned subsidiary's proposed sale and leaseback of the Crystal Endeavor cruise ship under a transaction valued at up to €350 million (about RM1.74 billion) with financial services provider Crédit Agricole has been terminated because of a substantial delay in construction and delivery of the vessel due to the impact of the Covid-19 pandemic and a worldwide freeze on cruise ship operations.

In Genting Hong Kong’s latest announcement dated Dec 22 to the Hong Kong bourse, Genting Hong Kong chairman and chief executive officer (CEO) Tan Sri Lim Kok Thay said the termination was also due to uncertainties in relation to new constraints to allow cruise ship operations to resume due to global Covid-19-driven restricted movement policies to curb the coronavirus outbreak.

"Reference is made to the announcement of the company dated Dec 23, 2019 and the circular of the company dated Feb 21, 2020 in relation to the disposal and the subordinated loan.

"In view of the substantial delay in construction and delivery of the vessel due to the impact of Covid-19 as well as the worldwide freeze on cruise operations and uncertainties in relation to new constraints to allow the operations to resume, on Dec 22, 2020, the purchaser and the seller (an indirect wholly-owned subsidiary of Genting Hong Kong) mutually agreed and entered into a termination agreement to terminate the acquisition contract and subordinated loan agreement. 

"Pursuant to the termination agreement, the acquisition contract and subordinated loan agreement were terminated with retrospective effect from Jan 1, 2020,” Lim said.

According to him, the parties had agreed that the first instalment to be refunded to the purchaser under the acquisition contract shall be set off against the subordinated loan to be repaid to the seller under the subordinated loan agreement. 

As such, no fund transfer occurred between the parties consequential upon termination of the acquisition contract and subordinated loan agreement. 

"The parties to the subordinated loan agreement further acknowledged that the drawdowns under the subordinated loan agreement shall be deemed not to have occurred, [with] the seller [being the subordinated lender] waiving its rights of payments of any interest under the subordinated loan in consideration of the termination of the transaction, with no other indemnity of any kind. 

"Each of the parties to the termination agreement is released and discharged from its obligations and liabilities by virtue of or in relation to the acquisition contract and subordinated loan agreement, and neither party shall have any claims against the other party.

"The (Genting Hong Kong's) board considers that the terms of the termination agreement are fair and reasonable, and in the interest of the company and its shareholders as a whole,” Lim said.

Genting Hong Kong’s filings on Dec 23, 2019 and Dec 22, 2020, however, did not specify the name of the company’s wholly-owned subsidiary that was involved in the transaction.

In the Dec 23, 2019 filing, Lim, however, elaborated on the purchaser, described as an investment holding company directly wholly owned by the purchaser partners that are in turn indirectly wholly owned by the Crédit Agricole group.

Crédit Agricole is one of the largest banks in France and worldwide, according to Lim.

Meanwhile, the vessel, upon completion of construction, will be one of the cruise ships operating under the Crystal Cruises brand, he said.

"As at Sept 30, 2019, the unaudited net asset value of the vessel was approximately US$271 million (about RM1.09 billion),” he said.

According to him, the seller had agreed to grant the subordinated loan amounting up to €300 million to the purchaser to finance, among others, the first instalment payment for the purchase of the vessel and interest incurred under the subordinated loan.

"[The] interest rate [is] 7% per annum, accrued from day to day and calculated annually on the basis of the actual number of days elapsed and a 360 days per year basis,” Lim said.

On the Hong Kong bourse today, Genting Hong Kong’s share price was HK$0.01 or 1.85% higher at HK$0.28 at the time of writing, with a market value of about HK$2.37 billion (around RM1.24 billion). The stock had seen some three million shares traded.