US-based luxury cruise operator Crystal Cruises appears to have become the first casualty of Genting Hong Kong's liquidity crunch.
On Wednesday, shortly after Genting filed for liquidation in a Bermuda court, Crystal announced it was suspending all cruise operations, with its ships heading into lay-up once they have completed their current cruises.
A statement posted on Crystal's website described the suspension as a temporary measure, as it intended to return its ocean-going cruise ships to service in late April, with its European river cruise ships set to follow at the end of May.
Crystal said suspending operations will provide its management team with "an opportunity to evaluate the current state of business and examine various options moving forward".
"This was an extremely difficult decision but a prudent one given the current business environment and recent developments with our parent company, Genting Hong Kong," said Jack Anderson, Crystal’s president.
Industry observers told TradeWinds that ultimately Crystal's fate will lie in hands of Edward Middleton and Tiffany Wong, both of Alvarez & Marsal Asia, who were appointed joint provisional liquidators at Genting's request on Wednesday.
Asset disposal possible
Crystal's fleet of cruise ships comprises of the 68,900-gt Crystal Serenity (built 2003), the 51,000-gt Crystal Symphony (built 1995), and the 20,500-gt polar expedition cruise ship Crystal Endeavour that was completed by affiliated MV Werften in 2021.
In addition, the cruise operator owns five European river cruise ships, and a Boeing 777 airliner kitted out as a private jet capable of carrying 88 passengers.
Cruise observers believe that Genting's liquidators may first try to sell off Crystal as a complete unit if they decide that full or partial liquidation is the best option.
A senior Miami-based cruise industry executive suggested that should a buyer for the company not be found, and its assets be sold off piecemeal, the river cruise ships would probably sell quickly.
"They are the only truly valuable assets. Real cash cows," he said.
"Crystal Endeavor will likely end up like the eight Renaissance ships — the banks will set up an operating company to secure a lessor at a sweet price with a lock-in to purchase it in three to five years at residual value," the executive added.
The Crystal Symphony and Crystal Serenity are also thought to be of interest to trading buyers, although at a price that reflects their age and the fact that vessel assets in the luxury end of the cruise spectrum have advanced significantly since the time these ships were built.
Crystal sold off its smallest cruise ship, the 3,370-gt Crystal Esprit (built 1991), to Lindblad Expeditions in September 2021.
Fast-paced expansion
Crystal was founded by Japanese shipping conglomerate Nippon Yusen Kaisha in 1988, and sold together with the Crystal Serenity and Crystal Symphony to Genting for $550m in May 2015.
The acquisition was part of a larger, fast-paced expansion plan that included shipyards, a raft of newbuildings and the launch of new Asian flagship brand Dream Cruises.
Crystal's expansion goals included not only new river and expedition cruise ships and the private jet, but also newbuildings at MV Werften to replace the Crystal Serenity and Crystal Symphony, and at one point even the restoration the long laid up transatlantic liner United States (built 1951).
Financial problems at subsidiary shipyard group MV Werften appear to be the main catalyst of Genting's current financial predicament.
Genting revealed in its court filing that it had "exhausted all reasonable efforts to negotiate with the relevant counterparties under its financing arrangements".
The company said it had no access to any further liquidity under any of its debt documents and its available cash balances were expected to run out on or around the end of January.
Flagship brand Dream Cruises told cruise media on Wednesday that it would continue operating "in order to preserve and protect the core assets and maintain the value of the group".
Dream Cruises has one ship currently operating out of Singapore. Its two other ships that operate out of Hong Kong and Taiwan were recently forced suspended operations due to new restrictions imposed by local authorities because of Covid-19 resurgences.
MV Werften's insolvency administrators said on Wednesday that they were looking for buyers for Lloyd Werft, the largest of the Genting-owned shipbuilder's yards, as a way to secure its long-term future and preserve jobs.
