In business, there always comes a time when you have to make tough decisions. Such is the dilemma Genting Hong Kong has been facing for some time now as hinted by leaked reports. In fact, things were so serious that it seems the company may have reached a decision that could see it not only save face but also help it keep the ownership of the business. Genting Hong Kong announced this week that it will be leasing one of its casino cruise ships to four banks without the borders of China.
Real estate investment trusts (REIT), is a common concept in the gambling industry. It allows for a gaming operator to sell its property with the probability of buying it back in the future. It provides a way for the company to cut down on operation costs while still maintaining ownership of the property.
In the new deal, Genting Hong Kong leased the Genting Dream floating casino for 12 years at a cost of $900 million. Part of the money, $502 million has already been used to offset an existing bank loan for the Genting Dream.
Time will start calculating as soon as the property is handed over to the buyers. After 12 years, Genting Hong Kong will have two options. One, they could purchase back the vessel from the banks. Or, if things are not going too well for them, they could choose to opt-out of the deal, an option that allows the banks to see the vessel to a third party on their own terms. However, things go really well for the Genting Hong Kong, the agreement allows them to purchase back the vessel even before the end of the 12 years.
Genting Dream was the first casino cruise ship to be launched by the Genting Hong Kong. Now the company has three more ships that are being prepared for the launch of the business. According to one post that was just published in the CalvinAyre.com, the company, which has been looking to expand, is confident that its business plans are solid enough. It is seeking additional investors to help it realize its plan of categorizing the ships into different segments; Crystal Cruises for the VIPs, Dream Crises for the middles class and Star Cruises for everyone.
When announcing the leasing agreement, Lim Kok Thay, Chairman, and CEO of Genting HK said that the company was forever grateful for the support it was given by the consortium. The financing plan that was agreed upon in the leasing agreement is favorable for the company as it is flexible and allows for the extension of time. While it appears as if this was bound to happen and the management had to act, there are also comments that implied that the decision missed the opinion of experts.
With the financing pressure off its back, the company is now focusing on launching new vessels. Crystal Endeavor is expected to be launched in August this year and the Global Dream sometime next year.