Despite a sizable decrease in its capacity during 1998 as its fleet reorganized, Star Cruises appears once again on a growth track with plans for two more newbuildings at Meyer Werft - to be financed in part by yet another re-shuffling of the company's ownership, the second in six months.

Star Cruises has announced the signing of a letter of intent to build two "Libra-class" ships, each 85,000 tons with a 2,300-passenger capacity and a price tag of $380 million each. Star Cruises said a firm agreement with the yard would be signed by the end of April, with the first ship due for delivery in 2000, the second in 2002, according to a company spokesperson.

The two Libra-class ships - plans for which were originally announced back in 1996 - will join the new 75,000-ton, 2,000-passenger Superstar Leo (to be delivered October 1998), the 75,000-ton, 2,000-passenger Superstar Virgo (September 1999), also being built at Meyer Werft; plus the 37,000-ton, 600-passenger Megastar Asia (ex-Europa, purchased from Hapag-Lloyd, to be handed over spring 1999).

During 1998, Star's capacity decreased by 19 percent, to 822,000 from 1,019,000 in 1997, the drop resulting from the charter of the 1,000-passenger Superstar Capricorn to Manhattan Cruises. (This capacity figure does not include the line's two smaller vessels, which conduct charters, nor the capacity of the 714-passenger Superstar Sagittarius, which is not in the overnight market, but rather, has been operating multi-hour day cruises from Malaysia's Port Klang since February. A Star Cruises spokesperson said reports that the Sagittarius was sold were "erroneous" and that the ship's day-cruise schedule is set to continue.)

As Star's new ships come on line, Cruise Industiy News estimates fleet capacity will increase to 884,000 in 1999, to 1,083,000 in 2000 and to 1,198,000 by 2002.

Shuffling Ownership

Star Cruises was spun off from its former parent company Genting International PLC, in December 1997. At that time, Genting transferred ownership of the cruise line to its shareholders, reportedly distributing 499.5 million shares on a one­ for-one basis and listing the stock on the Luxembourg exchange as well as the over-the-counter market in Singapore.

Genting's non-cruise assets were allotted to Genting subsidiary Resorts World Berhad, which is now 54.5 percent owned by Genting.

Last week, Star Cruises announced a second significant shift in its finances: Resorts World Berhad purchased a 20 percent share of the cruise line for $262.5 million, buying 125 million new shares at a price of $2.10. Together with its existing shares, Resorts World Berhad now owns 23.6 percent of Star Cruises. The infusion of capital will be used by Star to pay a $16 million deposit to Meyer Werft for the two Libra-class ships and to repay all short-term loans.

According to Reuters, the latest financial move represents a shuffling of assets of casino magnate Lim Goh Tong.

The report, quoting company executives, states that the Lim family has a 45 percent stake in Resorts World, that it held a 73 percent stake in Star Cruises prior to the recent equity offering, and a 59 percent stake afterward due to the enlargement of the share capital.

According to Reuters, while the Star Cruises purchase decreased Genting's liquid assets from 2.5 billion ringgit to 1.5 billion ringgit, the Lim family has denied suggestions that "Genting was buying into Star Cruises to reduce its cash hoard and to avoid being called on to save other companies caught in Malaysia's economic turmoil."

Funds to purchase the Star Cruises stake, and thus help finance the Libra class, were obtained by Resorts World through selling of the company's substantial investments in U.S. securities. "With profits arising from the disposal of ITT Corporation and other investments, Resorts World has the U.S. dollar funds to subscribe to the proposed investment," said a spokesperson.

Financial Results

Overall, the investment by Resorts World and subsequent rise in share price suggests a total value for Star Cruises of over $1.6 billion.

Last week. Star announced first quarter 1998 results showing a three percent increase in passenger nights over the same period last year, and an unaudited profit before taxes of $7 million, up from $6 million in the first quarter of 1997.

Management said it has recently reduced costs by consolidating and downsizing shore offices in Singapore, Taiwan, Bangkok, Australia and the U.K., as well as by paying Asian crew the equivalent of their salaries in the currencies of their country of origin - a move reflecting current Asian currency realities. According to Dato K. T. Lim, chairman of Star Cruises, "Improvements in efficiencies and purchasing will lead to over $20 million in cost savings in 1998."

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