Parq Vancouver, a luxury casino venue that first opened its doors two years ago, has had some difficulty keeping the wheels turning. It has blamed its lack of strength on anti-money laundering (AML) rules, which could be construed as a way of saying that it would be profitable if it was allowed to launder money. Whatever the reasons are, the casino is in more dire straits and has defaulted on a loan payment after deferring payment twice. The move does not bode well for Parq’s future.
According to M Partners Inc. equity research analyst Andrew Hood, Parq has taken in $170 million in revenue while carrying $152 million in expenses. That makes for operating income of around $18 million, but the venue’s debts carry extremely high interest rates, which are cancelling out any potential income generated.
Hood adds, “If they want to be feasible moving forward, they must refinance that debt. There’s no way they’re going to make money as a business unless they refinance that debt.” The solution is also one of the problems. The casino has not been able to find an alternative to carry the debt.
Parq Vancouver’s $18 million in operating income was completely wiped out by the interest payments on its debt. That interest amounts to around $30 million per quarter and ranges from 7.5% to 12%.
However, there is a light at the end of the tunnel. According to a statement by the company, “Parq is solidly on track to close a new equity and finance package, replacing our existing development and construction financing.”
In the meantime, though, Standard & Poor’s (S&P) Global Ratings has weighed in on the situation. It has downgraded Parq’s status from CCC to “selective default” and asserted that Parq’s decision to defer payment and its reduction in liquidity and inability to comply with the terms of the loan as reasons for the downgrade. It added, “We will reevaluate our ratings on the company once it successfully executes the proposed refinancing of its existing capital structure.”
The link to reduced revenue and AML rules is tenuous, at best. Hood offers, “It’s hard to say what number would be the effect [of the rules], because it was [the casino’s] first year operating. Generally, the casinos in the area have said the anti-money-laundering regulations affected revenues … [so] you could say that it’s unfortunate timing.”