Saipan casino operator Imperial Pacific International (IPI) just received a $500m cash injection from a Japanese firm.
On Wednesday, Saipan’s Lottery Commission okayed two amendments to IPI’s casino license agreement, including reducing the minimum stake IPI is required to hold in its unfinished Imperial Palace casino resort from 51% to a mere 10%.
Within hours, IPI informed the Hong Kong Stock Exchange that it had reached a deal with Japanese “institution” GCM Ltd, in which the latter company will invest the not inconsiderable sum of $500m in Imperial Palace’s phase one. IPI added that the first $100m tranche of this investment “has already been made as of 15 May 2019.”
GCM stands for Global Capital Management, and GCM’s bare-bones website says the company is involved in real estate and financial products, including management of ‘distressed’ assets. If you had to use only one word that describes IPI’s Imperial Palace project, you could do a lot worse than ‘distressed.’
In March, IPI reported a net loss of $378m for 2018, largely due to its inability to collect on the vast sums of money the company advanced to VIP gamblers. IPI is also dealing with a variety of lawsuits and financial penalties due to the company’s inability to make nice with its construction workers, as well as ongoing reports linking the company to sketchy behavior.
The company announced last November that it hoped to raise $38m via a bond placement to complete the Imperial Palace, but that plan pales in comparison to Wednesday’s news. Up until a few hours ago, IPI was majority owned by Hong Kong resident Cui Lijie, who appears to have grown tired of keeping Saipan’s white elephant afloat. In 2017, Cui was reported to have injected an additional $100m of her own cash into the project, but her belief in the casino’s questionable business model appears to have reached its limit.
The Commission also granted IPI’s request to have any rooms built by the Palace’s hotel partners count towards IPI’s requirement to have built 2,000 rooms once all phases of the project are complete. IPI claims it needs wiggle room with which to negotiate contracts with potential partners such as Sheraton or Hilton but appears more interested in avoiding the requirement to throw good money after bad.
The Commission has yet to rule on other IPI requests, including yet another delay in meeting the Palace’s construction timelines. IPI also wants a reduction in its required percentage of US construction workers from 65% to 30%.
A number of politicians in the Commonwealth of the Northern Mariana Islands (CNMI) have begun complaining about the diminishing returns from IPI’s presence. Last month, the government revealed that its tax take from IPI totaled only $41k in the current fiscal year, down from $43.6m in the previous year.
IPI CEO Mark Brown disputed this impression, telling the Commonwealth Casino Commission that IPI’s accountants were “looking into credits that we have coming to us” and that once this was sorted, “we will go back to continue to pay what’s due.”
