Asian casino operator Donaco International has resolved its multi-year dispute with a former vendor at its flagship Cambodian gambling venue.
On Tuesday, the Australia-listed Donaco announced the conclusion of negotiations and settlement of its longstanding financial dispute with the so-called Thai Vendors, who can now be publicly identified as Somboon Sukcharoenkraisri, Lee Bug Tong, Lee Bug Huy, Lee Hoe Property Co Ltd, Paramax Co Ltd and related persons.
The dispute dates back to 2015, when Donaco purchased the Star Vegas casino in Poipet from the Thai vendors, but kept them on to manage gaming operations for two years. The following year, the vendors built an adjacent casino, Star Paradise, leading Donaco to accuse the vendors of violating a non-compete clause.
Then followed several seesaw years of court fights and injunctions in various jurisdictions. A month ago, Donaco announced that it had convinced the vendors to return to the negotiating table. On Tuesday, the company revealed the terms to which the parties had agreed.
Donaco has secured a new Perpetual Lease on the Star Vegas property, giving it security of tenure over the casino until June 2115. Donaco will also receive $38m to remove the non-compete and non-solicitation clauses from its original deal with the vendors. In exchange, Donaco will pay $18m to the vendors to settle claims for unpaid management fees plus interest, which Donaco says equals 80% of its net current liabilities.
Donaco will also pay any outstanding rent and an additional lease payment of $20m to Lee Hoe Property. Donaco will then pay $20k per month for a five-year period, rising to $30k per month in years six through ten, while the rent will rise 3% every three years after that. Lee Hoe Property will also be entitled to a 25% cut of Donaco’s annual earnings over $16m in each of the next five years.
The vendors who hold roughly 18% of Donaco’s shares have agreed not to dispose of them for six months following the deal taking effect. The management agreement to run Star Vegas’ gaming operations will be terminated, leaving Donaco in sole control. And all parties agree to cease all legal actions against each other.
Donaco said Tuesday that its “pragmatic and fair” settlement with the vendors would allow the company to focus on “the forward momentum of the profitable Star Vegas business.” Chairman Mel Ashton added that the company would carefully consider the conditions of any future contracts with third-party vendors. No kidding.
The settlement couldn’t come at a better time for Donaco, which is coming off the year from hell, including falling gaming revenue, wholesale turnover in senior management, a temporary suspension of trading on the Australian Stock Exchange and the loss of its fledgling online gambling operations thanks to Cambodia’s market-wide ban.
The new year has started off on the same foot thanks to the coronavirus crisis doing a number on Donaco’s Aristo International casino on Vietnam’s northern border with China, which forced the company to go looking for some outside financing to help pay the bills.