Upping the ante: Imperial Pacific finds a new investor to revive Saipan casino
By Bryan Manabat
Saipan— The clanking and clanging of the gaming machines have stopped. The lights are out. The Imperial Palace Casino Resort, once the shiny new object in the tourist district of Garapan, now looks like a forsaken island after being shuttered at the onset of the Covid-19 pandemic.
Imperial Pacific International, the beleaguered casino operator, was on the verge of losing its exclusive license for failure to comply with certain requirements under its agreement. The Commonwealth Casino Commission said IPI owes $15.5 million in license fees for August 2020 and $3.1 million in regulatory fees for October 2020. IPI allegedly failed to contribute $20 million to the community benefit fund in 2018 and 2019 and failed to comply with its minimum $2 billion capital requirement and settle its debts to its vendors.
The District Court for the NMI, granting the IPI’s motion, has issued a temporary restraining order that prevented the casino commission from holding a license revocation hearing which was set for May 24-25.
The regulating agency suspended IPI’s license in April last year. However, IPI has argued that it should not be required to pay its annual license fees because it has been unable to operate Imperial Palace since March 2021 due to the pandemic.
Like a zombie that insists on hanging on to life, the IPI won’t give up. It is confident of finalizing a deal with the casino commission to keep its license, banking on a new company that is willing to place a bet on the Imperial Pacific Resort.
IPI previously told the court that at the end of May, it would begin receiving an infusion of $150 million in new capital that will allow it to meet its obligations to its creditors, resume operations and restart construction.
According to the beleaguered casino developer, it has signed a memorandum of understanding with the South Korean IH Group to provide capital. The IH Group is the same company that announced in 2016 that it was planning to construct a $10 billion casino hotel on Rota, and to complete the project in 10 years. The project has yet to happen.
Kyunam Kim, a representative of the IH Group, attended the July 12 hearing on the status of the negotiations between IPI and the casino commission.
Kevin Abikoff, attorney for IPI, introduced the new investor to the court. He told Chief Judge Ramona V. Manglona that the infusion of capital from IH Group "has been authorized" and the IPI and the casino commission “are on the final road to reaching an agreement.”
“We are waiting for the intricacies of the international wire system to allow the money to actually find its way to where it needs to be,” Abikoff said. “The initiation of the transfer happened and to try to show the court our good faith and our sincerity, Mr. Kim has agreed to join and show his face as the face of IH Group, which as I said at the outset is the financier here.”
The parties told the court that their negotiations were well-advanced and that they expected to finalize and execute a settlement agreement by July 18.
Manglona agreed to extend the stay of the revocation of IPI’s license to provide all parties more time to obtain approval of the settlement agreement, upon receipt of the notice. The judge also granted the request that upon the execution of the settlement agreement, the matter will stay until final approval is received by the casino commission.
All parties have been ordered to file a status report by Aug. 26.
In its motion for a temporary order, IPI stated that in 2014, it committed to a long-term investment of $3.14 billion in the CNMI for the development of a casino and hotel complex after Best Sunshine, its parent company, was awarded an exclusive license to operate a casino.
Its proponents and supporters in government hailed the casino industry as economic salvation for the CNMI, replacing the much-maligned garment industry which eventually reached its demise in 2009. But from its inception, the opulent casino industry has been a magnet for controversy and FBI scrutiny. It has been confronted by all sorts of scandals such as labor lawsuits, illegal hiring of alien workers and OSHA violations lodged against its contractors.
The partially completed casino resort opened in 2018. IPI said the project was beset by several “force majeure” events that impeded its progress.
In its court filings, IPI cited the global Covid-19 pandemic as “the most recent of those force majeure events” that caused the company’s revenues “to plummet from $412 million in 2018 to $3.1 million in 2020.”
“As a result, IPI was unable to meet certain payment obligations under the (casino licenses agreement), including payments owed to the (casino commission),” IPI said. “The (casino license agreement) had anticipated such a possibility and included in Section 25 a force majeure provision that excused IPI from performing these obligations when faced with such force majeure events.”
IPI said CNMI Gov. Ralph Torres himself “acknowledged and admitted” that “force majeure events” hindered its ability to meet its payment obligations under the license agreement.
IPI said its deal with the IH Group will provide much-needed investment that “may never happen” if its license was revoked. “The anticipated financing by IH Group will allow IPI to satisfy its creditors, resume operations, and restart construction,” IPI said.
The casino operator promises that restarting construction “will create jobs for the local economy and prevent partially completed buildings from deteriorating and becoming a nuisance.”
It added that the resumption of operations “will increase CNMI's tax revenues as well as enable IPI to pay the regulatory fees going forward while the parties arbitrate IPI's force majeure defenses to determine what, if anything, IPI owes for the disputed years of 2020 and 2021.”