Imperial Pacific International Holdings Limited has been downgraded by Fitch Ratings after concerns arose involving long-term construction funding for the Imperial Pacific Resort, formerly known by the working name Grand Mariana casino and resort. Although initially scheduled to open before the end of Chinese New Near (near the end of January) the company recently said that a soft launch of the casino would happen sometime in the first quarter of the year. A spokesperson added that construction “has been progressing smoothly, with over 2,000 workers laboring around-the-clock to ensure early completion.”
Yesterday, the rating agency stated that they believe IPI is on target to meet the deadline set for construction to be completed but longer-term CapEx funding for the casino and hotel resort has yet to be put in place. Failure to secure such funding for both construction phases may put more pressure on the liquidity of IPI.
Fitch lowered the Long-Term Foreign-Currency Issuer Default Rating to CCC when they were previously rated B(EXP) from September of last year. The proposed US dollar senior secured note issue of IPI has also been downgraded to B-(EXP) from BB-(EXP).
The downgrade is also reportedly a reflection of the need for the company to fund advances to customers and bear customers’ credit risk due to lack of licensed junket operators in Saipan. According to Fitch Ratings, so far, only one junket has gained licensing by the Commonwealth Casino Commission of Saipan. Because of this, IPI has been running their VIP segment via third-party introductions and internal marketing. The company is granting credit directly to such customers, with credit partly backed by guarantors. IPI’s unaudited VIP table games rolling for the year 2016 at the temporary Best Sunshine Live casino in Garapan was US$32.366 billion (HK$251.16 billion). That number represents the amount of betting or turn-over at the company’s VIP tables, not the casino’s profit from such play.
According to Fitch, they believe that the receivable days of IPI have expanded beyond 100 days in light of strong VIP rolling chips volume within the last six months. Operating cash generation will most likely be low, even though strong revenue growth has been seen. However, this cannot be absolutely determined through voluntary unaudited results.