Focus on Asia: White knight or white elephant?

Focus on Asia: White knight or white elephant?

  • Ben Blaschke — Managing Editor, IAG
November 29, 2021 3:00 PM
  • Ben Blaschke — Managing Editor, IAG

On the surface at least, it appears the turbulent story of Imperial Pacific International and its troubled Saipan casino, Imperial Palace, is nearing its sunset. Yet even as receivers start auctioning off the company’s gaming equipment to pay off some of its debts, there remain more questions than answers.

For the residents of Saipan – the largest island of the U.S.-ruled Commonwealth of the Northern Mariana Islands (CNMI) – the most pressing of those is what will become of the not-so-small structure that sits unfinished in prime position along the Garapan waterfront.

The casino at Imperial Palace closed in March 2020 due to COVID-19, and since then IPI has seen its license suspended for failure to fulfil its contracted financial commitments, including its annual US$15.5 million license and US$3.1 million regulatory fee in 2020, as well as annual US$20 million contributions to the community benefit fund in both 2018 and 2019.

Construction long ago ground to a standstill, leaving large sections of the hotel structure without roofing and exposed to the elements.

Despite this, IPI has maintained its Hong Kong Stock Exchange listing and continues to provide regulatory and financial updates, suggesting it still holds out hope for a white knight to ride in and save the day – presumably by purchasing what stands of Imperial Palace to do with it as they will.

Whether that is a realistic expectation is dubious at best, with industry experts adamant that the property was always going to be too big and too ambitious for the market. In other words, it will take an irresistibly good deal for any white knight to come calling.

There are, of course, many larger questions that may never be answered, such as what exactly IPI’s intentions were in the first place when it bid for and won a 25-year license to build and operate Saipan casino back in 2014, paying an initial US$30 million fee for the privilege. Majority owned by former Macau junket executive Cui Li Jie, who stepped down as IPI Chairwoman in June of this year, the company originally opened a temporary casino facility in Saipan in 2015, Best Sunshine Live, and quickly attracted global attention by reporting rolling chip volumes on its 16 VIP tables that exceeded volumes on the 100-plus tables at The Venetian Macao.

IPI said at the time that its generous commissions compared to those in Macau were attractive to players, although it soon became apparent that the company may not have been overly fussy when issuing credit: by mid-2017, outstanding receivables were on par with group-wide revenue and by 2018 were far in excess of any revenues being generated. IPI’s 2020 interim report revealed gross receivables had reached HK$9.05 billion (US$1.17 billion), while the company has posted losses of US$503 million and US$367 million in the past two years.

Even before COVID-19, IPI had given every indication that completion of Imperial Palace Saipan was in doubt, having been granted half-a-dozen deadline extensions and hinting at further requests to come. That so many requests were granted is more an indication of just how much authorities in Saipan and the smaller islands of Tinian and Rota – which had also been in line to enjoy the financial spoils of the booming integrated resort they had dreamed of – had riding on its success.

Saipan lawmakers recently introduced a bill to end IPI’s casino monopoly and issue up to five more licenses for smaller, more sustainable casinos that would, presumably, be located inside some of Saipan’s existing hotels.

Designed to replace at least some of the tax revenue that never was, it is perhaps the first real sign that even IPI’s biggest supporters have finally realized their own white knight is more like a white elephant.