Imperial Pacific Casino Construction Deadline Extended by CNMI
The government of the Commonwealth of Northern Marianas Islands (CNMI) continues to show confidence in Saipan’s lone casino operator, Imperial Pacific International (IPI), despite the Chinese gaming operators’ recent inability to meet its obligations. Earlier this month, Saipan handed over an out-of-business hotel for IPI to manage, while earlier it extended the construction deadline for the company’s mega-casino.
Imperial Pacific International is listed on the Hong Kong Stock Exchange, though its shares are down more than 50% over the past year. IPI has had three executives leave the company in the past two months, yet it has not replaced any of the three.
Meanwhile, Imperial Pacific missed an August 31 deadline to have the 392 rooms of its Garapan hotel completed. When complete, the newly-branded Imperial Pacific Casino Resort is supposed to occupy a central location in Garapan’s downtown tourist center.
Until that happens, the IPI will continue to operate a casino out of an old shopping mall. The mall-casino, which originally opened as Best Sunshine Live Casino, has itself had issues.
About Imperial Pacific International
Imperial Pacific International has world class credentials. IPI’s board of directors read like a who’s who of US politics, with former state governors and directors of the FBI and CIA acting as consultants. Saipan’s status as a US Overseas Territory made investment in the Pacific Ocean casino seem like a can’t-miss prospect for many Hong Kong visitors.
The company is owned by the widow of a Hong Kong billionaire. Paul Steelman designed the new Imperial Pacific Casino Resort. The replacement casino is majestic.
Yet construction of the integrated resort has lagged behind construction deadlines. A fatal accident on the construction site led to scrutiny by US authorities, along with claims that IPI used illegal foreign workers (Chinese nationals) to build the resort.
IPI also was accused of unpaid wages to the alleged illegal Chinese workers.
2021 Imperial Pacific Hotel Deadline
Despite those setbacks, IPI appears to be too big to fail in Saipan. The Commonwealth Control Commission extended its hotel construction deadline over two years, so now it has until February 28, 2021 to complete the Imperial Pacific Hotel.
Local officials of the Commonwealth of Northern Marianas Islands have spent a lot of political capital to back the casino’s construction. The CNMI has spent taxpayer money to support the casino-resort’s expansion. Local leaders need Imperial Pacific International to succeed.
Fees and Fines on IPI Casino
When the CCC extended the deadline, it did not give IPI a complete pass. Imperial Pacific was ordered to pay $500,000 to a local hospital authority, which sounds a bit like the donations made to now-suspended officials at the New York Port Authority sometime back.
Possible future enforcement actions were described, too. If the 2021 deadline is missed, then the CCC will fine Imperial Pacific $5,000 a day. That might sound substantial, but the casino is said to be generating $500,000 a day in revenues, so such a fine would amount to an additional 1% tax on the casino’s revenues.
Imperial Pacific Revenues
Revenues are not profits, though, and Imperial Pacific is a shining example of that concept. In the first half of 2018, Imperial Casino reported HK$2.2 billion in revenues, which amounts to $281 million in US dollars. Despite those big figures, that is done from HK$4.5 billion or $555 million in the first half of 2017.
Worse, the casino reported it has been carrying HK$13.7 billion in unpaid player debt. For the first half of 2018, it wrote off HK$5.8 billion of that debt. IPI simply gave up ever recovering those lost winnings. Last year, it wrote off HK$4.7 billion in gambling debts.
Casino Marker Writeoffs
That is a big part of the cash flow problem. Chinese high rollers sign huge markers (casino credit similar to IOUs), but never intend to pay back the debt. They enjoy their one trip to Saipan, then head back to the Chinese mainland knowing they won’t have to pay the debt.
Macau casinos do not offer markers, or any other kind of casino credit. They don’t, because Chinese mainland courts do not require residents to pay back casino debts.
Instead, Macau casino use third-party junket operators, who themselves lend huge credit to VIP players. Because the junket operators (ostensibly) use Chinese organized crime to collect debts. IPI does not use triads to collect debts, so they have no recourse to collect casino markers.
In the circumstance, a wise business owner might stop offering casino markers to VIP high rollers. The problem is, the source of VIPs might dry up, which would undermine the casino’s revenue stream. It seems that Imperial Pacific Resort Casino has to deal with deadbeat debtors almost half of the time, in order to collect revenues from its other VIP high rollers.