Despite operating one of the top earning casinos in the world, Fitch Ratings has warned that Imperial Pacific could default on its loans payments.
The operator recently revealed that its VIP table games rolling chip had surpassed US$32bn in 2016. But that hasn’t stopped the ratings agency from downgrading the Saipan casino group’s rating to a level that suggests ‘substantial credit risk.’
Imperial Pacific currently operates the temporary casino Best Sunshine Live whilst building the permanent venue; Imperial Pacific Resort in Garapan, Saipan, which will offer 300 gaming tables and up to 400 slots.
The Fitch downgrade focussed on the suggestion that Imperial Pacific does not have enough junkets in place. The casino will be offering commission rates of 1.4 per cent to VIP players it recruited directly; and 1.85 per cent to junket operators over the next three years.
“The downgrade of the final ratings reflects the company’s need to fund advances to customers and bear customers’ credit risk due to the lack of licensed junket operators in Saipan,” Fitch said. “So far only one junket has been licensed by the Commonwealth Casino Commission of Saipan. Imperial Pacific has been operating its VIP business through third-party introductions and internal marketing, with IPI granting credit directly to VIP customers who are partly backed by guarantors. Fitch believes IPI’s receivable days have expanded well beyond 100 days in view of the strong VIP rolling chips volume in the past six months. Proposed notes, which will be issued by Imperial Pacific International (CNMI) LLC (Saipan), are rated two notches above IPI’s issuer default rating because they are secured by essentially all the assets of the casino and resort under construction and guaranteed by Imperial Pacific Properties (CNMI) LLC, which owns the lease of the land on which the resort is built, and by the parent, IPI.”