CCC defers gaming license revocation deliberation

The Commonwealth Casino Commission board members unanimously voted yesterday to postpone until further notice whether to revoke or not Imperial Pacific International (CNMI) LLC’s exclusive gaming license.

CCC vice chair Rafael S. Demapan said they agreed to defer deliberation pursuant to IPI’s filing last Friday of Chapter 11 bankruptcy petition in federal court and notice for automatic stay.

Demapan said they also needed time for some clarity on legal issues.

At yesterday’s board meeting, Chuck Choi, who is IPI’s counsel in the bankruptcy case, provided the board an update of their bankruptcy petition.

Choi, who is in Hawaii and spoke on the phone, said U.S. District Court for the NMI Chief Judge Ramona V. Manglona will hold a hearing today, Friday, at 8:30am to consider certain “first day motions.”

The lawyer said typically whenever there is a Chapter 11 reorganization case filed, the debtor in possession seeks court approval to pay pre-petition wages to and in some instances borrow money as they have here in IPI’s case.

He said on the court calendar today, Friday, is the motion to pay pre-petition wages primarily to employees who provide security at the hotel/casino.

Choi said the amount that they’re seeking to pay is not significant, but the important thing for the commission to know is that IPI has negotiated a loan from a Hong Kong resident of up to $7 million.

He said the hearing is whether they can borrow up to $400,000 in the short term.

Choi said they will then seek the bankruptcy court’s approval to borrow up to $7 million so they have available funds to make payments to the CCC and or the government once a settlement is finalized.

“It is a request for permission to borrow up to $7 million because we anticipate we hope to be able to strike a deal with the commission,” he said.

Choi said they submitted a budget to the bankruptcy court that includes potential payment to the commission.

He said the payment has two conditions—CCC and IPI reaching a settlement agreement and getting the settlement approved by the bankruptcy court.

“In my experience, a dispute is resolved between the debtor in possession on the one hand and creditor on the other hand is almost always approved by the court,” the lawyer said.

Choi said, however, getting the settlement may take a while.

He said in their budget submission attached to their motion they have funds earmarked for the most important and critical condition to a successful reorganization of IPI.

Choi said that is really the reinstatement of IPI’s gaming license on terms that are acceptable to the commission.

“Obviously, we have to show you the money. But I think we have the funds to be able to at least start making the long delayed overdue payments,” he said.

In response to some board members’ questions, Choi have not confirmed with the plan sponsor and by plan sponsor he is referring to an investor that’s going to have to inject hundreds of millions of dollars to, among other things, to commit to catch up on IPI’s arrears on the regulatory fees and license fees.

“But I think what we would be able to do, once you have a firm agreement in place, is provide evidence that we have in fact funding to emerge from Chapter 11,” he said.

Choi said they need to finish their settlement deal with CCC and hopefully do a separate settlement with the government involving the license fee.

He said as part of the plan they would propose to make payments to other pre-petition creditors in accordance with the bankruptcy laws.

The IPI counsel said the plan is likely to be ready in a matter of two or three months.

He is hopeful that during that period, they will be able to strike an agreement with the CCC and with the CNMI government.

Choi said a plan to get confirmed by the bankruptcy court requires the plan proponent, IPI, to demonstrate that it can in fact implement a plan and that’s called the feasibility test.

He said there were lots of rumors and discussions about IPI filing for bankruptcy for years and that it finally happened.

“And so, one way or another, these issues will be resolved hopefully the satisfaction of all the stakeholders, the commission, the government, creditors, former employees,” the lawyer said.

He said if the issues are not resolved, the worst-case scenario is IPI’s license gets revoked and the property gets auctioned off.

Choi said he would ask the court to approve the settlement within a matter of a couple of weeks.

He said one of the challenges in a large Chapter 11 case such as IPI’s is the Office of the U.S. Trustee wants to see a committee of unsecured creditors.

Choi said the Office of the U.S. Trustee wants to see the committee organized and hire counsel to appear in the bankruptcy proceeding.

He said once they get deal done with CCC, he believes it will be much easier for them to make strike a deal and agreement with the government and other creditors.

Choi said they expect the court to approve their financing arrangement in the short term at today’s hearing because they need the money to make payroll, pay rent, and pay insurance professionals.

He said they want to be engaged with the CCC to see if they get a deal done.

“We want to see if we can get a settlement signed up and file a motion with the bankruptcy court to have approved,” Choi said.

On the reopening of the casino itself, he said he does not see that happening until after the plan is approved.

“So, you’re looking at year’s end, or early next year,” the lawyer said.

Choi said CCC must get the bankruptcy court’s approval before attempting to revoke IPI’s license.