IPI creditors not satisfied with bid price proposed

The official committee of general unsecured creditors have a filed an opposition to Imperial Pacific International (CNMI) LLC’s motion “to approve bid procedures for sale of substantially all of the debtor’s assets and related relief” as they are not satisfied with the bid price of $10 million proposed in liquidation of the casino property.

The official committee of general unsecured creditors, through attorneys Aram Ordubegian and Christopher K.S. Wong, have filed an opposition to IPI’s motion “to approve bid procedures for sale of substantially all of the debtor’s assets and related relief” due to concerns regarding the proposed bid of $10 million in the liquidation of the casino property and other IPI assets.

Specifically, the committee of IPI creditors feel the proposed bid was lowballed and unfairly favors “stalking horse purchaser” Loi Lam Sit, the same person who agreed to lend IPI over $7 million in debtor-in-possession financing pursuant to bankruptcy court’s approval.

“The motion contemplates a sale of only the debtor’s leasehold interest and related personal properties at a lowball and arbitrarily set price to Mr. Sit––the DIP lender with dubious connections to the debtor and its principals. Indeed, the proposed bid procedures unfairly favor Mr. Sit, without ever requiring him to demonstrate his ability to satisfy the leasehold obligations, his wherewithal to operate a hotel, or his connections to the debtor (i.e., whether any side agreements or conditions have been established for him to receive this sweetheart deal),” said the group’s lawyer Ordubegian.

Ordubegian adds that at this juncture of the case, the primary objective must be to maximize returns for creditors, including the Commonwealth, local vendors and suppliers, and former employees. However, this doesn’t seem to be the case therefore IPI’s motion must be denied.

“The only viable outcome, therefore, is the sale of the debtor’s assets through a strategic marketing process to bring it to an operating casino and hotel, ensuring not only the highest possible recovery for the creditors but also securing the tax revenue, tourism, and job creation that it would bring to Saipan. As demonstrated herein, the motion must be denied as the proposed bid procedures would necessarily tie to a sale that fails to satisfy the most basic obligation of a Chapter 11 debtor—to maximize returns for the creditors,” said Ordubegian.

“The proposed bid procedures raise significant concerns for several reasons: (a) the stalking horse bid price appears to be artificially low, (b) the debtor has failed to engage in any meaningful marketing process to solicit other potential buyers, and (c) the relationship between Mr. Sit and the debtor’s owners, as well as his overall intentions, remain murky at best,” Ordubegian adds.

Ordubegian further argues that IPI’s actions—or lack thereof—suggest a hasty acceptance of the unfavorable terms, which is not inevitable.

“The Commonwealth Casino Commission has stated that it will not restate a casino license to the debtor or parties connected to the debtor. However, the CCC has indicated a willingness to work with disinterested bidders for granting a casino license. By excluding the casino license from the scope of ‘acquired assets,’ the proposed bid procedures fail to capture the cumulative value of the assets as a casino hotel and dissuades potential buyers in the gaming/gambling industry from ever submitting a bid. Instead, the debtor proposes bid procedures which have been narrowly tailored to serve the interests of Mr. Sit, who does not qualify to operate a casino,” said Ordubegian.

In addition, Ordubegian states that IPI has viable alternatives, such as fulfilling its commitment to the committee to engage an investment banker to properly market the assets, potentially securing a “stalking horse” bid that truly reflects the assets’ value.

However, this value remains uncertain given that no appraisal or market test has been conducted since the Chapter 11 filing.

“Such process could have also attracted higher and better offers from other potential buyers to serve as the stalking horse bidder. This concern is further underscored by the opposition filed by creditor Dotts Law Firm, which indicates that an investor has expressed interest in acquiring the debtor’s assets and argues that the proposed bid procedures unfairly favor the insider. The current stalking horse bid, as it stands, does not represent a sound exercise of the debtor’s business judgment. Therefore, approval of the debtor’s proposed bid procedures would allow Mr. Sit to swoop in and obtain the assets at a low, arbitrarily set price of only $10 million, which ‘chills’ the bidding process by dissuading third parties from submitting their highest and best offers,” Ordubegian said.

The committee, Ordubegian further states, has identified an investment banker to facilitate a going-concern sale of the debtor’s assets.

“This approach is crucial to maximizing the chances of a favorable outcome in this case, not only for the creditors but also for the community of Saipan. Accordingly, the committee intends to file the employment application before the hearing on the motion, seeking the court’s approval to retain its own investment banker under Section 1103(a) of the Bankruptcy Code,” he said.

The NMI bankruptcy court is set to hear all oppositions on Sept. 19.