IPI receives initial $400K of $7M loan

The CNMI government has recently informed the NMI Bankruptcy Court that Imperial Pacific International (CNMI) LLC has withdrawn the initial $400,000 of the $7-million loan it secured and was approved debtor-in-possession (DIP) financing for.

Office of the Attorney General chief solicitor Robert Glass Jr., who represents the CNMI government in IPI’s Chapter 11 bankruptcy proceedings, filed a motion yesterday informing the court that IPI has withdrawn the initial $400,000 of the $7-million loan it secured and was approved DIP financing for.

In addition, Glass informed the court that IPI has since made a check payment of $209,070 to the Department of Public Lands for its overdue lease payments.

However, the check has yet to clear, Glass stated.

“On June 21, 2024, this court held a hearing on debtor’s first day motions where debtor indicated they had ‘earmarked’ money for payment to the Department of Public Lands from the initial $400,000 loan that was approved by the court as part of the DIP interim financing. On June 21, 2024, the Department of Public Lands received a check for the overdue lease payment and the penalty/interest due for the lateness of the payment for a total of $209,070. While a check was provided to the Department of Public Lands for the payment, as of this date, the check has not yet cleared. The Commonwealth will notify the court once the check clears and the funds are deposited with the Department of Public Lands,” he said.

Previously, Glass made a motion on behalf of the CNMI government to convert IPI’s Chapter 11 bankruptcy to a Chapter 7 bankruptcy which essentially means the liquidation of all IPI’s property and assets to pay off debts.

While Chapter 11 bankruptcy allows for a business/individual to reorganize and restructure, Chapter 7 bankruptcy essential means the complete liquidation of a business’ property and assets which may result in the company’s dissolution.

Glass argues that based on public information available, IPI does not have the financial wherewithal to successfully proceed under Chapter 11 of the Bankruptcy Code.

“The debtor has no business to reorganize, cannot show that there is a reasonable likelihood of rehabilitation, and has failed to maintain insurance. At the same time, the debtor seeks to encumber the bankruptcy estate with $7,000,000 in post-petition financing ($400,000 of which was allowed by this court’s interim order, with the remaining amount to be decided at the final orders for First Day Motion’s hearing on June 21,) putting the creditor body at a distinct disadvantage in the case. Neither the interests of the debtor’s creditors nor its estate would be served by having the debtor continue to unnecessarily incur the expenses associated with a Chapter 11 reorganization. Accordingly, there is ‘cause’ under section 1112(b) of the Bankruptcy Code for the court to convert [IPI’s case] to a case under Chapter 7 of the Bankruptcy Code,” he said.

Glass, in his motion, notes that the Commonwealth represents $87,573,315, or 52.8%, of IPI’s largest unsecured claims.

“This debt has accumulated due to debtor’s failure to make payments to several Commonwealth agencies since 2020,” said Glass.

Breaking the over $87.5 million down, Glass said IPI owes $62,010,280 to the Commonwealth for non-payment of Annual License Fees due Aug. 12, 2020; Aug. 12, 2021; Aug. 12, 2022; and Aug. 12, 2023.

In addition, IPI owes the Commonwealth Casino Commission $17,620,000 for the non-payment of the Casino Regulatory Fees due Oct. 1, 2020; Oct. 1, 2021; Oct. 1, 2022; and Oct. 1, 2023, including associated penalties.

Lastly, Glass says IPI owes the Commonwealth Department of Finance Division of Taxation and Revenue $7,943,035.39 for the non-payment of its taxes, including penalties and interest.

“Debtor has not operated since 2020 and, thus, it has no income and is unable to pay post-petition obligations that continue to accrue—like its rent due April 28, 2024, that has not yet been paid, and the pending annual Casino License Fee that will be due Aug. 12, 2024. Debtor has no ability to generate revenue; its hotel building is unfinished and has never been operational. In addition, debtor has no ability to operate as a casino; its casino gaming license is currently suspended and, until they were stayed by the filing of this case, two proceedings seeking revocation of the license were pending due to debtor’s failure to pay significant fees to the commission and for its failure to comply with an order of the commission requiring a payroll reserve,” said Glass.

“The debtor has also failed to maintain appropriate fire and damage insurance and general liability insurance as required by its lease agreement LA 15-002S for its lease of public lands from the Commonwealth posing a significant risk to the debtor’s bankruptcy estate and the public,” Glass adds.

The NMI Bankruptcy Court is set to hear the motion in August.

Last April 19, 2024, IPI filed its Chapter 11 bankruptcy petition with the U.S. District Court for the NMI Bankruptcy Court.