A ranking official of Moody’s Investors Services said last week that the international credit agency’s growing concerns that Imperial Pacific International Holdings Ltd. will complete its multi-million dollar integrated resort is why they downgraded the Hong Kong-based company’s rating.
IPI owns and operates Best Sunshine Live, a temporary casino facility inside T Galleria, while the hotel-casino Imperial Pacific Resort is being built. Imperial Pacific Resort is the lone casino licensee on Saipan.
“The review for downgrade reflects our concerns over [IPI’s] lack of funding to complete its [Imperial Pacific Resort] project due to a delay in the issuance of the company’s proposed bonds,” said Moody’s vice president and senior credit officer Kaven Tsang in a statement.
“The downgrade of [IPI’s corporate family rating] reflects the increased uncertainty over the company’s ability to secure sufficient funding to complete its project, in view of the delay in the opening of the casino to March 2017.”
He added that shareholders have been providing temporary loans to fund the project. “The investment will be funded mainly by proposed bonds. While the bonds have not been issued, the major shareholders have been providing interim shareholder loans to keep construction going.”
“A successful issuance of the proposed bonds will satisfy only part of Imperial Pacific’s funding needs to complete the entire Grand Mariana project,” added Tsang, who is also Moody’s lead analyst for IPI.
Tsang, according to the Moody’s report, said the “delay in issuing bonds could result in cost overruns and impact the construction schedule, delaying the opening of the casino. These could jeopardize their gaming license. This situation could also result in additional debt, increasing their debt leverage beyond expectations.”
IPI had already been promoting Saipan—a U.S. commonwealth—as a tourist destination with their gaming facility among the attractions and activities to do in one of the tropical island paradise in the Western Pacific. Chinese nationals can enter Saipan visa-free under a visa waiver program.
IPI, early this month, filed an announcement with the Hong Kong Stock Exchange that the original schedule of its casino having a soft opening by the Chinese New Year—Jan. 28—would not push through but it is still on track to begin operations in the first quarter of 2017.
Moody’s downgrade came a day after another international credit rating agency, Fitch Ratings, lowered IPI’s credit rating. Fitch also raised concerns last week that IPI has not yet secured long-term funds for the construction of its Imperial Pacific Resort on Saipan, according to separate reports by Asian Gaming Brief and Global Gaming Expo Asia.
Moody’s, Fitch, and Standard & Poor are considered the Big Three of the credit rating agencies that are nationally recognized statistical organizations chosen by the United States Securities and Exchange Commission. The three agencies provide rating systems to guide investors on the risks in putting up money in a particular company or market.
Moody’s, on its website, issued a B2 rating that is five levels below investment grade. They gave IPI a provisional rating in September last year based on concerns of “risk arising from possible money laundering [activities]” inside the temporary casino facility, which have been denied strongly by IPI and supported by CNMI regulatory agencies that they are complying with all federal laws.