Analysts question viability of $7.1bn Imperial Pacific Saipan investment

Sunday 14th of December 2014

Gaming industry analysts have raised doubts about the proposed $7.1 billion investment by Imperial Pacific in Saipan’s first large-scale integrated resort. The company was granted a 25-year license to build and operate a casino on the Northern Marianas island in August, with an option to extend for a further 15 years. The following month it more than doubled its budget to $7.1 billion, with plans for 4,200 hotel rooms and 1,600 gaming tables.

The South China Morning Post quoted an industry insider as saying, "Imperial will get their junket room that they can fly VIPs to. The government gets money so they can pay their people the back-wages that they owe. But they're not going to invest US$7.1 billion."

"They're going to say 'Oh, the situation has changed'… and it will drag on for 20 or 25 years."

Imperial Pacific, backed by Macau’s Heng Sheng group, said it planned to finance the project through equity and or debt financing, but, except for unsecured borrowings of HK$220 million, "has not yet formulated any concrete fund-raising plan."

The company said it would pay US$20 million within 60 days of starting construction on its first hotel, which is due to begin early next year, and US$20 million a year after the first full year of operation of the first hotel, scheduled to open in 2016.

However, gaming analysts are concerned about how the company plans to make it financially viable in a location that is quite distant from mainland gamblers. Although closer than destinations in Australia, Saipan is still a five-hour flight from Shanghai.

"I don't think anyone believes that a seven billion [dollar] investment would make sense in a place like Saipan. It's unclear what type of revenue they would be able to generate and returns on investment [achieved]," the newspaper quoted one equity analyst as saying.