Donaco to defer settlement of property dispute

by Charlotte Lee Last Updated
Donaco doesn’t plan to sell properties despite financial challenges 

Donaco International says payments linked to a settlement of a long-running dispute with people that sold the firm Star Vegas Resort and Club, a Cambodian casino complex, are to be deferred pending approval by a key lender to Donaco, Taiwan’s Mega International Commercial Bank Co Ltd.

GGR Asia reports the chairman of Donaco, Mel Ashton, said in a Friday filing: “We are pleased to have reached a variation with DNA Star Vegas Co and Donaco Hong Kong that provides more certainty around settlement while we continue to pursue the required consents with Mega Bank.”

He added: “Settlement payments will be withheld until consent from Mega Bank is received and will subsequently be offset at such time.”

He further stated: “We are also pleased that the parties agreed to also defer the additional lease payment of US$20 million as a part of the settlement variation.

“We thank the parties for their cooperation. The economic interests of all the parties are aligned and these actions remove uncertainty around the settlement and lease as we work to finalise bank consent.”

According to previous Donaco filings, the company acquired Star Vegas in Poipet – on Cambodia’s border with Thailand – from Thai vendors in July 2015 for a total consideration of US$360 million.

On March 2, the Donaco listed entity had told the Australian Securities Exchange that it had agreed to remove non-competition and non-solicitation clauses regarding its Star Vegas Resort and Club business in Poipet – from a 2015 contract it signed with the Thai vendors of Star Vegas – as part of a deal to end multiple court cases and arbitration disputes with them.

In return, Donaco is due to get US$38 million from those parties and in return provide an additional lease payment of US$20 million to an entity linked to the vendors.

In late March, Donaco said it was in the process of seeking agreement from Mega Bank regarding the agreement.

Since then, the coronavirus pandemic has led to the temporary closure – with effect from April 1 – of Cambodia’s casinos.

Donaco also runs the Aristo International Hotel and associated casino in Vietnam near the nation’s border with China.

Gaming business there has also been paused due to the coronavirus crisis.

On April 7, Donaco said in a filing the two shutdowns were they extended beyond an initial two-week period, were likely to cost it up to US$900,000 per month in “cash burn”.

Donaco’s casino operations slow down massively

Casino operator Donaco International says operations at its flagship Cambodian gaming venue have slowed to a crawl due to coronavirus.

Calvin Ayre reported in March that the Australian-listed company informed investors that it had decided to close “most of” the hotel at its Star Vegas casino in Poipet, near the border with Thailand.

The border with Thailand has been closed for two weeks and the Thai government said Tuesday that it would remain closed until at least April 5.

Donaco said total casino visitation to Star Vegas had averaged 2,430 players per day over the first 22 days of March, down 15 per cent from the first 22 days of February.

However, Donaco noted that its VIP gambling turnover had risen 9 per cent over the same span, suggesting that while traffic may have slowed, high roller traffic remains healthy.

Regardless, Donaco has arranged unpaid leave for many Star Vegas employees for March and April, while also reducing total headcount and deferring some ‘capital expenditure projects’.

Chairman Mel Ashton said the company “very much” regretted the layoffs but it was “a necessary decision for the current environment.”

Donaco also operates the Aristo International Hotel in northern Vietnam near the border with China.

Aristo’s business has also seen “decreased numbers” forcing the company to place unnecessary expenditure and all non-essential staff on hold until further notice.

The pandemic’s impact on Donaco’s operations is spoiling the bounce the company hoped to enjoy after finally resolving its multi-year legal dispute with some Thai vendors at Star Vegas.

Donaco’s shares are currently trading at less than half their value at the start of the year, the result of senior management upheaval and financing issues.

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