Fitch Ratings downgrades IPI

Fitch Ratings has downgraded Imperial Pacific International Holdings Ltd.’s credit rating after the international credit rating agency expressed concerns that the Hong Kong-based company has yet to secure long-term funds for the construction of its integrated resort on Saipan.

In separate reports by Asian Gaming Brief and Global Gaming Expo Asia yesterday, they said that Fitch downgraded IPI’s long-term foreign-currency issuer default rating to CCC (credit risk or speculative) from BBB (investment grade) four months ago. It has also lowered its proposed U.S. dollar senior secured note issue to an expected B-EXP rating from BB-EXP (moderate risk).

Fitch Ratings is one of three credit rating agencies that include Moody’s and Standard & Poor’s. Fitch is the smallest of the three nationally recognized statistical organizations chosen by the United States Securities and Exchange Commission and acts as a tiebreaker when Moody’s and S&P have similar ratings.

Although IPI is on track to finish the casino resort on time, Fitch said long-term capital expenditure funds for Imperial Pacific Resort has still not been secured.

“Failure to secure funding for the completion of both construction phases may further pressure IPI’s liquidity,” said Fitch Ratings in a statement released last Wednesday.

Fitch also cited the lack of licensed junket operators on Saipan. The Commonwealth Casino Commission has so far granted one provisional license to Big Bang Entertainment, whose clients are from Japan and South Korea.

“The downgrade also reflects the company’s need to fund advances to customers and bear customers’ credit risk due to the lack of licensed junket operators on Saipan,” added Fitch in the statement.

IPI has been relying on third-party introductions and internal marketing in dealing with its VIP players. They also grant direct credit to VIP customers that are only backed by guarantors.

“Fitch believes IPI’s receivable days have expanded well beyond 100 days in view of strong VIP rolling chips volume in the past six months. Operating cash generation is likely to be low, despite strong revenue growth,” said Fitch.

Fitch also believes that its new assessment on IPI faces substantial credit risk and that default is a real possibility, based on the ratings on its website.

The downgrade comes out almost a week after IPI reported a $32.37 billion unaudited VIP table games rolling chip turnover in 2016, surpassing Venetian Macau’s $31.02 billion.

“The actual gain or loss of the temporary casino will be determined after the review by the company’s auditors upon finalization of the consolidated financial statements of the group,” IPI said in a voluntary announcement filed at the Hong Kong Stocks Exchange last Monday.