ATTORNEY Chuck Choi informed the federal bankruptcy court on Thursday that there had been discussions between Imperial Pacific International, the Committee of Debtors, and the United States Trustee to sell IPI’s unfinished hotel-casino in Garapan through a plan or a Section 363 motion.
A Section 363 motion requests the court for an order authorizing the sale of a debtor’s assets.
Choi, who represents IPI in the Chapter 11 bankruptcy case, said they intend to file the motion next month.
He also told Chief Judge Ramona V. Manglona of the District Court for the NMI that IPI will file an organizational plan in the same time frame.
The committee’s attorney, Christopher Wong, informed the court that the parties have discussed a budget, a revised budget, and the catch-all language regarding insurance. He said they agreed that the insurance issued to the debtor — IPI — is valid.
U.S. Trustee attorney Neil Verbrugge reported to the court that the Trustee received a certificate of insurance for public liability coverage for IPI but not for property damage casualty coverage.
In response, Choi said IPI representative Howyo Chi encountered difficulties in obtaining coverage and that he received three denial letters for the property damage casualty coverage.
“Nevertheless, efforts are continuing to obtain such insurance,” Choi added.
For his part, Chief Solicitor J. Robert Glass Jr., who represents the CNMI government, informed the court that the check for $209,070 issued by IPI for its overdue lease payment and the penalty/interest due for the late payment to the Department of Public Lands had yet to clear.
As for the information provided by Joshua Gray through his attorney, Aaron Halegua, regarding the $20 million that IPI reportedly received in a separate litigation, Judge Manglona did not entertain additional arguments following a supplemental declaration from Howyo Chi.
A former IPI employee, Gray successfully sued the casino investor and was awarded $5.68 million by the court.
In his declaration, Howyo Chi acknowledged that during the license revocation hearing before the Commonwealth Casino Commission, IPI submitted an MOU between IPI Holdings and Kyosei Bank Group dated July 18, 2023.
Under the MOU, the bank group agreed to lend IPI Holdings (not IPI CNMI) $300 million for the following purposes: (a) $150 million to pay IPI Holdings’ debts; (b) $100 for IPI to finish the hotel construction and resume the operation of the casino; and (c) $50 million to settle the disputes involving IPI.
During the license revocation hearing, IPI also submitted transfer records showing: (1) “$10M payment to Ji on August 1, 2023,” and (2) “$10M payment to Ji on August 2, 2023,” and (3) “Shareholder Info of Toshisouken Investment Bank.”
A critical condition to the funding was that IPI must hold “a valid exclusive and sole gaming license in CNMI.”
Furthermore, for the full investment to be made, IPI was required to satisfy other conditions, including the transfer of Cui Lijie’s 50% interest in IPI Holdings to the bank.
These conditions were never satisfied, Howyo Chi added.
“The Transfer Records show that the Bank arranged for $20 million to be deposited into Ji Xiao Bo’s bank account in early August 2023. However, Mr. Ji never transferred $20 million into any of the Debtor’s bank accounts. More importantly, the conditions set forth in the MOU were not satisfied. I understand that the MOU was cancelled, and that Mr. Ji returned the $20 million,” Howyo Chi said.
On May 30, the federal court granted an interim motion, authorizing IPI to obtain an initial advance of $400,000 from Loi Lam Sit in a debtor-in-possession or DIP financing proposal.
IPI also informed the court that it had secured an additional $1million funding from Loi Lam Sit in addition to the remaining $6.6 million of the $7 million loan. No information about Loi Lam Sit was available as of press time Thursday evening.
Judge Manglona in the same hearing granted the request for the DIP financing to allow the additional $1 million loan for a total loan of $1.4 million.
She likewise granted the request for a final order to include language allowing IPI to use the DIP financing to pay for additional insurance. She said the debtor’s proposed budget will be incorporated in the proposed order, which Choi will prepare.
The CNMI government has requested the bankruptcy court to convert IPI’s Chapter 11 petition to Chapter 7.
Under the U.S. Bankruptcy Code, Chapter 11 bankruptcy allows a business corporation to restructure its debts and continue operating while Chapter 7 provides for the liquidation of a debtor’s property and distribution of proceeds to creditors.
In a separate motion, the U.S. Trustee told the court that there is “cause” to support converting IPI’s Chapter 11 petition to Chapter 7 or to dismiss the petition.
