The façade of Imperial Pacific International’s unfinished hotel-casino resort in Garapan on Friday, June 21, 2024.
SAYING that the casino investor has no ability to generate revenue or operate as a casino and has “no business to reorganize,” the CNMI government, represented by Chief Solicitor J. Robert Glass Jr., is requesting the federal bankruptcy court to convert Imperial Pacific International’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.
Chapter 7 provides for the liquidation of a debtor’s property and distribution of proceeds to creditors.
In a motion filed on Thursday, Glass said the CNMI government represents $87,573,315, or 52.8% of the debtor’s largest unsecured claims by creditors “who are not insiders.”
“This debt has accumulated due to Debtor’s failure to make payments to several Commonwealth agencies since 2020. Its $62,010,280.00 in debt owed to the Commonwealth is for the Debtor’s non-payment of the Annual License Fees due August 12, 2020; August 12, 2021; August 12, 2022; and August 12, 2023.
“Its $17,620,000.00 debt owed to the Commonwealth Casino Commission is for the Debtor’s non-payment of the Casino Regulatory Fees due October 1, 2020; October 1, 2021; October 1, 2022; and October 1, 2023, including associated penalties,” Glass said.
He said IPI also owes the CNMI Department of Finance-Division of Taxation and Revenue $7,943,035.39 for non-payment of taxes, including penalties and interest.
Glass said IPI has not operated since 2020, and thus “it has no income and is unable to pay post-petition obligations that continue to accrue — like its rent due April 28, 2024, that has not yet been paid, and the pending Annual Casino License Fee that will be due August 12, 2024.”
Glass added, “Debtor has no ability to generate revenue; its hotel building is unfinished and has never been operational. In addition, Debtor has no ability to operate as a casino; its casino gaming license is currently suspended and, until they were stayed by the filing of this case, two proceedings seeking revocation of the license were pending due to Debtor’s failure to pay significant fees to the Commission and for its failure to comply with an order of the Commission requiring a payroll reserve. Other complaints have also been filed by the Executive Director that also seek revocation of Debtor’s casino license.”
Glass said IPI “has also failed to maintain appropriate fire and damage insurance and general liability insurance as required by its Lease Agreement LA 15-002S for its lease of public lands from the Commonwealth, posing a significant risk to the Debtor’s bankruptcy estate and the public.”
“Overall,” Glass said, “based on the public information available, the Debtor does not have the financial wherewithal to successfully proceed under Chapter 11 of the Bankruptcy Code.”
He said IPI “has no business to reorganize, cannot show that there is a reasonable likelihood of rehabilitation, and has failed to maintain insurance. At the same time, the Debtor seeks to encumber the bankruptcy estate with $7,000,000 in post-petition financing ($400,000.00 of which was allowed by this Court’s interim order, with the remaining amount to be decided at the final orders for First Day Motion’s hearing on June 21, 2024), putting the creditor body at a distinct disadvantage in the case.”
According to Glass, “Neither the interests of the Debtor’s creditors nor its Estate would be served by having the Debtor continue to unnecessarily incur the expenses associated with a Chapter 11 reorganization.”
Accordingly, Glass said, there is “cause” under Section 1112(b) of the Bankruptcy Code for the court to convert the IPI case to a case under Chapter 7 of the Bankruptcy Code.
For its part, the official committee of general unsecured creditors, which represents over 160 unsecured creditors holding approximately $262.5 million in claims, has opposed IPI’s request for a final court approval of its debtor-in-possession financing proposal for the remaining $6.6 million of the $7 million loan that the casino investor said it has secured.
IPI filed for Chapter 11 bankruptcy in the District Court for the NMI on April 19, saying it owes creditors over $165.8 million.
