IMPERIAL Pacific International wants to transfer its exclusive casino license to a new investor, but the Commonwealth Casino Commission said IPI should surrender it.
During CCC’s monthly meeting on Wednesday, its chair, Edward C. Deleon Guerrero, shared a copy of his recommendation to Gov. Arnold I. Palacios and the Office of the Attorney General on “how to move forward with the casino industry.”
Also present in the meeting were CCC Vice Chair Ralph S. Demapan, Commissioner Mario Taitano, and the new commissioner from Rota, Thomas A. Manglona.
In his letter to the governor, Deleon Guerrero said, “It is my understanding that the…District Court for the NMI in the Oct. 1, 2024, IPI bankruptcy hearing decided to allow the sale of IPI’s assets, along with the casino license, to increase its value.”
“While the CCC is not necessarily against this idea,” he added, “it is important to remember that IPI has NOT satisfied the requirements of the CNMI casino gaming statute or Public Law 18-56, specifically the requirements for IPI to invest a minimum of $2 billion and construct a minimum of 2,000 new hotel rooms of five-star quality,” Deleon Guerrero added.
He said that if the casino license is to be included in the sale of IPI’s assets, then the potential buyer or buyers need to be informed that they would be required to satisfy these requirements as well.
To date, Deleon Guerrero said, “IPI has invested an estimated $400 million in the construction of the initial gaming facility in Garapan, with 329 rooms under construction and 15 completed five-star villas.”
He said there is “a greater chance of success for IPI to sell its assets and the casino license if they voluntarily surrender the ‘exclusivity,’ the casino license agreement gets amended, and the Legislature entertains amendment to P.L 18-56.”
Deleon Guerrero “respectfully recommends” that the CNMI government, with the assistance of the OAG, the Office of the Governor and the Legislature, consider the following:
1) Request the federal bankruptcy court to allow IPI to voluntarily surrender the casino license exclusivity.
2) CCC should cease all license revocation deliberations and related proceedings.
3) Request the Legislature to amend P.L. 18-56 once IPI voluntarily surrenders exclusivity to allow more casino licenses. The CNMI should grandfather one license for IPI (for the subsequent buyer).
4) Lower the minimum investment amount from $2 billion to $300 million per licensee to build new hotel rooms or invest $50 million per licensee to renovate existing properties. Reduce the number of required hotel rooms from 2,000 new hotel rooms to 300 rooms per licensee.
5) Lower the annual casino license fees from $15 million to $5 million per licensee.
6) Lower the annual regulatory fees from $3 million to $1 million per licensee.
7) Impose a casino gaming tax of 5% of gross gaming revenue.
8) Impose a one-time one-year fee ($15.5 million license fee and $3 million regulatory fee) as part of the post-petition fee requirements under the current law in approving the transfer of a license to a new investor. Also, require a $1 million application fee to cover costs associated with investigation and other due diligence to include financial, criminal, probity and other related vetting of the new casino licensee.
9) Amend the existing casino license agreement between the Lottery Commission and IPI.
10) Delete and waive IPI’s future obligations to construct Phase I and Phase II of the casino license agreement. IPI’s obligations should be restricted to completion and satisfaction of the requirements of the initial gaming facility.
11) Delete other IPI obligations not related to the initial gaming facility.
12.) Delete the Community Benefit Fund provisions moving forward.
Deleon Guerrero noted that House members, in a recent budget hearing, expressed their willingness to entertain additional licenses, but this will require amending the gaming law because IPI still has an exclusive license.
IPI has publicly agreed to waive the exclusivity if they can retain one license, Deleon Guerrero said.
“If we do not consider these options, this matter will drag on for many years and the Commonwealth will not realize the economic potential and other benefits that the gaming industry can contribute to our economy,” Deleon Guerrero said.
IPI options
In an interview on Thursday, IPI Director Howyo Chi said they are “looking to make a deal if the government is willing to sit down and talk.”
He shared the following options recommended by IPI:
Option 1: IPI keeps the license
1) Reinstatement of license. IPI shall pay $18,652,570 for the reinstatement of the casino license.
2) Settlement of casino license annual fee arrears. IPI shall pay $31,005,140 to settle the arrears in casino license annual fees. Payments’ timeframe to be determined.
3) Settlement of regulatory fees arrears. IPI shall pay $7.3 million to settle the arrears in regulatory fees due to CCC. Payments’ timeframe to be determined.
4) Future CCC and casino license agreement payment obligations. IPI will remit $5 million for the casino license and $1 million for CCC regulatory fees from 2024 onward if there is no modification to the current casino license law. Any outstanding balance shall be deferred to 2039. Upon the enactment of amendments to the gaming law, IPI will adhere to the new statutory requirements.
Option 2: IPI transfers the license
1) Reinstatement of license. IPI shall pay $18,652,570 for the reinstatement of the casino license.
2) Transfer of license. IPI agrees to transfer its casino license to another party. The successor must pay $1 million application fee to the CCC.
3) Settlement of casino license annual fee arrears. IPI shall pay $20 million to settle the arrears in casino license annual fees. Payments’ timeframe to be determined.
4) Settlement of CCC regulatory fees arrears. IPI shall pay $3.15 million to settle the arrears in CCC regulatory fees. Payments’ timeframe to be determined.
5. Future CCC and casino license agreement payment obligations. The new investor will remit $5 million for casino license and $1 million for CCC regulatory fees from 2024 onward if there is no modification to the current casino license law. Any outstanding balance shall be deferred to 2039. Upon the enactment of amendments to the gaming law, the new investor will adhere to the new statutory requirements.
General terms
In terms of timing, IPI suggested that all payments shall be made within 30 days of the execution of a formal settlement agreement between the parties unless otherwise specified.
• No admission of liability. All parties agree that the execution of this term sheet does not constitute an admission of liability by either party.
• Mutual release. Upon full compliance with the terms of this term sheet, all parties agree to release each other from any further claims or obligations related to the matters covered herein.
• Governing law. This term sheet shall be governed by and construed in accordance with CNMI laws.
• Confidentiality. The terms of this settlement discussion shall remain confidential between the parties unless required by law or regulation to disclose.
