Donaco settles case with Star Vegas casino

by Charlotte Lee Last Updated
Donaco doesn?t plan to sell properties despite financial challenges 

Australian-headquartered casino operator Donaco International has gained approval from a key lender to settle the casino firm’s legal cases with third parties, including its Cambodian casino venue.

GGR Asia reports that an outstanding debt of US$7.8 million payable to Mega Bank was a “notable reduction from the initially borrowed amount of US$100 million and the company is on track to repay all the remaining debt in financial year 2021,” Donaco said in a filing to the Australian Stock Exchange.

The approval by Mega Bank was in relation to the “successful settlement of all legal cases with the Thai-vendor” parties regarding Star Vegas and was “part of the provisions of a facility agreement with the lender,” Donaco noted.

“Donaco is extremely pleased to secure this approval as the company continues to work with Mega Bank and pay down the debt facility under the agreement,” it said.

The firm further noted that interest cover and debt ratio covenants were “not required to be tested” as of December 31 and would only be tested as of June 30, 2021, the end of the current financial year.

The casino operator said in a March filing it was awaiting agreement from Mega Bank on settlement of a longstanding dispute with the Thai vendors of Star Vegas, a property in Poipet on Cambodia’s border with Thailand, a country where casino venues are not permitted.

In a June filing, Donaco stated Mega Bank had “agreed to that deferral” until December 31, of a US$5 million payment owed to it on the principal of its loan to Donaco.

In early April, a time when Star Vegas and Donaco’s other Asian casino hotel, Aristo International in Lao Cai on Vietnam’s border with China, were both closed as a COVID-19 countermeasure, Donaco said it expected a “cash burn run rate” of between US$800,000 and US$900,000 per month.

Aristo International reopened casino operators in mid-May, with the Star Vegas implementing a limited reopening from September 25.

On September 1, Donaco said in a filing it had significantly narrowed its fiscal year loss as of June 30 this year, to just above A$58.9 million from A$198 million a year earlier, even though the second half of the reporting period was affected by COVID-19.

On December 18, Donaco said it had returned to positive earnings before interest, tax, depreciation and amortisation in October and November.

Donaco settles legal proceeds with Thai businessman 

Australian-listed boutique casino group Donaco International announced that it has officially settled various legal proceedings with a group headed by the prominent Thai businessman and politician Somboon Sukjaeroenkraisri.

The Thai group also includes Somboon’s two sons, Lee Bug Huy and Lee Bug Tong.

The settlement reached finalises proceedings in Singapore, Australia, Thailand and Cambodia relating from Donaco’s acquisition of the Star Vegas casino located in the Cambodian-Thai border town of Poipet, according to an Australia Securities Exchange release distributed by the board of directors.

Khmer Times reported in March that the release stated the two parties reached a settlement that amended the perpetual lease agreement, granting Donaco security of tenure over the casino until year 2115.

In return, Donaco will receive $38 million to remove the non-competition and non-solicitation clauses in the share sale agreement, pay $18 million to settle the claims for unpaid managements fees (plus interest) and pay any outstanding rent and an additional lease payment of $20 million to Lee Hoe Property.

The Thai group has also agreed not to dispose of any Donaco shares for a period of six months from the date of settlement.

Somboon Sukcharoenkraisri currently holds 148,199,529 shares, 17.99 per cent of Donaco.

The Thai group said the share sale agreement will be amended to acknowledge the existence of the competing casino constructed near the Star Vegas casino, the cessation of all legal actions and mutual releases and the management agreement will be terminated.

Chairman of Donaco, Mel Ashton, said: “We have reached a pragmatic and fair settlement of this long-running dispute, in what we believe is a timely manner.

“Most importantly, the remaining value of the Star Vegas business is retained for shareholders, and we do not expect any changes to the carrying value of the asset as a result of this settlement.

He added: “This gives us the stable platform we need to press forward on our other two key priorities for shareholders.”

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