Imperial Pacific earns Fitch downgrade

Fitch Ratings has downgraded its rating for Hong Kong-listed Imperial Pacific International Holdings Limited, after concerns it has still not yet secured sufficient long-term funding for the construction of its casino and resort.

“Fitch believes IPI is on target to meet its construction deadline, but longer-term capex funding for the casino and hotel resort is not yet in place…. Failure to secure funding for the completion of both construction phases may further pressure IPI’s liquidity,” noted the ratings agency on Wednesday.

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 in Saipan,” added Fitch.

“So far only one junket has been licensed by the Commonwealth Casino Commission of Saipan. Thus, IPI has been operating its VIP business through third-party introductions and internal marketing, with IPI granting credit directly to VIP customers who are partly backed by guarantors. Fitch believes IPI’s receivable days have expanded well beyond 100 days in view of the strong VIP rolling chips volume in the past six months. Operating cash generation is likely to be low, despite strong revenue growth.”

The ratings agency has lowered the casino operator’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC’, down from the ‘B(EXP)’ expected rating assigned in September 2016.

It has also downgraded the casino resort operator’s proposed US dollar senior secured note issue to an expected ‘B-(EXP)’ rating, from ‘BB-(EXP)’.