When Donaco International Ltd. picked up $100 million from Mega Bank in 2015 to finance its casino expansion plans, it didn’t expect that, right around the corner, was waiting a series of problems that would make it nearly impossible to keep up with the loan’s repayment scheme. Since then, the Australian-listed operator, which is behind the Star Vegas casino in Cambodia and Aristo International in Vietnam, has had to jump through hoops, sidestep legal issues and battle former partners to hang on. It has been able to survive through major upheavals and boardroom deals, but has only barely crawled forward. Behind on the massive outstanding loan, Donaco has worked out a deal with Mega Bank to pay off the balance and put this chapter of its legacy behind it.
Donaco Emerges From Almost-Certain Defeat
Donaco had been making payments on the loan as regularly as possible since 2015, but one headache after another caused problems. The global COVID-19 pandemic didn’t help, and Mega Bank had been putting pressure on Donaco to keep up. The casino operator announced this week through a filing with the Australian Securities Exchange that it had arranged with Mega Bank to pay $1 million a month through November of this year, followed by a $1.8-million payment in December. With that, the loan will be paid off and Donaco will be able to focus on other issues.
The new repayment scheme was reportedly finalized last month, and the first payment has already been made. That leaves $5.8 million remaining, and Donaco is confident it won’t have any more problems. Paul Porntat Amatavivadhana, the company’s non-executive chairman, is “extremely encouraged” about the arrangement and is already preparing for future operations. The company will have some help, too, as a shareholder loan from CEO and Executive Director Lee Bug Huy has been approved. That loan will be for $8.2 million, which will allow Donaco to bring its casino and hospitality businesses back to life. The loan carries a term of three years and will be repaid from operational cash flow from its two properties in Cambodia and Vietnam.
Long Road to Recovery
Donaco had initially set up Star Vegas with great expectations for Cambodia and Poipet, the city where the resort is located. It had partnered with a group of Thai entrepreneurs who allegedly proceeded to stab Donaco in the back. They handed over the real estate to Donaco through a lease, but then launched, in 2016, a casino essentially across the street that, according to Donaco, violated a non-compete agreement. Even the name – Star Paradise – seemed to be a direct reflection of the original property.
That set of a chain of issues that saw lawsuits in Cambodia and Singapore, with Donaco, at one point, asking for as much as $190 million in damages. The Thai partners didn’t budge, and litigation dragged on for years. The saga was finally put to rest after the Thai entrepreneurs took over the company, now controlling 42% of the operations, and shuffled the board around. That gave Mega Bank confidence that, eventually, Donaco would be able to make good on its outstanding loan payments and staved off almost certain repossession.
More Work Needed
Although everything seems to be headed in the right direction, it is still too soon to claim victory. Cambodia continues to deal with COVID-19 issues that have forced the country to shut down once again. Star Vegas and Aristo closed last year on April 1 following government mandates and Donaco was having to use all of its cash reserves to keep the company afloat. The mandates were lifted and the casinos were preparing to rebound, but then they ran into another problem this year.
This past February, Cambodia started to see another wave of COVID-19 issues, thanks to four Chinese nationals who were able to pay their way out of a required quarantine when they arrived in the country. They didn’t waste time enjoying a night on the town, visiting any nightclub they could, and two of the quartet later tested positive for the coronavirus. Thanks to their irresponsibility, Cambodia saw its first major outbreak that has continued to hinder economic recovery.