Moody’s sees high risk of default at Imperial Pacific

Ratings firm Moody’s Investor Services shaved its rating on Imperial Pacific by one notch to “Caa1” and said it still had a negative outlook on the company, indicating it sees a significant chance of another downgrade in the medium term.

The firm last cut it rating on the firm in January.

“The downgrade of Imperial Pacific’s corporate family rating reflects our concern over the company’s trend of weak operating cash flow,” said Kaven Tsang, a Moody’s vice president and senior credit officer. “Moody’s is also concerned over Imperial Pacific’s liquidity position and the sustainability of its business model, given its high levels of accounts receivables.”

For March Imperial Pacific reported a VIP roll at its temporary casino of $2.96 billion, recovering from February, but short of a peak of $5.58 billion recorded in January.

Since the casino opened in the T-Galleria with just a handful of table in late 2015, the facility has far exceeded expectations, generating an average roll of more than $2 billion a month. February’s figure was $1.66 billion.

However, the Saipan government has only approved one junket agent, meaning the operators is taking on the risk. Moody’s said the release of the company’s recent annual report had highlighted the concerns about high receivables and added it sees little prospect for improvement in the near term.

The Hong Kong-listed company had been scheduled to open its new resort at Chinese New Year, but that has now been pushed back due to construction and other delays, in part blamed on Typhoon Soudelor.

Imperial Pacific held a preview at the end of March for the new resort, however, it’s unclear as to when it will actually open for business. The company has written to authorities on Saipan to request an extension for its temporary facility.