Australia-listed casino operator Donaco International Ltd says it expects a “cash burn run rate”of between US$800,000 and US$900,000 per month during the temporary closure of its two casinos. Such expenses cover costs associated with “maintaining the casino assets” and other “associated corporate costs,” said the company in a Tuesday filing.
Donaco’s flagship venue, the Star Vegas Resort and Club, is near Cambodia’s border with Thailand. Its Aristo International Hotel and associated casino (pictured) are near Vietnam’s border with China. Both properties have been temporarily suspended due to the negative impact of the Covid-19 pandemic.
“The temporary action follows the Cambodian government’s announcement mandating the closure of all casinos from 1 April 2020, alongside the Vietnam government’s measures to temporarily close all casinos for a period of 15 days from 1 April 2020,” stated Donaco in its latest filing.
The company said it was introducing a range of measures to cut costs during the closure period in order “to ensure the company’s sustainability into the future”.
“As a result, Donaco has had to take difficult, but unavoidable, measures in relation to its staff, including reductions in headcount, placing employees on leave, standing down casual staff and deferring non-essential expenditure,” the firm told the Australian Securities Exchange.
The company said also that it was working to reduce operating and capital expenditure. As ofMarch 31, 2020, Donaco had a cash balance of US$11.6 million, according to Tuesday’s filing.
The document quoted Donaco’s chairman Mel Ashton as saying: “The situation we are facing with the Covid-19 pandemic is unprecedented and we’ve unfortunately had to take some drastic measures with our staff, including redundancies and pay cuts.”
Mr Ashton added: “This is to ultimately ensure the business remains afloat and to be in a healthy financial position once we eventually rebuild the team and restart operations.”
The filing also confirmed that Donaco was still in discussions with the group’s principal lender – Mega International Commercial Bank Co Ltd – regarding the settlement of litigation with the vendors of the Star Vegas business. The company was also trying to amend the June 30, 2020 covenants in respect to its term-loan facility, it added.
“Donaco continues to consider liquidity measures and sources of a capital injection to guarantee the business remains in a sustainable and dynamic position during this period of global uncertainty,” noted the filing.
It added: “The duration of the Covid-19 crisis and the period of closure of the casinos will obviously affect the requirement for a capital injection but … the board is confident of both the ability to maintain the business during an extended period of closures and source capital as required to strengthen the balance sheet.”
