Boutique Asian casino operator Donaco International Ltd has agreed to remove non-competition and non-solicitation clauses regarding its Star Vegas Resort and Club business (pictured), from a 2015 contract it signed with the Thai vendors of Star Vegas.
In return Donaco will get US$38 million from those parties as part of what the casino firm’s chairman Mel Ashton said in a Monday filing to the Australian Securities Exchange was a “pragmatic and fair settlement,” of a “long-running dispute”.
“The share sale agreement will be amended to acknowledge the existence of the competing casino constructed near to the Star [Vegas] casino,” stated Monday’s announcement.
According to previous Donaco filings, it acquired Star Vegas in Poipet – on Cambodia’s border with Thailand – from Thai vendors in July 2015 for a total consideration of US$360 million.
In September 2017, Donaco stated it had issued a “cease and desist” letter to those on the Thai vendors’ side. Donaco claimed they were still operating another Poipet venue called Star Paradise, in competition to Donaco’s Star Vegas venue – and in defiance of a non-compete agreement.
The non-competition question was not the only issue between Donaco and the Thai vendors.
A Donaco filing in August outlined that the Thai vendors’ side had unilaterally cancelled the 50-year lease on Star Vegas, arguing they were in the right on the basis that rent on the site owed by Donaco had gone unpaid for five consecutive months.
Donaco had argued that the lessor Lee Hoe Property Co Ltd – linked to the vendors – had obstructed Donaco’s attempts to settle the money owed.
In early February Donaco had stated in a filing it and the Thai vendors were suspending for two months – in search of a settlement – a number of disputes: a Singapore arbitration claim against the Thai vendors, by Donaco; the lease tussle in Cambodia; and “all other litigation matters” in Cambodia, Thailand and Australia.
Under the deal announced on Monday, Donaco will receive the US$38 million to remove the non-competition and non-solicitation clauses in the original share sale agreement of 2015.
Donaco will pay US$18 million to settle the other side’s claims for unpaid management fees plus interest.
Also as part of the deal, Donaco will furnish “any outstanding rent” and an additional lease payment of US$20 million to Lee Hoe Property. Payment of the latter will see the lease agreement resume and be classified as “perpetual”.
Rent payable by Donaco on the Star Vegas site will be US$20,000 per month for five years from the effective settlement date; and US$30,000 per month starting from the sixth year to the end of the 10th year from the settlement date.
The settlement is with: Somboon Sukcharoenkraisri, Lee Bug Tong, Lee Bug Huy, Lee Hoe Property Co. Ltd, Paramax Co Ltd and related persons, collectively known as the Thai vendors.
Donaco said the deal provided “certainty of tenure for the Star Vegas business and will conclude all disputes between the parties”.
The firm added, referring to the global coronavirus health alert, that the settlement “will also allow the company and management to now focus on the forward momentum of the profitable Star Vegas business, and continued improvements to the company’s balance sheet and financial position ahead of any Covid-19 impacts to second half revenue and earnings”.
Donaco had told the Australian bourse on Friday that it was looking for financing to help support the firm’s payment obligations and working capital needs, in the light of the closure of the border crossing between China and Vietnam in January due to the outbreak of Covid-19, which had hurt the Vietnam portion of its business.
The firm operates the Aristo International Hotel and its associated casino at Lao Cai, on Vietnam’s border with China.
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