Can Parq Vancouver Recover from Debt Distress?
Completed in September 2017, Parq Vancouver is a high-end, world-class development, the largest in British Columbia. Words used to describe it include unrivaled, luxurious, fresh, and impressive. It delivered, they said. It rose to all challenges and delivered.
The development, located next to BC Place, offers two four-star hotels, eight restaurants and lounges, as well as an event space, spa, fitness studio, and an adjacent park. It also has a two-story casino with 600 slot machines and 75 gaming tables.
Little more than a year and a half after Parq Vancouver’s grand opening, Bloomberg is reporting some distressful financial news. In 2018, the project lost $153 million during its first full year. And now, a debt refinancing situation has come to light; one that requires it to make an interest payment on a $150 million second-lien loan.
Some are calling it debt distress. And others are wondering if the development can survive such a tough financial challenge so early in its already-difficult first years.
Parq Vancouver Money Problems
According to Bloomberg, the second-lien term loan was arranged by a group of financial institutions in 2014 for Parq Holdings. And a deferred interest payment is coming due. The company must refinance its debt in order to make that payment.
And the next 12 months will be key to its future, as a $220 million first-lien term loan is due by December 2020.
S&P Global Ratings is not confident in the outcome. “We still believe that, absent a debt recapitalisation, the company will be unable to materially address its high fixed charges and financial sustainability.”
However, some investors claim that the development has assets worth more than its loans. Moreover, they claim it is still a vibrant business in a promising market. Paragon Gaming Holding CEO Scott Menke noted, “The revenues in Vancouver have grown consistently within the past 10 years; pretty much every other market has not seen a raise in table revenues.”
So, why the doom-and-gloom forecasts?
The Canadian gambling industry as a whole has been dealing with money laundering problems for years. And it all came to a head around the same time that Parq Vancouver opened. IIn the year that followed, Parq has had to implement numerous government mandated policies and train employees to combat money laundering.
Those implementations are expensive in and of themselves. Furthermore, they cut into the practices that have delivered so many high rollers. Most of these ‘whales’ travel from Asia and other parts of the world to gamble without reserve or limit.
Money laundering concerns were so great by 2017 that British Columbia Premier John Horgan hired an independent investigator to look into crimes that took place within the gambling industry.
– Ignoring Signs Of Money Laundering
Many casinos, owned and managed by many different companies – including the British Columbia Lottery Corporation (BCLC) – have been implicated in ignoring signs of money laundering or continuing practices that made it easy for gamblers to funnel money through casinos. Specifically, high rollers from China and other Asian countries were bringing cash that was likely obtained through criminal enterprises, buying chips with which to gamble in Canadian casinos, and then cashing out those chips for clean cash.
Many of the processes implemented by casinos at the command of the government have already been successful. Only a few months into 2018, Attorney General David Eby of British Columbia revealed that transactions that had been classified as potentially involving money laundering dropped from tens of millions of dollars to just $200,000.
There are few who will argue that anti-money laundering measures were not necessary and helpful. However, casinos have had to pick up the tab for the bulk of the related expenses. It is unclear exactly how much money Parq Vancouver spent to implement new policies and training. Nevertheless, it has lost some business due to the restrictions on high-stakes gambling.
Parq Vancouver Refuses Drake
The world-famous rapper, Drake, was in Vancouver in November 2018 to play several shows at Rogers Arena and stopped in at Parq Vancouver’s casino. But when he tried to gamble with more than $10K in cash without a receipt, he was turned away.
Casino President Joe Brunini explained the legal requirements for cash transactions over $10K, but Drake insisted he provided the receipts.
Drake posted about the incident on social media and claimed racism was behind the casino actions. Parq Vancouver, however, claimed otherwise. While they eventually apologised and explained that they could’ve handled it better, it was a massive public relations fiasco at the time.