Montreign Operating Company: Debt Repaid ?

A few months ago, the Montreign Operating Company, which owns and operates a major upstate New York casino called Resorts World Catskills, and which is an indirect subsidiary of Empire Resorts Inc, was on the verge of bankruptcy. We wrote about the liquidity challenges the business faced at the time. Since then, much has happened. First, one of the partners in Empire Resorts – a Malaysian gaming company called Genting Malaysiabought control of the portion of the business not owned for $129mn. Here is a synopsis of the complex transaction:

As of August 18, Kien Huat Realty III – the family trust of Lim Kok Thay, a businessman who is the controlling shareholder of the Genting group, a Malaysia-based casino and plantations conglomerate – held approximately 86 percent of the voting power of Empire Resorts’ capital stock, according to a filing by the American firm. Under the operation announced in August, affiliates of Kien Huat Realty III and Genting Malaysia additionally plan to acquire the outstanding shares held by Empire Resorts’ minority shareholders, for US$9.74 a share. The deal would lead to the privatisation of Nasdaq-listed Empire Resorts via a joint venture between Genting Malaysia and Kien Huat Realty III

Then Covid-19 came along and in March, the casino was closed. The new owner raised additional monies to support working capital needs. Now we understand that the company’s 1/24/2023 Term Loan has been repaid and Moody’s has withdrawn its CCC rating, based on a April 17, 2020 report by the ratings group. This – if correct – would be good news for the 4 BDCs with exposure to Montreign/Empire , all of which is in the said Term Loan. That debt was valued between 0% and a (15%) discount at year end 2019 by the BDCs involved and was rated CCR 4 by the BDC Credit Reporter.

At a time when BDCs are taking losses left right and center and are anxious to de-leverage their portfolios with borrower repayments, this could be good news for non-traded Business Development Corporation of America; PennantPark Floating (PFLT); Investcorp Credit (ICMB) and PennantPark (PNNT) – in descending order of the $74mn invested at cost. We’ve checked as closely as we can, but we’ll need final confirmation from the BDCs involved at some point. We won’t be removing the company from the Underperformers list till we’re certain but the odds look good that we’ve got some good news to report.