Donaco International Ltd has reached a settlement with the Thai vendors and owners of the property upon which its flagship Star Vegas casino sits that will see all legal proceedings immediately dropped and Donaco’s Star Vegas lease renewed for 95 years.
The settlement brings multiple proceedings to an end including an arbitration claim in Singapore, where Donaco was seeking US$190 million in damages, and a Cambodian court battle over a disputed 50-year land lease deal for Star Vegas, both related to Donaco’s assertion that the vendors continued to run gaming operations in Poipet in defiance of non-compete provisions.
Details of the agreement suggest that Donaco has ceded considerable ground in negotiations with the Thai vendors – named as Somboon Sukcharoenkraisri, Lee Bug Tong, Lee Bug Huy, Lee Hoe Property Co. and Ltd, Paramax Co – in order to guarantee the continuation of Star Vegas operations.
Those concessions, aside from dropping litigation, include removing non-compete provisions from the Share Sale Agreement between the parties, allowing the Thai vendors to continue running gaming operations at Star Paradise, the competing casino they built next door to Star Vegas in 2016.
Under a new lease agreement running until 2115, Donaco will pay the vendors US$20,000 per month for the first five years and US$30,000 per month for the following five years, with rent then increasing by 3% every three years. Donaco will also pay 25% of any Star Vegas EBITDA in excess of US$16 million for the next five years.
Explaining the reasoning behind the settlement, Donaco said it weighed the potential benefits of litigation, particularly in Singapore, against the risk of having its Star Vegas lease terminated.
“The settlement reached provides certainty of tenure for the Star Vegas business and will conclude all disputes between the parties,” Donaco said. “It 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.”
The agreement restricts the vendors from selling off their 17.99% stake in Donaco for at least six months, with the company adding, “The economic interests of the Thai Vendors are also aligned with the Company through their escrowed equity position in Donaco and the restructured lease agreement. No net change to the cash position of the Company will eventuate from the settlement.”
