Donaco Officially Completes Settlement with Star Vegas Thai Vendor

Article by : Helen Jan 21, 2021

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The litigation saga between Donaco International and its Thai vendors (Lee Hoe Property Co., Ltd and Paramax Co., Ltd) has finally come to its conclusion. On January 11, 2021, Donaco released an ASX announcement to inform its investors that the two parties’ settlement was completed.

The whole debacle began after Donaco acquired the Star Vegas Resort & Club business in Poipet, Cambodia, in 2015. The casino is located at the border with Thailand, which is a sweet spot for any Thai gambler (including VIP players) who would like to enjoy games on the casino floor – Thailand is yet to legalize casino operations.

However, the land under the casino was leased to Donaco by the Thai vendors, and the original agreement was going to last for the next 50 years.

Donaco also was in charge of operating the casino floor at the adjacent Star Paradise venue. In September 2017, the contract allowing that expired, but the venue owner based in Thailand kept it running despite not having Donaco’s consent to do so. This, from Donaco’s point of view, was considered a breach of the non-compete clause in the signed Star Vegas agreement – after all, Star Paradise is located next door from Star Vegas.

At the end of 2017, Donaco won an injunction to close Star Paradise in a Cambodian court. To make matters worse for the defendant, Lee Hoe Property, Donaco also handed over evidence that the Thai vendor was running an illegal casino under a supermarket’s guise.

The Thai vendor, in turn, threatened to terminate the lease on Star Vegas. Donaco also won an injunction to prevent that from happening. The arbitration in Singapore that followed the threats took the side of the Thai vendor; however, Donaco won the appeal in late 2019.

At the beginning of February last year, Donaco and the Thai vendors decided to press pause on all litigation matters and take two months to negotiate a settlement. In March 2020, the two parties reached an understanding and withdrew all of their requests from courts and authorities.

As a result of the settlement, Donaco’s lease on Star Vegas was extended to 2115. The Thai vendors agreed to pay the casino operator $38 million to remove the non-compete clauses from the contract. Donaco, in its turn, took up the obligation to pay the other party $18 million “to settle the claims for unpaid management fees plus interest,” as well as “any outstanding rent and an additional lease payment of $20 million to Lee Hoe Property”.

In late December 2020, Donaco announced that its lender, Mega Bank, gave the casino operator its approval to settle the case. In the same announcement, Donaco stated that “the company is on track to repay all the remaining debt in FY21”.

Now that the settlement is complete, Donaco is ready to let it all rest in the past and focus on the future. And the future looks a bit brighter for the casino operator: it bounced back to a positive EBITDA in October and November 2020. This fits only a selected few companies in the industry can boast these days.

Although the raw figures are hardly impressive ($0.54 million and $0.8 million for October and November, respectively), they are a good sign that the business is recovering from the damage caused by the pandemic-induced closures and a plummeted number of international travelers. And, as the company put it in its latest announcement, Donaco’s debt “has been reduced significantly, and a solid platform for growth is now emerging.”