Is Caesars Entertainment Going to Lose Its South Korean Resort Permission?

Article by : Helen Jan 22, 2021

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The long-awaited casino resort under development 10 kilometers away from the South Korean capital’s Incheon airport is still in trouble – as well as Caesars Entertainment. The Midan City resort was scheduled for opening in March 2021, but the construction works were abruptly stopped in February last year when the joint venture failed to pay around 30 billion won (~US$27.2 million) to its construction partner SsangYong E&C.

The construction is only 25% finished, and it is Caesars Entertainment that is reported to be blamed for not paying up – the investment doesn’t seem profitable enough for the company. Another ruth Korean news outlet report cites “a disagreement between shareholders regarding the change in business details” as the reason behind the stalled development.

South Korea’s Ministry of Culture, Sports and Tourism gave the developers until March 17 to figure out their differences, find a way to resume construction works, and submit a business plan change application to reflect the solution. If Caesars fails to do so, the casino operator will lose its permission for the resort – and the unfinished building might end up as a ‘ghost’ one.

We have informed the Midan City complex resort business about the application for change of business plan, but the documents have not yet been submitted.

Caesars Entertainment and Puri Group, a Chinese real estate developer, got South Korean authorities’ initial approval (a.k.a. “preliminary screening eligibility”) for building a casino resort in 2014. The casino resort was conceived as a foreigner-only one, and its construction site is located near Incheon airport outside Seoul. The resort is a part of a larger development project called Midan City in the Incheon Free Economic Zone (IFEZ).

The two companies partnered up via a joint venture and were expected to spend 2.2. billion won (roughly US$1.99 million) on the project. However, it turned to be a lot more costly than that in the long run. So far, the developers have already poured 55 billion won (roughly US$49.8 million) into the casino resort project.

Even though after merging with Eldorado Resorts in July 2020, Caesars became “the largest casino and entertainment company in the U.S.,” its 3Q2020 financial results were underwhelming, to say the least. The casino operator reported a net loss of $926 million (whereas in 3Q2019, it managed to score a net income of $37 million).

On the other hand, the casino operator raised $1.9 billion in equity at the beginning of October, and the adjusted EBITDA for the third quarter of 2020 was positive – $463 million (although almost twice as low as in 3Q2019 when it amounted to $810 million). As for the final quarter of last year, we’ll have to wait until February 25 to see how well Caesars finished the quarter and what toll 2020 has taken on the casino operator.

Caesars’ planned casino resort isn’t the only one that ran into trouble in South Korea. The Mohegan Sun project, Inspire Resort, also ran into a financial tight spot in October 2020, so the company had to pause the resort’s construction works at the 14-percent completion mark. It is unlikely Inspire Resort will make it on time for the opening in 2022 as planned; Mohegan Sun, however, remains optimistic that it’ll find the funds to resume works fast enough.

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