The unexpected loss of its Vietnam business has left Southeast Asian casino operator Silver Heritage Group in need of additional funding if it is to meet an upcoming US$2 million repayment of bonds.
In a trading update issued in conjunction with the company’s 2018 Annual Report on Friday – the release of which was delayed due to reporting irregularities discovered at its flagship Tiger Palace Resort in Nepal – Silver Heritage warned that recent events may cast significant doubt on the company’s ability to continue due to a potential inability to “realise its assets and extinguish its liabilities in the normal course of business.”
Of immediate concern is the company’s first US$2 million repayment of bonds due March 2020, part of a renegotiated deal with OCP Asia last September aimed at providing Silver Heritage more time to ramp up operations at Tiger Palace Resort. As part of that deal, Silver Heritage repaid US$6.8 million of bonds at the time and was granted an extension of the maturity date of the remaining US$11.2 million through to April 2021.
But those plans were thrown into disarray when the company learned that table games at Phoenix International Club in Vietnam – where it ran gaming operations on behalf of the owner – were no longer allowed under a revised Investment Certificate. Silver Heritage subsequently parted ways with Phoenix, which accounted for 45% of the group’s 2018 revenue, as part of a US$5.25 million settlement agreement.
In its Friday filing, Silver Heritage revealed that the cessation of its Vietnam operations “is a potential event of default under the terms of its Bonds,” although it added it had not yet received any notification of default from its Bondholders. The company has also received a waiver in relation to an upcoming EBITDA covenant test for the six months ended 30 June 2019, “which with the loss of its Vietnam operations it is unlikely to meet.”
Instead, Silver Heritage said it will seek new avenues of fundraising in order to pay its upcoming debts. Notably, the group is still chasing the second instalment of the settlement agreement after its former Vietnamese partner defaulted last month. Silver Heritage said that, following ongoing discussions, it has now received an initial payment of US$200,000 but is still working to receive the remaining balance.
The company is also continuing to court potential buyers of its Nepal operations with reports that up to four genuine expressions of interest have been received.
