Imperial Pacific cashes in HK$24 million per profit guarantee

Imperial Pacific International will be paid HK$24 million because of a profit guarantee clause signed when it acquired a 5 per cent profit stream of the Macau gaming promoter Hengsheng Group last year.
The only reason that Imperial Pacific International is receiving HK$24 million is because of a profit guarantee. In fact, 5 per cent of the profit of Hengsheng Group in 2014 accounted for only HK$10,7 million. The remaining HK$13,3 million is to be paid by the vendor of the profit stream, Ms. Cui Limei, as compensation for the shortfall of results.
However, this outcome is below the expectations of Imperial Pacific International when it first paid HK$400 million for the 5 per cent profit stream of the Macau junket operator.
“Even if there is no growth for the year 2014 and the Junket Profit remains HK$554 million, the Target Company will still be entitled to receive approximately HK$27.7 million pursuant to the Profit Transfer, which will be more than the Guaranteed Profit Share of HK$24 million for the same period”, it was explained when the contract was signed.
This is one of the consequences of the recent slowdown in Macau’s Gross Gaming Revenue (GGR) that has been shrinking since June, which in turn led to the first-ever annual decline in revenue, in 2014. A total of HK$341.3 billion accounted for a decline of 2.6 per cent in Macau GGR.
As part of the profit guarantee Imperial Pacific is due to receive an extra HK$72 million for the period 1 January to 31 December, 2017. The contract also involves the payment of another HK$304 million from January, 2018 to December, 2029 to be paid in different periods. However if the aggregate profit stream equals HK400 million the profit guarantee will be considered terminated.
As for January of last year, the Hengsheng Group had seven VIP rooms across StarWorld Casino, Wynn, Galaxy, Sands Cotai Central, MGM and The Venetian, totalling 82 VIP gaming tables targeting premium  players.
J.S.F.