When Parq Vancouver, a glimmering waterfront casino, opened amid much to-do in late 2017, few would’ve anticipated that a dirty money crackdown was about to throw the city’s roaring gambling business into turmoil.
Vancouver-area casinos for years had been accepting millions of dollars in questionable cash from gamblers showing up with suitcases and hockey bags bulging with bills, according to British Columbia Attorney General David Eby. But new rules implemented last year to more tightly identify sources of funds have put a damper on that rollicking trade.
“The anti-money laundering regulations in British Columbia have been a problem," says Andrew Hood, a Toronto-based equity analyst at M Capital Partners Inc. who covers Dundee Corp., one of Parq’s two owners. “The regulations were supposed to cut down on illicit gambling but, of course, that hurt volumes across casinos."
For Parq, one of the province’s largest-ever private developments, the clampdown came at a delicate time. The plan was to replace costly construction financing with cheaper debt after opening but business picked up slower than expected amid the new restrictions. It lost nearly C$153 million ($114 million) in 2018, according to a March 28 Dundee filing. Now Parq’s in a race to refinance debt in order to make an interest payment this week on a second-lien loan, according to S&P Global Ratings.
Loan Payment
Parq Holdings LP has a $150 million second-lien term-loan that was arranged by a syndicate of financial institutions led by Credit Suisse Securities in 2014, according to data compiled by Bloomberg. The amount of interest isn’t disclosed, but Parq had deferred an interest payment by one month to April 30 and its ability to pay hinges on the company refinancing its debt, S&P said earlier this month when it downgraded Parq Holdings LP to CCC, eight notches below investment grade, from B-.
"We still believe that, absent a debt recapitalization, the company will be unable to materially address its high fixed charges and financial sustainability," S&P said, adding there’s a risk of a payment default or a debt restructuring within the next 12 months.
Ottawa Owner
Privately held PBC Group, an Ottawa-based real estate developer, is the majority owner of Parq with 63 percent. Dundee, a Toronto-based public holding company with investments in agriculture, resources and real estate, owns the remainder. PBC and Dundee declined requests to be interviewed for this story.
Parq’s $220 million first-lien term-loan due in December 2020, which would be paid first in the event of a default, is down just one percent over the last 12 months, according to Bloomberg data. That may be because creditors believe Parq’s assets are worth more than the loans -- the resort generated C$43.5 million in revenue in the three months ended Dec. 31, up 36 percent from the same period in 2017, according to disclosures by Dundee. Interest on its senior debt hovers around 10 percent at $22 million a year.
If not for its untimely launch, Parq would’ve seemed a sure bet in a city that’d become a magnet for wealthy Asian high rollers known to drop more than C$500,000 -- source undeclared -- at gaming tables.
The shimmery copper-hued casino-cum-hotel complex finally offered an upscale option in downtown Vancouver with a second-floor entrance leading directly into the neighboring BC Place stadium -- on opening night, VIPs waltzed across for a Coldplay concert.