Donaco Looks To Open Value To Cut $40M Debt

Casino resort operator Donaco International said it was reviewing what it would do about its $39.9 million debt to Mega International Commercial Bank Co Ltd, which it secured against assets at Star Vegas Resort and Club (pictured) in Poipet, Cambodia.

Donaco told the Australian Stock Exchange on Thursday it would launch a strategic review to investigate how the board recovers cash for up to three months.

"The Board is currently conducting a strategic review to consider a range of ways to remove or restructure megabank debt and secure cash flow to carry out capital management initiatives," the statement on Thursday said.

The company's shares appear to have contributed to the review, with the board saying "current share prices do not reflect the value of the company's assets at all." Donaco shares were trading around A$0.07 ($0.05) in mid-market yesterday.

"Discussions are currently underway with several parties who have put forward proposals to increase the value of the company's assets and provide value to shareholders," the statement said. "The board is currently in discussions with potential strategic advisers to help the board consider a range of proposals."

The company said it expects the review to take about three months and will keep investors informed about the progress.

Donaco said the debt to Taiwan's Megabank was secured only for assets from its Star Vegas business in Cambodia. Donaco has casinos and hospitality operations in Vietnam, a city near the border with China's Yunnan province, and near the border with Thailand in Cambodia.

Donaco is in a dispute with three Thai businessmen who once owned a club with Star Vegas Resort, a Puypet casino. Donaco says the former owners are breaking contracts with the company by running two competing casinos. The company has filed a dispute with arbitrators in Singapore and is airing the side of the dispute in Australian courts. Donaco is seeking at least US$190 million in damages against the three.

The company reported a after-tax loss of A$124.5 million for the fiscal year ended June 30, taking into account non-cash impairment costs of A$143.9 million for the license value of its Star Vegas business, a cost incurred as a result of the dispute.

Earlier this month, the company announced that executive director and CEO Joey Lim Kyung-yu is taking three months off for health and other reasons and his brother, non-executive director Ben Lim Kyung-hoe, will take his place.

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