In a recent development concerning the shuttered Imperial Palace Saipan casino, a creditor of Saipan’s Imperial Pacific International (CNMI) LLC (IPI) has expressed interest in purchasing the casino. The creditor, represented by Michael Dotts of Dotts Law Office, has called for a live bidding process, starting at a price of USD 10.3 million. This move comes amidst ongoing discussions about the future of the casino property, with Dotts emphasizing the need for a transparent and structured sale process to ensure maximum return for creditors.
Background on the Sale Process and Investor Interest
Imperial Pacific International (CNMI) LLC has been in financial distress for some time, leading to the closure of its casino operations at Imperial Palace Saipan. With the company now looking to sell the property, various stakeholders, including creditors, have raised concerns about how the sale should be conducted. Michael Dotts, representing Dotts Law Office, which is a creditor of IPI, highlighted the involvement of a mystery US investor who has shown interest in purchasing the casino.
However, Dotts argued that the sale process proposed by IPI lacks transparency and proper procedural steps that are essential for an equitable sale. In a motion opposing the current sale process put forward by IPI, Dotts stressed the need for more time to allow for proper due diligence by potential investors.
The Call for Due Diligence and Proper Procedures
Dotts underscored the importance of having a well-structured process in place for the sale of the Imperial Palace Saipan. He stated, “A proper procedure needs to be put in place so that other investors can obtain due diligence material.” This statement reflects his concern that the current process might not allow all interested parties to access the necessary information to make informed bids.
According to Dotts, IPI possesses crucial materials that potential purchasers would need to evaluate the investment. These materials include blueprints, construction inspection reports, permits, construction contracts, and estimates of the cost required to complete the building. The lack of access to such information could deter serious bidders or lead to undervalued bids, ultimately affecting the creditors’ recovery from the sale.
The Proposal for a Bid Package and Extended Timeline
To address these concerns, Dotts proposed that IPI should assemble a comprehensive “bid package” containing all the essential documents and information that potential buyers would need. “The potential bidder from the United States has advised that bid packages are generally provided when properties are sold in bankruptcies,” Dotts noted, emphasizing the standard practice in such transactions.
Dotts suggested that the time for investors to consider placing bids should only commence once the bid package is made available. Additionally, he advocated for allowing investors the opportunity to have their own architects and engineers inspect the building or, alternatively, for a neutral architect or engineer to provide a report on the building’s condition. This approach, Dotts argued, would provide transparency and could potentially increase the property’s sale price by attracting more interested buyers.
Financing the Evaluation Process
The proposal also includes a recommendation for IPI to fund the hiring of a neutral expert to provide the building condition report using debtor-in-possession (DIP) financing. “Providing such a report with the bid package may increase the interest in the purchase of the property and result in a higher sales price,” Dotts explained. This move could ensure that the sale process is perceived as fair and open, thereby maximizing the potential returns for all parties involved.
Recommendation for a Blind Bidding Procedure
To further ensure a fair bidding process, Dotts recommended a blind bidding procedure starting at USD 10.3 million with increments of USD 100,000 for each new bid. This method aims to prevent any pre-determined “stalking horse” bidder—an initial bidder chosen to set the minimum acceptable bid—from acquiring the property for an undervalued price of USD 10 million.
“The Dotts Law Office proposes that 90 days after the bid package is made available to investors, sealed bids be submitted,” Dotts outlined. This approach would encourage the stalking horse bidder to make a higher bid to fend off potential competing bidders. By creating a more competitive bidding environment, Dotts hopes to achieve a higher sale price for the property, benefiting the creditors and the local community in the CNMI.
Considerations Beyond the Highest Bid
Dotts also highlighted the need to consider factors beyond just the highest bid when deciding the property’s sale. If multiple bids are received, and there is a significant difference in price, the property would naturally go to the highest bidder. However, if bids are relatively close in value, Dotts proposed that a bid committee should evaluate other factors, such as the bidders’ ability to complete the construction project.
“It is in the best interest of the CNMI and of all creditors who reside here that not only the highest price is obtained for the property but that the purchaser actually completes the project,” Dotts emphasized. This sentiment reflects a broader concern for the long-term economic and social impact of the sale on the CNMI community, beyond the immediate financial recovery for creditors.
The Importance of a Transparent and Fair Sale Process
The call for a structured and transparent sale process for Imperial Palace Saipan underscores the complexities involved in selling distressed assets. For creditors like Dotts Law Office, the primary goal is to maximize recovery while ensuring that the property is sold to a buyer capable of completing the development, thereby contributing to the local economy.
As the discussions around the sale process continue, it remains to be seen how IPI and other stakeholders will respond to Dotts’ proposals. The emphasis on due diligence, transparency, and fairness highlights the need for a comprehensive approach to asset sales, particularly in cases involving significant financial and community interests.
Looking Ahead: Potential Outcomes and Implications
The outcome of the proposed auction and the response from IPI and other stakeholders will have significant implications for the future of Imperial Palace Saipan and the broader economic landscape of the CNMI. If Dotts’ recommendations are implemented, it could set a precedent for how distressed asset sales are conducted in the region, ensuring that all parties have a fair opportunity to participate and that the community benefits from the eventual sale.
Moreover, a successful sale could pave the way for new developments and investments in Saipan, potentially revitalizing the local economy and providing new opportunities for growth. On the other hand, if the sale process lacks transparency or is perceived as unfair, it could deter future investors and undermine confidence in the CNMI’s business environment.
As the situation unfolds, the focus will remain on ensuring that the sale of Imperial Palace Saipan is conducted in a manner that maximizes value for creditors while promoting the long-term economic interests of the CNMI. By advocating for a transparent, fair, and well-structured sale process, Dotts Law Office and other creditors hope to achieve a positive outcome for all stakeholders involved.