The group of businessman Enrique Razon Jr. is now locked in a bitter dispute with the Las Vegas-based management firm it contracted to run Solaire Resort & Casino.
In a disclosure to the Philippine Stock Exchange, Razon’s Bloomberry Resorts Corp. said it had scrapped its management services agreement with Global Gaming Philippines LLC (GGAM), citing the latter’s “breach” of their management services agreement (MSA).
As a consequence, Bloomberry also sacked Solaire’s chief operating officer Michael French, GGAM’s official representative .
But GGAM fought back by bringing the case for arbitration, claiming that it was Bloomberry that was guilty of a breach of the MSA.
Shares of Bloomberry fell by 1.79 percent to close at P12.08 per share on Friday as the market anticipated that GGAM, which has an 8.7- percent stake in the local gaming firm as part of a management incentive package, may soon unload its stake following the termination of its management contract with Razon’s group.
In explaining the alleged “breach” of the MSA, Bloomberry said: “GGAM has not spent any material time in attending to the management of Solaire and has failed to perform its obligations and deliverables under the MSA.”
“However, many members of the existing management team are very capable and will continue to manage Solaire effectively without GGAM and its representative,” the company said.
GGAM is a unit of a Las Vegas-based casino investor, developer and manager of casino properties. It also operates in Macau and Singapore.
“The Bloomberry termination of its contract with Global Gaming was an unexpected development. It suggests that the team that Bloomberry had assigned the task of Solaire’s management and global marketing wasn’t doing its job and may reveal that the operating/financial performance of Solaire has been below expectations. Bloomberry now has a tough task of hiring a new casino management that will help the company achieve the original objectives set for Global Gaming,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.
“The termination should also have some unexpected benefits such as savings on performance incentives promised to Global Gaming, as well as costs like a potential share overhang since Global Gaming does own an estimated 8.7 percent of the company through Quasar Holdings. Since Global Gaming is no longer an investor in Bloomberry, it may sell this stake into the market,” Lacson added.
But company sources said while this development may prompt GGAM to unload its stake in Bloomberry, concerns on the shares overhang may be “exaggerated” as the management company was not likely to sell everything on the board.
At the same time, the source said there was enough demand for Bloomberry’s shares that the company would not even need to buy back those shares.
Under the terms of the MSA, GGAM provided planning technical and other advisory services to the Solaire Manila project during its construction and fit-out stage and was supposed to provide management services during its commercial operation. Bloomberry was to pay GGAM 2-6 percent of the earnings before interest, taxes, depreciation and amortization (Ebitda) generated by Solaire Manila, including local high roller table games.
A separate “incentive fee” was supposed to be given to allow GGAM to be paid a graduated fee for achieving certain Ebitda thresholds in relation to foreign high roller tables and junket players.