Court stops sale of GGAM’s Bloomberry shares

Gaming firm Bloomberry Resorts Corp. on Monday obtained a court order preventing the unloading of P7.42 billion worth of its shares by Global Gaming Philippines LLC (GGAM), the Las Vegas-based management firm that was earlier booted out of Solaire Resort & Casino.

In a memorandum issued Monday morning, the Philippine Stock Exchange—one of the respondents to Bloomberry’s lawsuit—said it had received an order from the Makati Regional Trial Court granting a 20-day “temporary order of protection” for the Bloomberry group effective immediately.

The order stops GGAM or any of its directors, officers, placement agents, stock broker agent Deutsche Regis Partners Inc., “John Does” and the PSE as market operator from crossing the 921.184 million Bloomberry shares, equivalent to a stake of 8.7 percent, that were beneficially owned by GGAM.

GGAM moved to sell its Bloomberry shares to 50 institutional investors at a discounted price of P8.05 per share last week, prompting the listed gaming firm to seek a six-day trading suspension. The PSE initially granted the trading suspension but only for one day, allowing the resumption of trading of Bloomberry shares the following day.

Bloomberry, led by business magnate Enrique Razon Jr., obtained the protection order on grounds that the shares that GGAM was trying to dispose of were the subject of a counter-claim in an ongoing arbitration proceeding.

“…If the sale of the shares is completed, the petitioners will not be able to get back the shares and they will not be able to satisfy any judgment for damages that they may be able to obtain against GGAM in their ongoing arbitration proceedings on the termination of their MSA (management services agreement) because of GGAM’s uncured material breach of the MSA,” Bloomberry said.

Bloomberry terminated the MSA with GGAM for Solaire four months ago, claiming a breach of their MSA. As a consequence, Bloomberry fired its chief executive officer Michael French, who was the key representative of GGAM in the gaming firm.

GGAM fought back by bringing the case for arbitration, claiming that Bloomberry was the one that violated the MSA.

“After the former CEO/president of Bloomberry was let go, we initially thought that the GGAM shares would naturally become a share overhang so, in a sense, the sale was expected. But given that Bloomberry had counterclaims on the GGAM stake, selling the shares could result in a regulatory nightmare if the counterclaims would prosper,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.

“But from another perspective, it also reflects the developing impact of the shareholder/management disagreement over the share price,” Lacson said.

The share price of Bloomberry tumbled by more than 26 percent since the legal squabble with GGAM started.

After obtaining protection from the court yesterday, Bloomberry’s shares were up by 0.23% to close at P8.80 per share, giving it a market capitalization of P92.98 billion.

Under the terms of their original agreement, 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.

A separate “incentive fee” was supposed to be given to GGAM. Under the scheme, GGAM is to be paid a graduated fee for achieving certain Ebitda thresholds in relation to foreign high roller tables and junket players. The option to acquire a minority stake in Bloomberry, which was exercised by GGAM resulting in the 8.7-percent stake, was also part of the old incentive package.