Financial red flags for Sullivan casino

MONTICELLO, NY — The largest shareholder of Empire Resorts, the company that owns Resorts World Casino, has indicated that it would be willing to take the company private. The company, Kien Huat Realty III Limited (KH), said it doesn’t believe the casino can survive if Empire remains a public company.

KH owns about 86% of the company’s common stock, and said in a letter filed with the Securities and Exchange Commission that it would be willing to purchase the remaining stock it doesn’t own.

The letter was also sent to a special committee formed to “evaluate strategic alternatives” for Empire going forward. The letter said, “Kien Huat’s repeated infusions of equity and debt investments in the company over the years have enabled the company to continue operating until now. Kien Huat’s commitment to provide further equity financing to the company pursuant to the commitment agreement… will expire on April 15, 2020 and Kien Huat’s final equity investment may occur as early as November 15, 2019. As we no longer believe that the Company can become financially self-sustaining as a standalone public company, at this time, we do not intend to provide further equity or debt financing beyond our obligations under the Commitment Agreement while Empire remains a public company.”

The letter went on to say that KH would be willing “to entertain an invitation,” from the company to “submit a proposal to acquire all of the outstanding equity of the Company not owned by Kien Huat. We intend to immediately enter into discussions with potential equity and debt financing sources.”

Resorts World responded with a press release on July 25, that said, in part, “The special committee… will consider the Letter and any response thereto in connection with its ongoing review of strategic alternatives.”

The casino has been hemorrhaging money since it opened. The company reported a loss of $138.7 million in 2018 and has not taken in more than 45% of the revenue that was projected before it opened.

KH first joined forces with Empire Resorts in 2009, when Empire was attempting to open a casino in Sullivan County with the St. Regis Mohawk Tribe of American Indians. At the time, KH paid about $55 million for slightly less than half of the Empire stock.