Vancouver's Parq casino looks to refinance amid debt pressure

The Parq Vancouver, a luxury casino complex that opened to fanfare in 2017, is seeking to refinance its debt amid increasing financial pressure and missed debt payments.

Andrew Hood, an equity research analyst at M Partners Inc., said since becoming operational, the complex brought in $170 million in revenue, incurred $152 million in expenses, for about $18 million of operating income.

However, its large debt coupled with a high-interest rate completely wiped out any income it made last year.

"If they want to be feasible moving forward, they must refinance that debt. There's no way they're going to make money as a business unless they refinance that debt," Hood said.

The building's owners took on about $450 million of debt in order to build the casino complex, which also includes two luxury hotels and eight restaurants and a conference centre.

Hood says Parq Vancouver made about $18 million of operating income in the 2018 fiscal year. However, he estimates its interest payments were about $30 million a quarter. Interest on its loans vary between over 7.5 to 12 per cent.

The complex has already deferred payment on one of its loans twice, most recently on Monday, Apr. 29.

Some positives for company

But Hood says Parq Vancouver can turn around its financial situation.

"The positive is the company has said to S&P Global Ratings [a financial services company] that they're getting close to refinancing [the debt]," he said.

The high interest rates on its current loans were because the casino hadn't been built yet, Hood added. Now that the building is built and operated, there is less risk involved and it can justify getting a lower rate of interest.

In addition, 2018 was not a typical year for the company. There were still start-up costs — like employee training and extra marketing.

Once the business is up and running, Hood says it will be able to increase its income.

Impact of anti-money laundering rules?

Some have cited the B.C. government's new anti-money laundering regulations, introduced in December 2017, as one reason for Parq Vancouver's financial troubles.

But Hood says it's hard to deduce its impact.

"It's hard to say what number would be the effect, because it was [the casino's] first year operating," he said. "Generally, the casinos in the area have said the anti money-laundering regulations affected revenues ... [so] you could say that it's unfortunate timing."

He says Parq Vancouver should focus on building up more positive exposure to attract people to the facility.

"It's an impressive facility ... [and] people who visit Vancouver would certainly be interested in visiting it even if they're not gambling."