By Ricki Chavez-Munoz
Holders of national bonds Series I and J, represented by Banco Santander Chile, have filed a lawsuit against Chilean gaming company Enjoy and BTG Pactual Chile, “appealing the revoking of advance payment of a US$50 million loan made in April 2019, a year before the local judicial reorganization process the company had announced.” There is no surprise that Enjoy, one of Latin American casino hotel leading companies, has landed in Chapter 11 in the USA, seeking financial solace under a system where major Enjoy stockholders are US investment funds.
Enjoy is in US financial limbo because in its own country, Chile, the company began what is called a Judicial Reorganization process, something equivalent to Chapter 11, in April this year, owing to the negative economic effect following social upheaval in the country in 2019 when the people rose up against the abusive constitution that tyrant Augusto Pinochet left as a legacy years earlier. In addition, the ravages of the coronavirus global pandemic caused a profound economic impact on the company, motivating a practical abandonment of investment projects in four municipal casino tenders it had won earlier in the year.
In the US, Chapter 11 can be taken as some sort of financial vacation for companies that were poorly run or that came to such a hiatus as a result of a financial hangover. There have been casino companies, such as those of now-President Donald Trump, that have arrived at Chapter 11 before they were sold off or were dumped on to Chapter 7, which handles liquidation of bankrupt companies.
It is curious to see that in gaming numerology 11 means nothing special during the course of a craps game but at the beginning of the game number 11 wins on the come-out roll, same as iconic number 7. As counterpart, at the end of the game, while an 11 roll can be a result without greater consequence, a 7 roll is curtains for bets on the Win and all is over, just as bankrupt companies find when they land in chapter 7 of the US judiciary.
Similarly in business, with the kind of limbo that the US legislative system affords companies in Chapter 11, this can change the fortunes of such. However, as generally seen as with Trump’s companies, those who had held the financial aces set off a nefarious dusty trail like lecherous hustlers taking loot and funds and leaving hundreds of poor workers and unsuspecting suppliers facing ruin.
The casino business is not a business like any other, because a casino that enters the greyness of Chapter 11 also enters into a state of questionable financing, where the house that guarantees pay to winners from the operation’s regulatory bankroll can be said to offer as false a promise as by a dodgy politician, just as those seen at the Trump casinos when hi rollers stopped coming and took their action to other casinos elsewhere in New Jersey.
The problem for Enjoy and its casinos now is that while they are able to pay small potatoes winning bets of some pesos and cents on the slots, a state of financial limbo puts more doubts than certainties in the future of the company’s high roller action. The likelihood of a 7-out roll is more ominous in this kind of financial craps game of Chapter 11, which could be seen as the result of some incredible craps out.
There is no space to have a look at Chile’s gambling legislation – Law No. 19.995, as amended by Law No. 20.856 – which establishes the General terms of licensing, Operation and Control of Gambling Casinos in the country – to see if they allow a casino in the bankruptcy anteroom to bank gambling games. Or, for that matter, to check on legislation in Argentina or Uruguay, where Enjoy also operates gambling casinos.
The sad truth is that when a casino operation is affected by the uncertainty of a bankruptcy process, the company’s accounting system begins ‘savings galore’ drives, so that the company does not suffocate financially. Such savings, however, do impact on promotion, sales and services of the products, or casino promotions in this instance, denting the trust of customers, as happened with Trump’s casinos in Atlantic City, New Jersey, USA, where they were sold off or went belly up.