Genting Malaysia works with US tribe to recover RM1.49 billion notes

PETALING JAYA: Genting Malaysia Bhd (GENM), which had subscribed to the promissory notes issued by the Mashpee Wampanoag Tribe in the US last year for a gaming resort development in the US, said it will work with the tribe to review all options available for its investment in the promissory notes.

The total amount invested in the interest bearing promissory notes (including accrued interest) as at June 30, 2017 amounts to US$347.4 million (RM1.49 billion).

In a filing with Bursa Malaysia, Genting said it is supportive of the tribe's endeavour to protect its land base and their associated development rights and will work with the tribe to assess the recoverability of the promissory notes and impact to the group's consolidated earnings and net assets for the financial year ending Dec 31, 2017.

The group had earlier disclosed in its 2016 annual report that the recoverability of the promissory notes is dependent on the resolution of the legal case that the tribe is currently embroiled in.

To recap, the group announced on April 1, 2016 its subscription to the promissory notes issued by the tribe to finance the pre-development expenses of an integrated gaming resort in Taunton, Massachusetts in the US. The 900-room resort casino is to be opened in phases.

Although GENM Group does not have any equity interest in the project or the tribe, which is sovereign, the investment in notes allows the group to enhance the returns expected from its involvement in the Project.

Prior to that, in September 2015, the US Department of Interior (DOI) had issued a record of decision (ROD) to take the tribe's aboriginal lands in Taunton and Mashpee into trust for the tribe, enabling them to pursue the development of the resort on its initial trust land in Taunton.

However, in February 2016, a group of local Taunton residents took legal action against the DOI for issuing a ROD to hold the tribe's reservation lands in trust. A judge of the US District Court in Massachusetts subsequently ruled against the DOI in July 2016 but allowed the tribe's land to remain in trust while the DOI and the tribe decide how to move forward.

The tribe chose to appeal the case to the US Court of Appeals for the First Circuit, where it remains pending today.

"Given that the lawsuit remains pending and further rulings are expected to be made, construction of the integrated gaming resort has been put on hold pending further court developments and/or actions by the DOI or other relevant governmental authorities that will enable the tribe to ultimately proceed with the integrated gaming resort project," said GENM.

In December 2016, at the request of the tribe, the DOI initiated a review process to determine whether it would continue to hold the tribe's lands in trust under a different legal category, join the tribe in its appeal of the US District Court's adverse ruling or take the tribe's lands out of trust.

The DOI eventually decided in April 2017 to continue evaluating its ability to keep the lands in trust under a different legal category.

Last month, the tribe said it requested a suspension of the DOI's review of its submissions, to preserve the tribe's rights to seek further review and consultation at a later date and investigate all options available to secure the tribe's land base.

However, the request to suspend the review process was declined by the DOI, who decided to extend and expand its review process by requesting further materials on whether the tribe's history supports its rights to trust land.

The tribe and the local Taunton residents are required to submit materials to facilitate the additional analysis by Aug 31, 2017 and reply to the opposing submissions by Oct 30, 2017. The tribe's lands remain in trust unless ordered by a court to take it out of trust.

GENM shares fell 1.74% to close at RM5.66 last Friday, with a total of 2.39 million shares traded, giving it a market capitalisation of RM32.08 billion.