Wakayama prefecture’s IR ambitions came to an shuddering halt last month when the prefectural assembly voted down its area development plan. Governor Yoshinobu Nisaka finally has now posted a message on the prefectural website about the project he had been pursuing.
Titled “Wakayama’s IR rejection and the aftermath”, Nisaka’s statement said, “Unfortunately we were unable to proceed with the Wakayama IR project, which we had been preparing for several years.
“Losing out on this massive project of JPY 470 billion (US$3.6 billion) in investment and increasing local residents’ annual income by 10% each year is a severe hit to the prefecture.
“The assembly was divided between those for and against … but a decision was made, so I hope now we can join forces to pursue the next opportunity.”
Addressing the decision to vote down Wakayama’s area development plan, Nisaka said, “The issue is not how to judge debates that occurred within the assembly, but that they were not factual,” – a reference to concerns aired by the assembly over funding from the prefecture’s preferred partner, Canadian investment firm Clairvest.
“In case of a Wakayama IR, the majority of project preparations are done overseas, so the financing is also done in the overseas ways,” he said.
“It was the operator, Clairvest’s, suggestion to use the methods they had for so many casinos and IR properties in the past. This was in the form of Credit Suisse, which is a world-class bank that has provided financial support for many projects in the IR industry, issuing a letter declaring, ‘This project is trustworthy and we are sufficiently confident in arranging financing institutions for it.’ This letter is known as a ‘Highly confident letter’.
“People who thought this project could not be trusted were claiming, ‘A commitment letter is legally binding so it can be trusted, but a highly confident letter is not legally binding and cannot be trusted,’ and questioned the format, but that is not necessarily correct.”
He continued, “After issuing the ‘highly confident letter’, Credit Suisse would decide on the formation of the financial group and initiate financing within the deadline, and according to Credit Suisse’s explanation, given through the operator Clairvest, many projects have succeeded using this method, not a single one has failed.
“We proved these successful cases through documentation [that was only for] the special committee of the prefectural assembly. Apparently this is the typical pace for Credit Suisse until the loan is actually made, but the council had reliability concerns, perhaps with the expectation that there would be a strict inspection by the national government once it passed in the Prefectural Assembly.
“Credit Suisse’s formation efforts were far ahead of schedule and the corporations that already expressed that they would invest and finance has already disclosed their limits. Total investment had already exceeded the JPY 470 billion required, which was reported to the Prefectural Assembly.
“The format that financial corporations use to express intent for financing is called a Letter of Intent (LOI). There are people who claim that LOIs are pointless, every letter of commitment, letter of intent and highly confident letter has separate content, and it is not as if these three methods decisively differ in terms of legal liability. The level of legal liability is dependent on the content.”
Governor Nisaka praised the IR team put together by Clairvest, including casino operator Caesars Entertainment as well as Mario Ho.
“[Mario Ho] still hopes to pursue investment in an IR in Wakayama,” he said.
“Without IR, in other words, without the power of a casino, I believe investment at a scale of JPY 470 billion is impossible, but without a casino there are various legal regulations that will no longer be necessary. Naturally, I hope to put this failure behind us and continue investment bids in order to keep Mario Ho and other investors from giving up on Wakayama.”
