Osaka’s First IR Might Not Get the Approved Loan

Osaka’s casino resort is the first in more ways than one. Not only will it be the first integrated casino resort in the whole of Japan, but now it has secured the highest-ever loan of JPY550 billion (US$4.1 billion). 

Many banks are involved:

The government discussed this loan for almost a year. It was finally approved, but some banks that considered being included in the loan are now changing their decision. 

After long negotiations, the District Development Plan for the first IR in Osaka finally got approved in April. 

The works on the construction are estimated to be completed in winter 2029. MGM Resorts and Orix are in charge of building the resort, along with the Osaka prefecture and city. As the CEO of MGM Resorts thinks, the opening can be scheduled for 2030.

After the COVID-19 pandemic forced many casinos to shut their doors and negatively affected the whole industry, banks started questioning their decision about the loan. Hesitation is supported by the fact that many locals are against the casino opening in their city, since they are worried about potential gambling addiction and threats to public safety. 

Osaka’s banks, MUFG Bank and Sumitomo Mitsui Banking Corp. (SMBC), are expected to provide the syndicated loan to the casino. Both of the companies are expected to lend between JPY200 billion ($1.5 billion) and JPY300 billion (2.23 billion). However, the exact amount is still unknown since it depends on the amount that other banks will provide. 

Resona Bank and SBI Shinsei Bank, both reliable banks from Japan, want to be included in this major project. Development Bank of Japan, which is controlled by the state, and Sumitomo Mitsui Trust Bank also might become the lenders. Additionally, many smaller regional banks will have a chance to be included, which will keep the loan within the borders of the state without any banks outside of Japan getting involved.

Possible withdrawal of Mizuho Bank:

On the other hand, Mizuho Bank, which was expected to join the group, hasn’t said anything official yet, although the name of the bank is missing from the list of the ones which already confirmed its involvement.

The bank doesn’t seem very interested in the project. MUFG and SMBC accepted repaying the loan from the earnings of the IR, but Mizuho doesn’t accept that but wants to rely on the company’s creditworthiness, which is more of a corporate finance approach.

If Mizuho decides not to be involved in the loan, it would be an issue for other lenders since they would have to invest an amount of JPY100 billion ($740 million) more than previously planned.

The risks exist. Since the resort will be situated on Yumeshima Island, there is a possibility of soil contamination and liquefaction, which can seriously affect the environment – and anyone can be guilty of that. This is among the key points of the loan agreements, and the banks have to decide whether the investment will be good for them in the future.