'Fair Value' Required for Ownership Transfer Under UK Law
Market Price Must Be Confirmed Through Sale Process
Sale May Be Completed If Price Is Met
Bain May Choose Direct Management Due to High Growth Potential
Global private equity fund Bain Capital, which took over management rights of Inspire Resort in Yeongjongdo, Incheon from Mohegan Group in February, has once again initiated the process to sell Inspire. This move is in accordance with the legal obligation to comply with the 'Appropriation' procedure for secured assets under UK law, as the Inspire corporate entity was established in the United Kingdom. Bain Capital may proceed with a sale if it receives an appropriate offer in terms of price and other conditions; however, if such an offer does not materialize, it can ultimately secure ownership, further develop Inspire Resort, and then consider a resale at a later stage.
According to the capital markets industry on May 16, Bain Capital has begun the sale process in order to complete the official ownership appropriation procedure required under UK law.
Previously, Bain Capital and others provided mezzanine loans to MGE Korea, a UK-based entity holding 100% of Inspire's shares, and set the entire equity as collateral. In February of this year, a financial covenant breach occurred at MGE Korea, prompting Bain Capital and other secured creditors to initiate the ownership appropriation process for 100% of the shares in accordance with UK law, where the company was incorporated. As a result of the enforcement of collateral rights, Bain Capital secured management control of Inspire. Subsequently, the official name of the resort was changed from 'Mohegan Inspire' to 'Inspire Entertainment Resort.'
According to legal experts, the appropriation process for secured assets under UK law includes an objective assessment of the collateral's value. In Korea, a typical fair value assessment refers to either the market transaction price or a valuation by an accounting firm. However, under the UK legal system, a legally recognized process must include not only an independent accounting firm's valuation but also a mandatory market-based public bidding procedure.
Therefore, Bain Capital can either sell Inspire Resort at its desired price during this process, or, if a sale does not occur, complete the legal ownership appropriation procedure and transfer ownership accordingly.
Bain Capital's position appears to be that any method is acceptable as long as it guarantees Inspire's future growth. In fact, after securing management control, Bain Capital has been implementing strategies to enhance Inspire's growth potential, such as appointing Vice President Lee Hanna, who previously led global distribution and marketing projects at Bain & Company, as Chief Strategy and Marketing Officer.
Inspire Resort recorded total sales of approximately 219 billion KRW and a net loss of 265.4 billion KRW in its first year of operation (October 2023 to September 2024). Even in terms of adjusted EBITDA, it posted a loss of more than 70.5 billion KRW. However, as of the end of February this year, the resort had attracted a cumulative 5.2 million visitors, delivering performance that exceeded expectations in terms of growth potential. An Inspire representative stated, "The peak season results following the grand opening in March 2024 have not been fully reflected yet," and explained, "During the initial stabilization phase of operations, significant investments have been concentrated in hiring and infrastructure development, so it will take some time to generate profits. From the outset, we have consistently pursued a strategy to maintain a balanced ratio of gaming (casino) and non-gaming revenue, with a particular focus on providing experiences centered on non-casino content such as MICE (Meetings, Incentives, Conventions, Exhibitions) and events."
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