Foxwoods Seeks ‘Mutually Beneficial’ Restructuring (Update1)
By Beth Jinks
Aug. 28 (Bloomberg) -- The owner of the Foxwoods Resort Casino said it’s seeking “a mutually beneficial” solution to the proposed restructuring of at least $1.45 billion of debt, backing away from earlier reported comments suggesting lenders may go unpaid.
“Like any other restructuring, the tribe is looking at all its options and there’s no plan at this time,” a spokesman for the Mashantucket Western Pequot Tribal Nation said today. “Through the process, the tribe will be pursuing a mutually beneficial resolution with its banks and bondholders. We’ve always had a favorable relationship with our lenders and we look forward to working with them on a solution that works for all.”
Michael Thomas, the Mashantucket Pequot Tribal Council leader who is seeking re-election as chairman, told tribal members they would be paid before banks or bondholders, the Day newspaper of New London, Connecticut, reported on Aug. 26. The paper cited an e-mail from Thomas sent to members. New London is about 14 miles from Foxwoods, which is located on tribal land in the southeastern Connecticut town of Ledyard.
That same day, the Foxwoods owner announced the proposed restructuring and said it had hired Miller Buckfire & Co., a New York investment bank, and the law firm Weil, Gotshal & Manges LLP as advisers. The news prompted Moody’s and Standard & Poor’s to cut their ratings on the tribe’s debt by four notches. A default be the biggest to date by any tribal casino company.
MGM Grand Hotel
Foxwoods, among the largest casinos in the U.S. by gambling space, has lost business to the recession and competition from new casinos and racetracks with slot machine-style video-lottery terminals in nearby states. Slot revenue fell 13 percent in July, the casino said on Aug. 14.
It has three hotels and six casinos with more than 7,200 slots and 380 table games. The Mashantucket Pequots, described as native Algonquins, receive income from the earnings. Mashantucket opened a casino and hotel under the MGM Grand brand in May 2008, just as the recession began to hurt gambling revenue.
“They borrowed a fair amount of capital to build the MGM Grand and the MGM Grand didn’t come close to what they were hoping for in returns on investment,” said Dennis Farrell, a debt analyst at Wells Fargo Securities LLC in Charlotte, North Carolina. “With the weakness in the overall market when they have amortizing debt coming due, they need to handle that and they’re obviously going to have a difficult time.”
Mashantucket has a $700 million revolver loan due in July 2010, $500 million in 8.5 percent bonds that mature in 2015 and $250 million of 5.912 percent bonds due in 2021, according to data compiled by Bloomberg.
It also owes money to Kien Huat, a Malaysian investment company owned by the family that controls the Genting Bhd. Group. Kien Huat initially helped finance Foxwoods and holds a loan with about $21.2 million principal remaining that requires the tribe to pay it a portion of casino revenue.
The tribe also owed $685.2 million in special revenue obligations and $375.1 million in subordinated special revenue obligations as of June 30, 2007, according to prospectus documents from the tribe’s most recent bond sale.
Native American casinos on tribal land don’t pay federal income tax. They usually pay a slot-machine tax to the state government. In Connecticut, tribes pay the state 25 percent of their slot winnings, and no taxes on table betting or other revenue.
To contact the reporter on this story: Beth Jinks in New York at email@example.com
Last Updated: August 28, 2009 16:12 EDT
EDITORIAL FOOTNOTE; According to the article, the Mashantucket Pequots debt on their casinos in South Eastern Connecticut is at least about $1.45 Billion ($1,450,000.000.00).
Think about the debt of the Mohegan Tribe's Mohegan Sun Casino, in Uncasville, Connecticut? It is allegedly between $1.2 Billion and $1.6 Billion.
Hello? Are we (the Mohegan Tribe) going to restructure, too? Has the present Tribal Council got us (the Mohegan Tribe) in this mess?
Some tribal members believe it is the MTGA's fault. What do you think?