MOODY'S LOW DEBT RATING OF MOHEGAN TRIBAL GAMING AUTHORITY TO CAA3

Moody's lowers debt rating of Mohegan Tribal authority
By Brian Hallenbeck
Publication: The Day
Published 05/10/2011 12:00 AM

Moody's Investors Service further lowered its ratings on the Mohegan Tribal Gaming Authority's debt Monday, citing its concern that the authority has yet to refinance a $675 million line of credit, or "revolver," and $250 million in bonds, both of which come due next year.

The agency dropped its "corporate family" and probability-of-default ratings from "Caa2" to "Caa3," meaning it considers the authority at substantial risk of default. Moody's downgraded all of the authority's long-term debt, assigning it a "negative" outlook.

Authority executives could not be reached for comment late Monday afternoon.
During a conference call with investors last week, Mitchell Etess, the authority's chief executive officer, declined to discuss the status of the authority's attempts to refinance its debt except to say it was still working with advisers.

Moody's, in a statement issued Monday, noted the $675 million revolver - of which $493 million had been drawn as of March 31 - is due in March 2012 and that $250 million in senior subordinated notes obtained at 8 percent interest mature in April 2012. Moody's warned it would consider the debts due if the MTGA was unable to refinance them a year in advance.

"Both of these debt obligations are considered to be current," Moody's said Monday.

The MTGA has total debt of about $1.6 billion.

The "Caa3" rating also reflects MTGA's "significant leverage" - its debt is nearly seven times its EBITDA (earnings before interest, taxes, depreciation and amortization) - "continuation of weak consumer gaming demand trends in the Northeastern U.S., and the possibility of gaming in Massachusetts," the agency said.

In announcing a previous downgrade last December, Moody's raised doubts about whether the MTGA could avoid a restructuring of its near-term debt as opposed to a refinancing. A restructuring often involves creditors receiving less money than they are owed, while a refinancing involves the negotiation of better loan terms, including extended maturities.

The MTGA operates the Mohegan Tribe's Mohegan Sun casino in Uncasville and Mohegan Sun at Pocono Downs, a racetrack casino in Wilkes-Barre, Pa.

Last week, it announced it would partner with a developer to operate the proposed Concord Resort racetrack casino in Thompson, N.Y. The authority has also said it will seek a license to operate a casino in Palmer, Mass., should Massachusetts legalize casino gambling.

EDITORIAL FOOTNOTE: With this much debt, how is the MTGA ever going to get the funds to do deals in Palmer or the Catskills?


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