Bloomberg Report on Foxwoods Debt Default — Now $1.45B

From Bloomberg Report (miigwetch to K.C.):

Foxwoods Casino Owner Said to Seek Debt Restructuring

By Beth Jinks and Jonathan Keehner

Aug. 26 (Bloomberg) — Mashantucket Western Pequot Tribal Nation, owner of the Foxwoods Resort Casino, is seeking to restructure at least $1.45 billion in debt as winnings dwindle, according to a person with knowledge of the situation.

A restructuring plan has been submitted to creditors and the Connecticut casino’s owners have hired Miller Buckfire & Co., a New York investment bank, as an adviser, said the person, who declined to be identified because the talks aren’t public.

Foxwoods, one of the largest casinos in the U.S. by gambling space, may become the biggest tribal casino company to default. The operation 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.

“They can’t do the types of things other debtors can in a restructure,” Megan Neuburger, an analyst at Fitch Ratings in New York, said today in an interview. “Tribal casinos can’t do a debt-for-equity swap. They can’t raise cash by selling off assets on tribal land” to repay creditors.

Lori Potter, a Foxwoods spokeswoman, didn’t respond to a call and e-mail seeking comment. The Day newspaper in New London, Connecticut, reported the restructuring efforts earlier.

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 may have other debts as well.


Standard & Poor’s today cut its Mashantucket rating four steps to CCC and placed the debt on credit watch, citing the restructuring reports.

Creditors probably can’t take over assets or operations of casinos on tribal land, which are sovereign nations, as they may with commercial bankruptcies, Neuburger said on a conference call. That leaves them little choice other than to restructure debts and work with the tribe, Neuburger said. No tribal casino has tested bankruptcy laws.

“Bankruptcy law does not apply to tribal situations in the same way it does to a commercial situation,” Neuburger said.

Michael Thomas, chairman of the Mashantucket Pequot Tribal Council, told members that the tribal government would be paid first, before bankers or bondholders, The Day reported, citing an e-mail sent out last week.

The tribe has a payment due on its loan Sept. 1, said Lawrence Klatzkin, an analyst in New York at Chapdelaine Credit Partners, a unit of Chapdelaine & Co., a municipal bond broker.

Equity First

“It might be posturing, but the tribe is indicating that it might put itself, the equity holder, ahead of the debt, ignoring corporate law,” said Klatzkin. “It probably won’t happen, but if it does, who’s to say other tribes don’t say, ‘If Foxwoods doesn’t need to meet its U.S. legal obligations, maybe I don’t either.’”

Closely held Foxwoods, based in Ledyard, Connecticut, once competed only with Atlantic City for gamblers in the northeastern U.S. Today gamblers can also visit the Mohegan Sun casino, operated by the Mohegan Tribal Gaming Authority, 10 miles away in Uncasville, Connecticut, and slot casinos in Pennsylvania; Yonkers, New York; and Rhode Island.

Competition is expected to intensify when New York City’s Aqueduct Racetrack expands and adds slots, and if states including Massachusetts allow casino gambling.

Located on tribal land in the hills of southeastern Connecticut, Foxwoods 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.

Malaysian Investor

Malaysian investor Kien Huat initially helped finance Foxwoods, which opened a casino and hotel under the MGM Grand brand in May 2008.

Three smaller tribal gaming companies have missed loan obligations during the recession, Neuburger said. In New Mexico, Buffalo Thunder Resort & Casino and Inn of the Mountain Gods Resort & Casino, and in Michigan, Little Traverse Bay Band of Odawa Indians, have defaulted on bond payments.

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