From dBusinessNews (via Pechanga):
In a special report released today (Nov 2009 Fitch Report), Fitch Ratings says there are two important issues that will determine the future for the Native American gaming industry’s expansion: whether tribes will have access to the debt capital needed to finance growth, and federal government policy decisions regarding approvals for future Native American gaming developments on off-reservation lands. Investor sentiment on the Native American gaming sector has soured in this economic downturn, as poor trends in regional gaming markets pressure credit profiles, three tribes defaulted on bond payments in 2009, and the Mashantucket Pequot Tribal Nation recently announced a forbearance agreement with its senior lenders after the Tribal Chairman made comments highlighting investors’ concerns about the unique legal issues involved in lending to a tribal government.
Fitch believes many investors are likely to take a ‘wait-and-see’ approach with respect to these ongoing debt workout and restructuring efforts before committing significant additional funds to the sector, making it unlikely a tribe would be successful in arranging debt financing for a large-scale greenfield casino development at the present time (for additional information on this topic see Fitch research ‘Managing Through Distress: Considerations for Investors in Distressed Native American Gaming Credits’, dated May 11, 2009). However, over the longer term, the federal government’s policy stance with respect to approvals for off-reservation gaming projects will be the most important factor shaping the future growth path of the Native American gaming industry.
‘Right now the Native American gaming sector is feeling the effects of poor gaming operating trends and unfavorable credit market conditions, but those issues are likely to be less limiting down the road assuming an economic recovery and improved investor sentiment on the sector,’ said Megan Neuburger, Director at Fitch. ‘Actions taken by the federal government under the Bush Administration in 2008 were clearly an effort to curb off-reservation gaming expansion. Department of Interior officials have recently made public comments that they are in the process of reviewing their policy on off-reservation gaming approvals, and we’re closely following the developments to assess their impact on the industry.’
According to the report, since the promulgation of the Indian Gaming Regulatory Act (IGRA) set the framework for the Native American gaming industry in 1988, there has been significant political controversy. Proponents of expansion tout the benefits of economic development, while opponents decry ‘reservation shopping’ and the ills associated with the expansion of casino gaming. While it has never been easy for a tribe to obtain the regulatory approvals necessary for gaming on off-reservation land, recent developments have made the likelihood of a successful outcome even more remote. These developments include guidance and a rule published by the U.S. Department of the Interior in 2008, as well as the 2009 U.S. Supreme Court ruling in Carcieri v. Salazar.
In the special report, Fitch explains these developments, the associated impact on the approval process, and the actions the federal government may take under the Obama Administration with respect to these issues, as well as providing a summary of the implications for the credit outlook for the sector. ‘Native American Gaming Insights: Off-Reservation Gaming Approvals: How Will the Feds Play Their Hand?’ is now available on Fitch’s web site at ‘www.fitchratings.com’.
Additional information is available at ‘www.fitchratings.com’.
Turtle Talk 