The Mashantucket Pequot’s decision in late August to hire a financial advisor heightened fears that the operator behind the Foxwood’s Casino in Connecticut might be considering a default on its $1.5bn debt load. The move saw both Moody’s and Standard & Poor’s downgrade the tribe’s rating by three notches.
Keith Foley, senior vice president of debt research at Moody’s, said it was the lack of information from the tribe about its actions that was the main cause for the “pretty severe” downgrade.
“The two primary reasons for that were, one, the announcement was very brief which raised a lot of uncertainty in terms of what the options are or what they were thinking. In addition, the statement that they hired a financial advisor, particularly given some of the challenges in the Connecticut gaming market, suggested to us that there is always the possibility that an option could be chosen that could lead to some impairment to creditors.”
However, Foley was keen to stress that a “favourable outcome” might still be possible, and that this could have positive ramifications far beyond the confines of the Mashantucket’s own debt dilemma. “One of the things I would like to point out is that a key implication from this could be that if the Mashantucket tribe truly demonstrates that it is taking every possible step to honour its debt service obligations and they maintain strong corporate governance standards, it could set a very good example for other tribes and increase the legitimacy of lending to the Native American sector in general.”
Turtle Talk 