Foxwoods Casinos (one of the largest tribal) Fails to Make Full Debt Payment

Discussion in 'Wall St. News' started by ByLoSellHi, Nov 17, 2009.


    Foxwoods fails to make full debt payment

    By JOHN CHRISTOFFERSEN (AP) – 1 hour ago

    NEW HAVEN, Conn. — Foxwoods Resort Casino, one of the world's largest, has failed to make a full payment on its debt, leading to a default and another credit-rating downgrade as casinos around the country struggle amid the severe recession.

    The Mashantucket Pequot Tribal Nation, which owns Foxwoods, said it has paid $14.2 million of the $21.25 million semi-annual interest payment that was due Monday on $500 million in debt notes. The tribe said it does not anticipate paying the balance within a 30-day period, resulting in a default.

    The tribe, which has been seeking to restructure billions of dollars in debt, said its efforts are "separate and distinct" from operations at Foxwoods and will not affect customers, employees, suppliers or business partners.

    Foxwoods is the most high-profile example of a tribe defaulting on its debt, said Megan Neuburger, director at Fitch Ratings. She said investors have long wondered what would happen if a tribe, which has national sovereignty, defaulted on its debt.

    "This is definitely a precedent-setting situation," Neuburger said. "Certainly everyone in the investing community will be watching this to see what the outcome is."

    Standard & Poors lowered its credit rating to D, its lowest rating. Lenders will be more hesitant to make loans to Foxwoods, said Craig Parmelee, S&P's managing director.

    "The availability and cost of financing for Foxwoods in the future is in question," Parmelee said.

    Foxwoods is one of several casinos across the country defaulting on its debt as consumers cut back on discretionary spending, Parmelee said. Among those, he said, are Buffalo Thunder and Inn of the Mountain Gods, both in New Mexico; and a Michigan casino owned by the Little Traverse Bay Band of Odawa.

    Some commercial casinos not owned by American Indian tribes have gone into bankruptcy, he said.

    Parmelee said he did not expect Foxwoods to close, however. Lenders can take possession of commercial casinos that default and sell them to third parties, but that option likely is not available when dealing with Native American tribes who operate as sovereign nations, he said.

    The most likely scenario is a renegotiation of the debt, Parmelee said. That could mean some loan forgiveness, but lenders might question payments to tribal members and review the tribe's business plan, he said.

    "I don't think shutting down the casino is the best route to meeting the goals of either party," Parmelee said.

    Tribal officials said last month they had entered into a forbearance agreement with senior lenders that extends through Jan. 20. Such deals occur when a creditor gives up the right to immediate repayment of a loan by a debtor under certain conditions.

    Foxwoods, along with Mohegan Sun in Connecticut, underwent expansions just before the economic downturn. But Mohegan Sun, operated by the Mohegan Tribe, has said that the casino is financially healthy.

    "For those entities that took on additional debt to fund expansions, that certainly was a factor that contributed to many of the defaults across the gaming industry in the last two years," Parmelee said.

    Foxwoods and Mohegan Sun said this week that slot machine revenue dropped about 4 percent in October compared with the same month last year.

    Parmelee said he expects the level of declines in slot revenue at casinos to lessen, but he does not expect any meaningful growth next year.

    Copyright © 2009 The Associated Press. All rights reserved.
  2. Arnie


    I was at Mohegan this past week. Pretty dead. Plus they stop selling liquor at 1:00 AM. Helluva way to run a casino.
  3. AyeYo


    Boy, well good thing that added that gazillion dollar MGM Grand expansion right before the depression hit. *eyeroll*

    I would really hate to see Foxwoods go under. The new (smoke free!!) addition is a great place.

    To the guy that just went to Mohegan, are the minimums at the tables down at all or is it still $25 on the weekends?
  4. This is EXACTLY the answer to "Why do we have collapses?" What kind of dumb ass statement is that????? Is the general public to somehow believe that the "building" will be foreclosed upon, but the customers, suppliers, etc. will NOT be affected???? Oh, my bad - they can still play blackjack in the parking lot!!!!!

    A "management team" that thinks it can separate inseparable business units is doomed by its own stupidity!!!

  5. Arnie


    Only played poker.

    Btw, it's a beautiful casino. I was really impressed for something off the "strip".
  6. In So. Fla, they're advertising penny slots.

    Amazing times we live in.
  7. That's what you get for lending to a state-controlled enterprise I suppose. Your debt will always be junior to the interests of the state regardless of what the law says.
  8. AyeYo


    It is. Are you not from CT?
  9. AyeYo


    Say what? It's run by the tribe, the state of Connecticut has nothing to do with it.
  10. The tribe claims to be, and to some degree is, a sovereign state.
    #10     Nov 17, 2009