Foxwoods casino owner is seeking to restructure its debt
NEW YORK - Mashantucket Western Pequot Tribal Nation, owner of the Foxwoods Resort Casino, is seeking to restructure at least $1.45 billion in debt as the recession and competition cut into winnings.
The Ledyard, Conn., casino’s owners have hired Miller Buckfire & Co., a New York investment bank, and the law firm Weil, Gotshal & Manges LLP as advisers, according to a tribal statement yesterday.
Foxwoods, one of the largest casinos in the United States by gambling space, may become the biggest tribal casino company to default, and its status on sovereign tribal land complicates negotiations. 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 yesterday. “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.
Foxwoods will continue to operate as usual, and the tribe doesn’t expect the restructuring to “affect our employees, customers, vendors, or business partners,’’ according to the statement. “The tribe does not plan to make any additional comments regarding this matter at this time.’’
Bill Satti, a spokesman for the tribe, didn’t return a call seeking comment. The Day newspaper in New London, Conn., reported the restructuring efforts earlier.
Mashantucket has a $700 million revolver loan due in July, $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 yesterday 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 the assets or operations of casinos on tribal land, Neuburger said. That leaves them little choice other than to restructure debts and work with the tribe, 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 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.
“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 US legal obligations, maybe I don’t either.’’’
