Tribal gaming companies look to restructure debt

LAS VEGAS, Nevada -- Florida's Seminole Tribe has turned Indian gaming into a global enterprise and big returns, but not all reservation casinos are doing as well.

The recession, which hit the entire casino industry hard in 2008, has forced tribes from New Mexico, California and Connecticut to either default on millions of dollars in debt or to refinance their bonds.

One of the biggest, the Mohegan Tribal Gaming Authority, which owns the Mohegan Sun resorts in Connecticut and Pennsylvania, recently moved to refinance its $1.075 billion debt.

The tribal authority said it would trade $598 million in bonds for new notes. The deal places few restrictions on the tribe's operations.

Mohegan officials are also looking to cut about $200 million from the tribe's credit agreement, reducing the debt to about $475 million.

"That Mohegan Sun is able to refinance (its debts) just goes to show the strength of our business," said Victor Rocha, a member of the Pechanga Band of Luiseño Indians in Riverside, Calif., and a nationally known Indian gaming analyst.

Rocha pointed to increases in first-quarter revenues as an example of a stable gaming company. Net income for the first quarter ended Dec. 31 was $24 million, the authority said.

Net revenues were $351.9 million, up 28.5 percent from $273.8 million in the same period a year earlier.

The authority attributed the upswing to increases in gaming and nongaming revenues at the Mohegan Sun Casino and at the tribe's Mohegan Sun at Pocono Downs.

Authority CEO Mitchell Grossinger said he is confident that as the economy continues to stabilize, the company's business volume will improve.

Rocha agreed, saying the tribe had been very disciplined, given that it had an "almost insurmountable amount of debt." But he said the debt restructure allows the tribe to pursue expansion opportunities in Massachusetts, including a new license for a resort near Boston.

The Mohegans are not the only tribe to restructure their debt during the recession. In 2009, the Mashantucket Pequot Tribal Nation, which owns Foxwoods Resort Casino & MGM Grand at Foxwoods in Connecticut, began efforts to reorganize the obligations of its casino.

The tribe's gambling business had about $2 billion in debt it could no longer afford.

Despite fears that a default could hurt business at a tribal casino, creditors have little choice but to make concessions -- normal restructuring rules do not apply to tribal casinos.

The Mohegans and Pequots, like most other tribes, are sovereign nations under federal law. They can't be forced into bankruptcy. And because only tribes can operate casinos on Indian reservations, creditors can't seize assets to operate themselves or to sell.

Rocha said that with many tribes successfully restructuring their debt, the industry is on a "slow and steady" path to recovery. Indian gaming is now a $26.4 billion a year industry.

He said any projects built these days are "smaller and smarter." The pre-recession MGM Grand at Foxwoods, built for $700 million, has been replaced by a resort that can be built for $160 million to $200 million.

"Those days of building the big monsters are gone," Rocha said. "But it's the same in Las Vegas."