The credit rating agency Standard & Poors downgraded the credit outlook for the Mohegan Tribal Gaming Authority yesterday from "stable" to "negative."
The announcement was made one day after MTGA released its second quarter earnings report which showed a 21% drop in profits for the quarter. S&P maintained their credit rating grade of "BB-" for MTGA.
A second major credit rating agency, Moody's, announced in February that it was also reviewing MTGA's credit rating.
A downgrade in the tribe's credit rating increases the amount they would otherwise pay to borrow money. The tribe has already secured financing for their current expansions at the Pennsylvania slot parlor and at Mohegan Sun on the reservation in Connecticut and will not be affected but anticipated borrowings in 2009 would likely be affected by a downgrade.
MTGA must repay $330 million related to its Sunburst expansion debt in the summer of 2009 as well as some borrowings related to partnerships with other tribes to establish casinos that have not yet come to fruition, which is expected to bring the total amount to be repaid in excess of $350 million. It is likely that MTGA will need to secure additional financing in order to repay the full amounts that come due next year.
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