Sunday, September 14, 2008

Tribe Seeks To Borrow $51 Million This Week

Feather News

The Mohegan Tribe will attempt to borrow $51 million this week toward the construction of its government building, according to a September 14 report in the New York Times.

This amount is believed to be about half of what the total building will eventually cost the Tribe, according to one source who previously said that the total cost will be about $100 million.

Currently, the tribal government pays about $7 million in annual interest expense, or close to $7,000 each year per tribal adult.

The $51 million bond package is tax-exempt, meaning that those who buy the bonds will not pay taxes on the interest income that will be paid to them by the Mohegan Tribe.

The Tribe delayed the bond offering since the Spring in the hope that its interest rate would drop but that doesn't seem likely given the decline in casino earnings since then and the further tightening of credit markets.

The Mohegan tribal government is almost entirely reliant upon gaming revenues - and businesses associated with its casinos - to finance its government budget.

Today, the world's financial markets will begin absorbing the news that two of the world's financial giants - Lehman Brothers and Merrill Lynch - are averting collapse by filing for bankruptcy (in the case of Lehman Brothers) and by being sold to another bank (in the case of Merrill Lynch). What effect this will have on the credit markets, and the Mohegan Tribe's attempt to borrow money, is unclear but higher interest rates are a distinct possibility.