This installment of The Tribes In The Media is a Cape Code Times article from yesterday outlining the latest financial difficulties of the Twin River racetrack-slot parlor in Rhode Island.
Tribe's casino backers struggle with debt
Cape Cod Times
By Stephanie Vosk
September 24, 2008
The main financial backers for the proposed Mashpee Wampanoag casino, already in difficult financial straits, received more bad news in recent days.
Moody's Investor Service yesterday downgraded the credit rating of their "racino," Twin River, in Rhode Island, citing a "high probability" that the owners will seek bankruptcy protection, the Associated Press reported.
Tribe coverage Moody's action follows Standard & Poor's credit rating downgrade a few days earlier. S&P made the change after Twin River owners missed a Sept. 2 interest payment on $145 million in loans to its second-lien lenders, according to the AP.
The greyhound track and slot parlor is owned and operated by UTGR, a subsidiary of BLB Investors, Inc., which includes principles Sol Kerzner and Len Wolman, who have backed the Wampanoag tribe since at least 2006.
The developers have reached a secret deal with the tribe to finance a $1 billion Indian casino in Middleboro. The tribe is currently waiting for the federal Bureau of Indian Affairs to review its application to put land there into trust.
If the company does declare bankruptcy, it may affect the investors' ability to borrow money in the future, but it shouldn't alter the deal with the Wampanoag, said Clyde Barrow, a leading researcher of gambling economics at UMass Dartmouth.
Under that agreement, they're not really the investors, just the brokers, he said.
"They don't have to borrow anything," he said. "All they have to do is find somebody to put up the money."
Tribal council spokesman Scott Ferson did not return calls seeking comment.
It also won't affect operations at Twin River, but the investors may be forced to sell the license for much less than they paid for it, Barrow said.
Their overall investment totalled nearly $700 million and is more than double what casino investor Richard Fields recently paid Donald Trump to buy an Atlantic City casino.
Kerzner, Wolman and their partners overpaid for the former dog track in Lincoln, R.I., and then put too much into the Twin River renovation project, Barrow said.
"I think they bought on the speculation that they were going to be able to turn this into a full-blown casino and compete with Foxwoods to a much greater degree than they've been able to do, and of course that has not happened," Barrow said.
Under a deal with Rhode Island officials, the investors only take in about 30 percent of gross gaming revenues from the video lottery terminals, Barrow said.
The problem is not the payment setup, or the fact that Twin River is under performing — slot revenues there are going up each year while they are dropping at many other casinos, Barrow said.
"They're carrying too heavy of a debt load," he said. "Basically they're carrying casino debt on a dog track."
In June, Twin River officials approached Rhode Island officials with a request to slash the state's take in half in exchange for an up-front payment of $560 million. A deal hasn't yet been reached.
"The Moody's report was not unexpected," Twin River spokeswoman Patty Doyle told the AP. "It certainly doesn't change our intention to continue the dialogue with lenders, vendors and the state."
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