Sunday, December 7, 2008

Mohegan Gaming Authority 4th Quarter Analysis: Part III

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MTGA's press release on its fourth quarter and fiscal year earnings also describes other significant events and news on what it plans to do in the future.

Opening Winter entrance to cost $69.5 million more:

"The Authority currently anticipates incurring an additional $69.5 million in connection with the Earth Expansion relating to the construction of the Earth guest connector and the retail podium which will connect the Winter Parking Garage to the Earth Casino. The Earth Expansion also will incorporate renovated food and beverage facilities, including a burger restaurant, a family-style sit down pizzeria and a four-station quick-serve dining area, as well as 7,000 square feet of new retail space." The Earth expansion will include "a burger restaurant, a family-style sit down pizzeria and a four-station quick-serve dining area, as well as 7,000 square feet of new retail space."

The press release also states, "As of September 30, 2008, the Authority has incurred approximately $58.0 million for the Earth Expansion relating to excavation and foundation work for the planned podium and hotel tower, as well as professional fees for design and architectural work."

Expansion financing to be redirected in refinancing of MTGA debt:

MTGA secured $1.25 billion in bank financing for its Pocono Downs and Mohegan Sun expansion. Due to halting the expansion at Mohegan Sun in September, MTGA needed to amend that financing agreement. The press release stated that most of MTGA's lenders have agreed to changes in the agreement, one of which is to reduce that $1.25 billion total to $1 billion. The second change is to use some of that bank financing to refinance the $330 million in bonds that come due July 15, 2009. Other details include reducing the overall investment in the expansion at Mohegan Sun's Project Horizon expansion from $950 million to $350 million, limit other capital expenditures, change the allowable debt ratios and modify the interest rates and bank fees under the financing agreement.

We expect that MTGA's next filing, anticipated to be released in a few weeks, will discuss what the new interest rates and bank fees will be.

Casino to maintain its distribution to tribal government (so far):

MTGA distributed $80 million to the Tribal government last fiscal year, not including reimburseable expenses or pass-through money. The press releas said that "distributions to the Tribe are anticipated to total $82.5 million for fiscal year 2009."

Corporate diversification department costs soar:

MTGA's corporate diversification department was set up about five years ago to search for diversification opportunities. Thus far, it has implemented one project - Pocono Downs. The department has been costing us about $10 million per year since it was started about five years ago, however, this year the costs have soared to close to $30 million. According to the earnings press release, "Corporate costs and expenses for the fiscal year ended September 30, 2008 increased by $18.4 million to $29.0 million compared to $10.6 million in the prior fiscal year. Corporate costs and expenses for the fiscal year include $9.5 million in non-cash charges for additional reserves recorded against the net assets of Wisconsin Gaming."

MTGA's bread and butter - Mohegan Sun slot revenues:

MTGA reported a total of $1.36 billion in net revenues (before expenses) for fiscal year 2008. The bulk of these revenues is derived from slot machine revenues at Mohegan Sun, which accounts for about 63 percent of MTGA's total net revenues (before expenses). Slot machine revenue for the fiscal year declined 7.1 percent, to $856 million from $922 million in fiscal year 2007.