By Ken Davison
A major Wall Street credit rating agency lowered the Mashantucket's credit rating yesterday on the news that the Tribe is seeking to restructure part of its $2.3 billion in debt.
Standard & Poor's Rating Services lowered the Tribe's credit rating from B+ to CCC, a rating that denotes high risk junk bond status. Both the Mohegan and Mashantucket Tribes now have debt that is rated as junk bonds, risky to investors purchasing the bonds. Standard & Poor's also put Mashantucket on a credit watch with negative implications. In January, Standard & Poor's reduced the Mohegan Tribal Gaming Authority's (MTGA) senior subordinated notes from B to CCC+.
According to the most recent filing by the MTGA, "Such credit rating downgrades may impact our ability to access the debt capital markets in the future. In the event we are able to access the debt capital markets, our costs of the issuance of new debt may be greater than costs incurred by us in the past. We also could be subject to more restrictive covenants and other terms in connection with any such issuance."
While the Mohegan's business arm, the Mohegan Tribal Gaming Authority, is the entity that borrows money for its gaming operations and not the tribal government, the Mashantucket Tribe is the borrower on behalf of its Foxwoods casino.
The Mashantucket Tribe issued a statement yesterday afternoon saying it is "in compliance with all debt agreements and is also current with all its debt payments." But that may not last for long, according to sources. An advisor to the Tribe told The Day newspaper that the Tribe is at risk of defaulting on repaying a $700 million line of credit that is due on Monday.
The Mohegan Tribe recently completed its own refinancing of a large bond issue that came due this summer. The Mohegan gaming authority refinanced $330 million of debt that it could not repay.
Yesterday's article in The Day newspaper generated dozens of reader's comments from the public. To see the readers comments, scroll to the section underneath the The Day article at the following link: Link To Article In The Day
Many of the reader's comments were very negative toward the Tribes and Tribal members.
The financial difficulties aren't expected to affect the Mashantucket's push for a slot parlor in Philadelphia. Foxwoods Development Co. is a separate entity from the Mashantucket Tribe and is a thirty percent partner in a group that has been approved for a slot parlor in that city.
Both Indian casinos have a difficult road ahead of them, especially when more casinos in neighboring states open their doors to the same customer base that visits the Connecticut casinos.
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