Tuesday, September 22, 2009

Tribal Casino Financing

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This installment of The Tribes In The Media is an article in yesterday's issue of the The Day newspaper on the Mohegans and Mashantuckets their financial reporting requirements. While the Mohegan Tribal Gaming Authority, the Tribe's business arm, is required to publicly disclose financial statements, the Mohegan government's finances are not publicly disclosed by the Tribe.

Casinos go separate financing directions
Mashantuckets give information to select few; Mohegans report regularly to SEC
By Brian Hallenbeck
The Day
September 21, 2009

One is “closely held,” the other's an “open book.”

That's one way to distinguish Connecticut's tribally owned casinos.

When it comes to disclosing their finances, the Mashantucket Pequot Tribe, which owns Foxwoods Resort Casino and MGM Grand at Foxwoods, tells its lenders and financial analysts what it thinks they need to know. It tells everyone else little or nothing beyond the casinos' monthly slot-machine revenues, which the state makes public.

But the Mohegan Tribal Gaming Authority, having registered with the U.S. Securities and Exchange Commission, files quarterly, annual and current reports that the SEC posts on its Web site. Most recently, for example, the authority filed a so-called 8-K form on the results of the Mohegan Tribal Council's Aug. 30 elections.

Each approach has its advantages, according to analysts and bondholders, some of whom expressed frustration with the Mashantuckets' lack of transparency in the wake of the tribe's announcement that they're seeking to restructure a debt load of more than $2 billion.

The Mashantuckets, who have not registered with the SEC, communicate via IntraLinks, a secure online service accessible to those who hold their debt. The tribe also allows securities analysts to access the information, analysts say.

”We have many gaming credits that follow this same procedure, said Jane Pedreira, a gaming analyst with Clear Sights Research. “Many tribal entities report this way, so it's not unusual. … It really depends on the comfort zone of the organization. Companies that want their information to remain private use IntraLinks.”

The Mohegan authority, which operates Mohegan Sun, has long embraced the transparency that comes with registering with the SEC, according to Jeffrey Hartmann, its chief operating officer.

”We filed when the (Mohegan) tribe sold its first tranche of debt in 1995,” he said. “I think over the years it's helped us build support with Wall Street …. We're an open book.”

Costs associated with SEC registration have grown in recent years because of additional reporting and auditing requirements imposed following the Enron debacle, Hartmann said. “But we've never regretted (registering). We enjoy a good relationship with our bankers and bondholders and part of that is our filings.”

Tribes that register can be publicly traded, meaning the bonds they issue to raise capital are available to most investors, according to Kent Richey, a securities attorney with Faegre Benson, a Minneapolis firm with a practice in Indian law.

”Theoretically,” he said, “if the Mashantuckets were registered, you could call your broker and say you want to buy some of those Mashantucket bonds. But they didn't register, so you can't.”

Nonregistered bonds can only be traded among so-called QUIBS - institutional investors holding at least $100 million in securities investments, Richey said.

There are three reasons why a tribe might choose not to register, he said.

”First, there may be a feeling that since it's a sovereign government, its business is its own business. It's a matter of privacy. Second, it puts you at a competitive disadvantage - you don't want your competition to know what you're doing. And third, there's the cost of compliance, which can be more than a million dollars a year.”

Pedreira, the gaming analyst, said the Mashantuckets have become more investor-friendly as they've become more accustomed to the needs of the bond market.

”I would say bondholders probably prefer registration, but it's not a huge issue,” she said.
"Regional"