The following article appeared in Bloomberg News yesterday. Note that 100 basis points would be equal to 1 percentage point. So when the article refers to 972 basis points that is equivalent to 9.72 percent.
Mohegan to Sell First Tribal Gaming Debt in 18 Months (Update1)
By Beth Jinks, John Detrixhe
October 14, 2009
Mohegan Tribal Gaming Authority, in the first bond sale by an American Indian gaming company in more than a year, plans a $200 million private offering of notes.
Proceeds of the second-lien, senior secured debt due in 2017 may be used to repay term loans and revolving credit, the Uncasville, Connecticut-based casino operator said today in a statement. Gambling-company bond yields widened 3 basis points relative to comparable-maturity Treasuries to 972 basis points yesterday, according to Merrill Lynch & Co.’s U.S. High Yield Gaming index. Spreads narrowed to 910 basis points on Sept. 24, the tightest this year, the data show.
Mohegan is offering notes almost two months after the chairman of the Mashantucket Western Pequot Tribe, owner of the Foxwoods Resort Casino located about 10 miles from Mohegan Sun, spooked bondholders by reportedly telling his constituents that they would be paid before creditors in a restructuring. Bonds of the tribe plunged on Aug. 27. Five days later, the tribal council said it placed Chairman Michael Thomas on administrative leave pending an internal review after backing away from his comments.
Moody’s Investors Service and Standard & Poor’s cut their ratings on Mashantucket’s estimated $1.5 billion of debt by four steps on Aug. 26. They said the gradings could be lowered further.
FireKeepers Development Authority, an unincorporated subdivision of the Nottawaseppi Huron Band of the Potawatomi, was the last American Indian casino to sell bonds, issuing $340 million of seven-year, 13.875 percent notes on April 22, 2008, according to data compiled by Bloomberg. The debt priced at 96 cents on the dollar to yield 14.95 percent, or a spread of 11.52 percentage points.
The notes traded yesterday at 105 cents on the dollar to yield 12.4 percent, or a spread of 10.47 percentage points, according to Merrill Lynch data.
Lenders may “retrench” from American Indian gaming if a restructuring impairs existing creditors while protecting tribal cash distributions, Moody’s said on Aug. 31. That would make “it difficult for other Native American gaming issuers to raise additional funds in the capital markets,” the debt-rating service said.
Leo Chupaska, Mohegan’s chief financial officer, couldn’t immediately be reached for comment.
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