Monday, March 8, 2010

More On The Financial Outlook Of Foxwoods

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The following installment of The Tribes In The Media is an article by Brian Hallenbeck of The Day newspaper on further credit downgrades of Mashantucket Pequot debt and interesting actions being taken by the senior creditors.

More Mashantucket bonds are assigned default S&P rating
By Brian Hallenbeck
The Day
March 6, 2010

Standard & Poor's, the financial company that rates bonds, has assigned its default rating to three more layers of bonds issued by the Mashantucket Pequot Tribe, which is seeking to restructure more than $2 billion in debt under a forbearance agreement reached with its senior lenders.

Terms of that agreement prevented the tribe from making full interest payments due this week on more than $620 million worth of bonds, financial sources said Friday.

Standard & Poor's said in a statement that its rating action "stems from our belief that the tribe did not make the full interest payments due March 1, 2010 on its special revenue and subordinated special revenue bonds. The agency downgraded from "CCC" to "D" its "issue-level rating" on $250 million in 5.912 percent special revenue bonds maturing Sept. 1, 2021, and $300 million in special revenue bonds maturing Sept. 1, 2012, and its "underlying rating" on $70.4 million in 6.5 percent subordinated special revenue bonds due Sept. 1, 2031.

The amount of the interest payment due in each case could not be readily verified. Nor could it be determined whether the tribe had made any partial payments.

Standard & Poor's assigns a "D" rating when payments on an obligation are not made on time, even if a grace period has not expired, "unless Standard & Poor's believes that such payments will be made during such grace period."

Late last year, the tribe defaulted on a $21.25 million semiannual interest payment on $500 million worth of 8.5 percent notes that mature in November 2015. The tribe made a partial payment of $14.2 million on the so-called "coupon."

In October, the tribe entered into the forbearance agreement with a banking syndicate that holds a $700 million line of credit that will come due in July. The forbearance, originally set to expire Jan. 20, was extended through April 30.

Under the terms of the agreement, sources said, the banks are "trapping" the revenue the tribe derives from its Foxwoods Resort Casino, including MGM Grand at Foxwoods, essentially restricting the "waterfall" of cash that cascades to various levels of lenders and, ultimately, the tribe itself.

Standard & Poor's, in announcing the latest downgrades this week, put it this way: "… The administrative agent has exercised its right to prevent the transfer of free cash flow into trustee accounts that collect funds for the required principal and interest payments for the Tribe's junior creditors."

Tribal officials declined to comment on the Standard & Poor's rating action or other aspects of the tribe's debt-restructuring.