Tuesday, November 30, 2010

Credit Rating Agency Downgrades Mohegan Gaming Authority Debt

Feather News

A report was issued yesterday by Moody's Investor's Service, a Wall Street credit rating agency, that is expected to announce a downgrade in the Mohegan Tribal Gaming Authority's debt.

A second major Wall Street credit ratings ageny, S&P, cut the rating on MTGA debt to 'CCC,' according to Bloomberg News. The credit rating reflects the highly speculative nature of MTGA's debt.

S&P is anticipating MTGA's "increasingly likely" need to restructure its debt load. Of MTGA's approximately $1.6 billion of total debt, $925 million will be due for repayment in 2012. Bank debt accounts for $675 million of the $925 million amount while the other $250 million represents senior subordinated notes bought by investors and registered with the Securities and Exchange Commission. The $250 million was borrowed in 2002 and has an 8 percent coupon rate.

The credit downgrades come on the heels of MTGA's announcement last week that it lost $26.3 million in the months of July through September. A major factor in the loss was a result of writing off $66.4 million, spent primarily on a stalled hotel project, which MTGA determined "did not have any future benefit."

About three weeks ago, MTGA annnounced publicly that it retained Blackstone Advisory Partners as a financial advisor. According to The Day newspaper, Blackstone also works with some of the holders of debt owed by the Mashantucket Pequot Tribe.

The Mohegan Tribe's gaming arm also announced a shuffling of executives last week. Today, MTGA filed with the federal Securities and Exchange Commission the following report on those changes:

"On November 23, 2010, the Mohegan Tribal Gaming Authority (the “Authority”) announced certain changes to its senior executive management structure effective January 1, 2011. Mitchell Grossinger Etess, age 52 and President and Chief Executive Officer of the Authority and Mohegan Sun, will be ceding day-to-day responsibilities of Mohegan Sun to Jeffrey E. Hartmann, age 49, who will become President and Chief Executive Officer of Mohegan Sun. Mr. Hartmann is currently the Executive Vice President and Chief Operating Officer of the Authority and Mohegan Sun. Mr. Etess will continue as the President and Chief Executive Officer of the Authority. Raymond Pineault, age 44, will become Executive Vice President and Chief Operating Officer of Mohegan Sun to replace Mr. Hartmann. Mr. Pineault is currently Senior Vice President of Casino Operations for Mohegan Sun."