Of the Foxwoods default --
While the new slot machines are being introduced, slot revenues continue to fall, and the nation is in the midst of its worst economic downslide.
On Nov. 16, the nation disclosed that it paid $14 million – $7 million short on a $21 million scheduled payment on a $500 million debt, and expects to enter default within 30 days. In August, the nation announced it had hired an investment bank to help restructure more than $2 billion in debt.
All of Indian country is closely monitoring the Mashantucket’s financial circumstance and how it will be resolved as it will set a precedent for Indian casinos and other businesses everywhere.
Tribal nations and their creditors are in a unique financial situation, creditors can’t take over an Indian casino or force the sale of its assets, and it is generally assumed that tribes, as sovereign nations, cannot protect themselves by filing bankruptcy, although that assumption has never been put to the test in a U.S. court.
So, Foxwoods and other casinos facing harsh financial times have to remain open under whatever loan restructuring agreement is settled upon in order for their creditors to be repaid.
Whatever the outcome at Mashantucket, the current economy and the prospect of tribes defaulting on loans means higher financial costs, smaller loans, and fewer creditors willing to take the risk of lending money with no guarantee of its return.
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Hopefully states that are considering new gaming compacts with native american tribes will attempt to address the issue of insolvency at the time that they write the compact. In CT there do not appear to be any processes to handle this condition. Many times the tribes will waive sovereign immunity to make "deals" with suppliers that will not deal with them without doing so. It is important to obtain a waivier of sovereign immunity in all matters of insolvency before the compact is ratified.
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