Chukchansi seeks to restructure debt on resort

Chukchansi seeks to restructure debt on resort
By Marc Benjamin - The Fresno Bee


The Chukchansi Economic Development Authority hopes to restructure debt on Chukchansi Gold Resort and Casino after missing an interest payment earlier this week, the tribe announced late Wednesday.

The tribe's debt on the resort is about $310 million, according to Moody's Investor Services.

Lawyer Rob Rossette, who represents the tribe, said the plan is to restructure the debt and place its loan under new payment terms.

The tribe, he said, is not seeking new money such as through refinancing, and the debt restructuring is not similar to a bankruptcy reorganization.

"When you have issues dealing with debt and you have no other options, you proactively address it," Rossette said. "We have to sit down with our bondholders and work out the terms."

The amount of the missed payment was not made public. A prepared tribal statement said Chukchansi is paying 8% interest on one set of notes that matures in 2013 and a floating rate on a second set of notes that matures next year.

During the restructuring, Chukchansi Gold Resort will remain open, employees and vendors will be unaffected and guests shouldn't see any changes, the tribal statement said.

Financial issues are not new for the Chukchansi. In 2004, the tribe and the company running the casino were in a dispute with subcontractors who accused the casino of not paying them. Eventually, the tribe and company agreed to pay more than $17 million.

The debt restructuring comes on the heels of a disenrollment effort being undertaken by tribal leaders. Last month, 57 members of a longtime tribal family were told they were no longer in the tribe.

The Picayune Rancheria of Chukchansi Indians has 1,100 enrolled members.

Some family members say the tribe's financial problems are driving disenrollment, which results in fewer tribe members getting monthly stipends from casino profits.

Tribe members also are eligible to receive college scholarships, food stipends, clothing allowances and utility stipends.

But Rossette said the disenrollments are unrelated to the tribe's debt.

"The way the business operates has nothing to do with enrollment issues," he said. "Those are governance issues. The tribe has its laws and follows its laws."

Rossette said the slowing economy is the reason for less revenue from the casino to pay off the construction bonds.

Chukchansi is not the only Indian gaming venue hit recently with financial problems.

Other tribes in California, Connecticut and New Mexico also are trying to work similar debt-restructuring deals, said Anthony Miranda, a former chairman of the California Nations Indian Gaming Association, which represents 30 tribes with casinos in California. Chukchansi is not one of them.

"Tribes are trying to restructure their debt as much as anyone else," he said.

Many tribal casinos are in remote areas, which means extra travel time and gas expenses for customers who can choose something closer to home, he said.

"You are competing as part of the entertainment industry with the movies and people's discretionary dollars for going out to dinner," Miranda said.

The National Indian Gaming Commission's website shows that California gaming venues made $7.36 billion in 2008 but only $6.8 billion last year, said Susan Jensen, a spokeswoman for the California gaming association. [There is a limited amount of discretionary income any Slot Barn can remove from the local economy by creating Gambling Addicts. Once that supply of new Addicts is exhausted, the revenues dwindle.]

And there are now 62 casinos compared to 59 in 2008, she said.

The downward revenue spiral appears to have leveled off, she said.

"They are kind of holding steady, but tribes have had to cut staff for the first time since the industry got going," Jensen said.

In the past few months, Moody's and Standard & Poor's, two of three major bond-rating companies, have lowered the creditworthiness of the Chukchansi Economic Development Authority.

The most recent bond rating dropped Chukchansi to the "C" range; less than a year ago, the casino had a B+ rating from Standard & Poor's.

A "B"-range rating shows financial vulnerability but an ability to pay off debts. A "C" rating means agencies are concerned a company might not meet its debt obligations.

Because Chukchansi Gold is a single casino in a lower-income region, Standard & Poor's Ratings Services believes its debts could be more difficult to repay.

Those factors, Standard & Poor's said, are "somewhat tempered by the high quality of the Chukchansi Gold Resort & Casino," but the casino faces significant debt in 2012 and 2013 as well as the potential for higher interest costs.

In dropping Chukchansi's credit rating two months ago, Standard & Poor's said Chukchansi's debt repayments could be hampered further by a new casino proposed near Madera that would create new competition in the region.

The U.S. Department of Interior gave its go-ahead to the North Fork Rancheria of Mono Indians' application for a proposed casino near Madera, which would include 2,500 machines and a 200-room hotel only 30 miles from Fresno – and 30 miles from Chukchansi Gold, which is on 48.5 acres near Coarsegold.