Mohegan Sun casino fails to refinance $811M debt

Mohegans given more time in debt talks
Tribal authority owes $1.6 billion
By JAMES MOSHER
The Bulletin


Uncasville, Conn. — The parent entity of Mohegan Sun recently received a waiver from its bankers, something the casino operator sees as a vote of confidence in its future. Yet it could be the calm before a major storm in Connecticut’s economy in 2012, an analyst said.

Foxwoods Resort Casino, whose parent also is in talks to restructure debt, and Mohegan Sun are on course for severe financial problems in the year ahead, said Clyde Barrow, a University of Massachusetts Dartmouth professor of public policy who follows the New England casino industry.

The Mohegan Tribal Gaming Authority was unable to complete a refinancing agreement during its fiscal first quarter, which ended today. With that, the authority’s auditors attached a “going concern” warning to 2011 financial statements, authority CEO Mitchell Etess said Thursday.

A filing with the Securities and Exchange Commission said lack of a resolution would materially impair Mohegan Sun’s ability to operate.

‘At the precipice’

“The waiver is very important, but it doesn’t solve the problem,” Barrow said. “They’re telling people that they’re at the precipice. Foxwoods is in an even worse situation, but they’re just not talking about it.” [Because the debt of Mohegan Sun is publicly traded, their SEC filing is publicly available online. Foxwoods is not subject to such scrutiny and defaulted more than a year ago.]

Debt talks haven’t broken down, both casinos say.

“What I can tell you is that discussions are continuing and that we will make appropriate disclosures in due course,” said Hud Englehart, a spokesman for Foxwoods President and CEO Scott Butera. The Mashantucket Pequot Tribal Nation owns Foxwoods and its sister MGM Grand at Foxwoods property.

Back in the black

“We are ... pleased with the progress made in recent weeks toward finalizing our refinancing plan,” Etess said in releasing fiscal fourth-quarter results showing net income attributable to the authority rose to $46.7 million from a loss of $26.3 million a year earlier. “Though we were not able to complete the plan during our first quarter of fiscal 2012 and, as a result, our auditors issued a ‘going concern’ opinion’ for our 2011 financial statements, we have obtained a waiver from our bank group addressing the opinion which we believe reflects the group’s continued confidence in and support of the authority and the Mohegan Tribe.”

The matter will be discussed further during the authority’s conference call Wednesday, something Etess said he looks forward to.

Distributions to Mohegan Tribal Nation members were nearly doubled in the quarter ended Sept. 30 to $23.4 million from $12.8 million a year earlier.

Major employers

Foxwoods and Mohegan Sun are two of Connecticut’s largest employers and major sources of revenue to the state government. Both are members of the Chamber of Commerce of Eastern Connecticut. Chamber President and CEO Tony Sheridan declined to comment on the Sun’s finances Friday, saying he was still studying them.

Mohegan’s total debt as of Sept. 30 was $1.6 billion, the authority reported. Of that, $811.1 million comes due within the next 12 months, including $535 million that needs to be paid by March 9 and $250 million in 8 percent notes that mature on April 1. This debt will need to be refinanced before the due dates, the authority said Thursday.

Blackstone Advisory Partners L.P., hired in November 2010, and Credit Suisse Securities, hired in January 2011, have been working for months on formulating a refinancing package, but to no avail, so far.

“While the authority’s efforts to refinance or replace its outstanding indebtedness, including its fiscal 2012 maturities, at or prior are ongoing, it can provide no assurances in this regard,” the Mohegan authority’s press release said Thursday.

Greater cash flow

The authority’s cash flow rose to $90.5 million in the latest fourth quarter from $73.1 million a year earlier. Net revenue fell 0.1 percent to $373.5 million from a year earlier, while gaming revenue was up 0.2 percent to $337.2 million, the Uncasville-based entity said. Nongaming revenue was off 6.9 percent to $67.1 million.

The improved cash flow was attributed to higher table games revenue, the authority said. Net income growth was helped by reduced operating costs and increased efficiencies at Mohegan Sun Connecticut and Mohegan Sun at Pocono Downs, a Pennsylvania racetrack/casino.

Mohegan Sun Connecticut’s slot machine handle was down 8 percent for the fourth quarter compared with a year earlier, while gross revenue was down 4.3 percent. Connecticut table game revenue was up 6.9 percent to $78.1 million, the authority said.

“We could not be more pleased with our earnings for the quarter,” Etess said. “The results were quite impressive, particularly given the impact of Hurricane Irene and persisting economic concerns.”


Mohegan Sun casino fails to refinance $811M debt
By The Associated Press

UNCASVILLE, Conn. - (AP) -- The parent company of the Indian-run Mohegan Sun casinos in Connecticut and Pennsylvania says it has failed to reach an agreement to refinance $811 million in debt, but lenders have waived a possible default.

The Mohegan Tribal Gaming Authority said Thursday that a delay in refinancing debt was among conditions that "raise substantial doubt about our ability to continue as a going concern."

Mitchell Etess, chief executive of the authority, which owns and operates the Mohegan Sun in Uncasville and Mohegan Sun at Pocono Downs in Wilkes-Barre, Pa., told The Associated Press on Friday that the dire warning is only a financial requirement of auditors.

"Auditors have no choice," he said. "They must put in that language."

Etess cited the waiver as a vote of confidence by lenders and cited fourth-quarter income of $46.7 million, compared with a $26.3 million loss in the same quarter last year.

Etess said refinancing is taking a long time because of the weak recovery following a deep and prolonged recession that has sharply cut into consumers' entertainment spending.

He also cited the "status of Native American gaming financing" generally.

"Those impacts that have happened in the outside world have impacted our bondholders' thoughts as we go through the process," Etess said.

The neighboring Mashantucket Pequot Tribal Nation in eastern Connecticut has worked to restructure billions of dollars in debt after its Foxwoods casino was hit hard by the economic downturn and increased competition in the Northeast.

Last month, the Mississippi Band of Choctaw Indians received a six-month extension on loans to May.

And in Washington state, revenue at some tribal casinos fell as much as 30 percent at the start of the recession, forcing tribes to struggle with ways to refinance debt on new casinos and other ventures.

A report issued in March said that for the first time, revenue fell in 2009 at American Indian gambling casinos nationwide as the recession forced consumers to curtail spending. The report by economist Alan Meister of Nathan Associates Inc. said casinos generated about $26.4 billion in 2009, down 1 percent from 2008.



Mohegan Discloses ‘Going Concern’ Risk as It Works to Refinance
By Beth Jinks

Dec. 29 (Bloomberg) -- Mohegan Tribal Gaming Authority, the operator of Mohegan Sun casinos in Connecticut and Pennsylvania, said it has yet to reach an agreement to refinance $811 million in debt, raising the risk of being unable to continue operating.

The delay in refinancing fiscal 2012 maturities is among conditions that “raise substantial doubt about our ability to continue as a going concern,” the Uncasville, Connecticut-based casino operator said today in a regulatory filing. Mohegan said it received a default waiver from its bank lenders yesterday.

Mohegan is being advised by Blackstone Group LP and Credit Suisse Group AG as it tries to refinance much of $1.61 billion in debt owed as of Sept. 30. The debt includes $535 million outstanding under a bank credit facility maturing March 9, and $250 million of senior subordinated notes due April 1.

Mohegan is “pleased with the progress made in recent weeks toward finalizing our refinancing plan,” Chief Executive Officer Mitchell Etess said today in a statement.

PricewaterhouseCoopers LLP is the auditor.

Closely held Mohegan and Foxwoods Resort Casino, which is owned by the Mashantucket Western Pequot Tribe in Connecticut, were hurt by the 18-month recession that ended in 2009 and face competition from neighboring states as casino gambling expands.

--Editors: Romaine Bostick, Jeffrey Tannenbaum