Foxwoods misses debt payment deadline

Foxwoods misses debt payment deadline
Gaming analyst predicts partial closure of casino in next few years

A deadline for repayment of a spent $700 million line of credit came and went Tuesday with Foxwoods Resort Casino’s tribal owner pledging to continue working to resolve the debt.

The Mashantucket Pequot Tribal Nation was lent the money by a banking group headed by Bank of America Corp. and its Merrill Lynch & Co. subsidiary. No word of a settlement or possible deadline extension came from either side Tuesday.

“The Tribal Council remains committed to reaching a consensual agreement with its lenders,” said William Satti, the tribe’s director of public relations.

A Bank of America representative declined comment.

“It’s our policy not to comment on customers and our relationships,” spokeswoman Shirley Norton said.

Negotiations are ongoing, but the tribe doesn’t plan to comment until talks are concluded, Satti said.

The tribe, which also owns MGM Grand at Foxwoods, is looking to restructure about $2 billion in total debt. A recent decision to end incentive payments to tribal members at the end of this year is a way to help the debt negotiations along, gaming industry analysts say.

“It was a necessary step for them to get some kind of extension,” said Roger Gros, publisher of the Las Vegas-based Global Gaming Business magazine. “They were putting it off, but now there’s nothing they can do.”

Gros called former tribal Chairman Michael Thomas “a sacrificial lamb” for last year deciding that tribal members would get their incentive payments before lenders were repaid. Thomas was subsequently ousted as chairman.

The decision to end the incentive payments, detailed in a July 1 letter to tribal members, is a sign the tribe is getting serious about a major restructuring, said Clyde Barrow, a gaming and public policy analyst at the University of Massachusetts Dartmouth.

“It signals a real move on the debt,” he said Tuesday.

Competition coming

Financial challenges will increase in intensity once casino gambling begins in Massachusetts, Barrow said. Foxwoods gets more of its customers from Massachusetts than any other state. Barrow estimates Foxwoods could lose up to a quarter of its customers in the first year Bay State casinos operate.

Some casinos in Las Vegas and Atlantic City are closing down entire floors in order to cut expenses. Foxwoods might have to go even further. Barrow predicts in two years Foxwoods will have to embark on a “major reconfiguration” that could result in closing its older casino coupled with an expansion of gaming space at MGM.

Foxwoods Resort Casino, which opened in 1992 and was Connecticut’s first casino, is the world’s largest gambling establishment.

“They’re going to have to close something down,” Barrow said. “Foxwoods has just gotten too big.”

A court case in Wisconsin may provide some relief for Foxwoods and the tribe, Gros said. The January federal court decision voided a $50 million debt owed to Wells Fargo & Co., a San Francisco-based bank, by the Lac du Flambeau Chippewa Tribe of Wisconsin over the expansion and refinancing of a Mississippi casino.

[Tribe Renegs on $50 Million Bond]

“It’s a landmark decision,” Gros said. “It threw investment banking practices into question. Before, a bank could just take over a business that defaulted. Now it’s not so clear-cut.”