Funding delay ‘seriously impairs’ River Cree Casino

Funding delay ‘seriously impairs’ River Cree Casino
Default on $100 million debt could cause bankruptcy action
By Gary Lamphier and Lewis Kelly, edmontonjournal.com
April 20, 2012

EDMONTON — Alberta’s largest destination resort casino faces a possible bankruptcy filing after defaulting on more than $100 million of debt owed to a group of major financial institutions.

River Cree Resort and Casino — co-owned by Las Vegas-based Paragon Gaming and the Enoch Cree First Nation — failed to meet a deadline to repay $111 million of term loans due to a group of six lenders.

The debt, representing the balance of a $180 million financing package secured by River Cree’s owners in 2006 when the sprawling casino, hotel and entertainment complex west of Edmonton was built, was due Monday, a court filing states.

River Cree’s lending syndicate — which includes the giant Ontario Teachers’ Pension Plan, BMO Guardian Capital and Mackenzie Financial, among others — subsequently issued a notice demanding repayment of the loans, the filing states.

The dispute appears to have been triggered, at least in part, by an alleged interruption in the normal flow of funds to the resort complex from the province’s First Nations Development Fund (FNDF), administered by the department of International, Intergovernmental and Aboriginal Relations.

In an application filed with Alberta’s Court of Queen’s Bench early this week, Paragon is seeking an order directing two trust companies — CIBC Mellon Trust and BNY Trust Co. of Canada — to disburse $11.7 million of FNDF funds that Paragon alleges are currently frozen.

“CIBC has refused to transfer the FNDF funds from the FNDF account,” Paragon president Scott Menke said in an affidavit.

“The FNDF funds are used, among other uses, to fund the operations of the resort. Without the FNDF funds, (Paragon’s) ability to operate the resort is and will be seriously impaired.”

In an interview, Menke said the River Cree Casino remains very successful, and the owners recently secured a refinancing commitment from a major Canadian bank to replace the outstanding loans, a source said.

“The River Cree Casino is one of the most successful casinos in Western Canada. We’re upset by the recent decision coming out of aboriginal relations, and confused by it. Hopefully cooler heads will prevail,” Menke told the Journal.

“The government knew of the April 15 deadline for our existing loan. We have been negotiating with the government for a year, and we’re baffled as to why they haven’t taken that seriously. Now we find ourselves in default.”

In his affidavit, Menke said a department official expressed concern that the proposed uses of the FNDF funds in 2012 differ from the original uses outlined under a 2005 agreement. But he said that is incorrect.

Mike Deising, a spokesman for the department of Intergovernmental, International and Aboriginal Relations, disputed Paragon’s version of events.

“Paragon is entitled to its opinion and interpretation on things. What I can tell you is we have a grant agreement with Enoch. It’s a seven-year agreement, dating back to 2005 ... saying that we’re going to direct FNDF funding,” he said.

“To date we’ve given Enoch $190 million. By the end of this year, we will give them $212 million, when the grant ends. We just gave Enoch $11 million last week. We are directing funds to Enoch as per the FNDF grant application that they have right now, that expires at the end of this year,” he said.

“FNDF money cannot be used for gaming operations or security or per capita distribution. Other than that, everything’s on the table.”

Despite the loan default and the ongoing dispute over access to FNDF funds, Menke said River Cree will continue to operate normally, and there will be no short-term impact on its employees.

“The casino will stay open for a long period of time. We’re ready to do whatever it takes for the next periods of time to work with government to see that we can get through it. The casino employs 800 people, provides $45 million dollars in goods and services to the greater Edmonton area, it brings in tourism from all parts of the province,” he said.

“We would have never thought that we’d be in this situation. We’d had such a great working relationship with all levels of the Alberta government. To find ourselves in this situation ... is very upsetting to us.”