MASHANTUCKET, Conn. – The Mashantucket Pequot Tribal Nation, owner of Foxwoods Resort Casino, has reached a new agreement in principle with its senior lenders to extend a debt forbearance agreement as it works to restructure $2.3 billion of debt.
The existing forbearance agreement, which was scheduled to expire Jan. 20, will be extended through April 30, according to a statement released by Director of Public Affairs Joele Frank of Wilkinson Brimmer Katcher, a New York-based public relations firm.
The agreement in principle has been made with a majority of the tribal nation’s lenders and will be finalized and executed shortly, the statement said.
The extended deadline gives Mashantucket more time to work out the details of its debt restructuring.
The statement stressed that the tribal nation’s debt restructuring efforts are separate and distinct from operations at Foxwoods and will not have any impact on guests, employees, suppliers or business partners at Foxwoods or MGM Grand at Foxwoods.
“Foxwoods remains committed to providing its guests with its signature guest service, unparalleled gaming options, the very best in entertainment, and world-class services, dining and amenities,” according to the statement.
Although the tribe does not plan to make any additional comments or provide updates on the discussions with its creditors until they are concluded, the tribal council remains committed to working with its lenders to reach consensual resolutions, the statement said.
Plummeting slot revenues over the past two years as the economy tanked and people had less discretionary cash to spend on gaming, and debt from expansions have combined to throw the tribe into unprecedented financial hard times. The news last August that Mashantucket, owner of the biggest, most successful Indian casino in the country, was looking to restructure $2.3 billion in debt was seismic, sending shockwaves through Indian country and the financial organizations that lend it money.
In November, the tribe announced it had paid only $14 million of a $21.25 million bond interest payment on $500 million in notes and expected to default on the balance, which it did a month later.
Now Mashantucket has the dubious honor of leading Indian country casino owners through the uncharted waters of debt restructuring, loan defaults and forbearance agreements.
A forbearance agreement is typically an agreement to postpone, reduce, or suspend payment due on a loan for a limited and specific time period. Interest that accrues during the forbearance typically remains the debtor’s responsibility. When the forbearance expires the unpaid interest typically is added (capitalized) to the principal balance of the loan.
Typically, the lender agrees not to foreclose on the property or accelerate payments due on the loan during the forbearance period. But foreclosure is not an option in Indian country in any case.
Tribal nations and their creditors are in a unique financial situation in that creditors cannot take over an Indian casino or force the sale of its assets, because of the sovereign status of Indian nations and their lands. Also, 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 all of Indian country – and the financial entities involved in Indian gaming – are closely monitoring how Mashantucket deals with its debt obligation.
“Foxwoods is going to set the precedent,” Greg Guedel, of the Native American Legal Services Group, told Global Gaming Business. “It’s such a significant business enterprise that it is probably going to become a model, good or bad, for whatever happens subsequently.”
Foxwoods’ well-being is also crucial to the state, which receives 25 percent of the casino’s slot revenues.
Mashantucket, which employs around 10,000 people, has contributed nearly $3 billion directly to the state’s economy since 1993 and millions more indirectly through purchases and spill over business.
Meanwhile, slot revenues continued to slide in December compared with the same month in 2008. The nation reported December slot revenue of $44.6 million, a drop from $44.9 million a year earlier.
The state received $11.3 million for December.