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Seminole Tribe's Bonds Boosted to 'Investment Grade'

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The bonds backed by the Seminole Tribe of Florida’s gaming arm recently received a boost to "investment grade" by Fitch Ratings. The company credited the change to improved tribal governance, strong gaming revenue, two clean audits, and the cancellation of discretionary accounts considered at risk of mismanaging money, reported the South Florida Business Journal.

Yesterday the Tribal gaming division's $1.74 billion in debt was raised to BBB- from a below investment grade rating of BB+. Another $528 million in Seminole Tribe bonds were improved to a BB+ rating from a BB rating—though still classified as "below grade." Still, the Seminole Tribe's bonds are rated among the highest for American Indian gaming groups, Fitch said.

Fitch called the tribe's outlook "stable," although the potential for the state to expand gaming presents a threat, the company said. If Florida approves commercial gaming, Fitch projects the tribe's financial profile will be "manageable."

Over the past five years, the tribe's gaming revenue has steadily increased, aside from 2010 when it remained flat. The tribe operates six Florida casinos. Fitch expects the tribe to plan expansions for its Hollywood and Coconut Creek casinos.

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Fitch downgraded the tribe's ratings in June 2010 stemming from a National Indian Gaming Commission notice of violation for not allocating gaming revenue among all tribal members. The tribe paid a $500,000 fine to regulators and has since completed two clean audits.

“Relative to the time of the downgrades, Fitch is less concerned about the tribe's governance issues interrupting the gaming operations or the flow of funds that secures the rated debt," the Fitch report stated.

Further concern may arise as the tribe nears its March 2014 $736 million term loan mature date, Fitch indicated.