The Mohegan Tribal Gaming Authority has $505 million in loans outstanding and another $250 million due April 1, Keith Foley, an analyst at Moody’s Investors Service, recently told investors. The gaming authority, parent company of casinos in Uncasville, Conn., and Wilkes-Barre, Pa., also has about $21 million in interest payments due Feb. 15, he said.
Mohegan Sun announced this month that fourth-quarter net income rose significantly, to $46.7 million, compared with a net loss of $26.3 million in the same period in 2010. But it also said it failed to reach an agreement to refinance debt, though lenders waived a possible default.
“They get to live another day,” Foley said in an interview.
Executives at Mohegan Sun did not respond to a request for an interview.
Mohegan Sun is not alone as several Tribal-run casinos — some with plans for expansion that have been put on hold — struggle to refinance debt after being caught short when the economy went into recession in December 2007.
Foxwoods Resort Casino in eastern Connecticut seeks to restructure debt, and the Mescalero Apache tribe restructured $200 million in bonds last year for casino resort property in New Mexico. A spokeswoman said Foxwoods is in debt talks, but would not provide details.
An advantage that Tribal-run casinos have over their commercial counterparts is that they cannot file for bankruptcy and creditors can’t foreclose on their properties because tribal governments are sovereign, said Clyde Barrow, director of the Center for Policy Analysis at the University of Massachusetts at Dartmouth.
Valerie Red-Horse, an investment banker and financial adviser who worked on the Mecalero Apache deal, called it the “best model out there,” in part because it preserved the casino’s financial distributions to tribal members and tribal government while bond holders kept their stakes, she said.
Some tribes have been forced to agree to cut their distributions until debt is paid down, Red-Horse said. Making sure distributions continue is a “very delicate subject. It causes a lot of angst among tribes,” she said.
Financial problems at the casino, the Inn of the Mountain Gods, were due in part to the slowing economy and faltering tourism, she said.
Tribal-run casinos expanded rapidly because they are strong economic development tools for the tribes that run the casinos, said Peter Kulick, a Lansing, Mich., tax and gaming lawyer. The businesses survived economic downturns in the 1970s and 1980s and were seen as immune to recessions, he said.
“In the last go-round, that’s not the case,” he said.
Kulick and Barrow said competition is the newest threat to casinos, even as revenue is now rising as the economy slowly improves.
“There are some real pockets of recovery going on right now,” Barrow said.
Massachusetts legalized casino gambling in November, but it will be years before the three casinos authorized will be operating.