Casinos Seek Debt Restructuring
Struggling Indian tribes in New Mexico and Michigan are negotiating preliminary deals with investors in the red tens of millions from bank loan losses and bond debt, reports The Wall Street Journal.
Prior to 2008 and the recession, some American Indian casinos were wealth magnets. But a two-year dive in business fueled by the national financial crisis sent casino owners scrambling for restructuring deals.
Indian American casinos are excluded from normal restructuring rules, and Indian sovereignty inhibits investors from seizing assets or receiving ownership rights after default. Declaring bankruptcy is out of the cards, according to most experts, reports The Wall Street Journal. Ultimately, creditors swallow the losses and extend maturities on remaining debt.
Last month, the Pueblo of Pojoaque tribe in New Mexico agreed with a bondholders committee, including American International Group Inc., Brigade Capital Management LLC and other investment companies, to rework $245 million in bond debt after profits fell at its extravagant Buffalo Thunder Resort & Casino near Santa Fe. Making this the first bond-restructuring deal for a tribal casino, creditors will forsake most payments until 2014, then receive payments based on casino profits.
In a similar bind, the Little Traverse Bay Bands of Odawa Indians in Michigan closed on a deal Nov. 30, resulting in the exchange of $143 million of existing Senior Notes and related unpaid accrued interest, for $23 million of cash and $40 million of new 9.0% Senior Secured Notes due 2020, states the tribe's website.
Both deals should bring relief to the $20 billion Indian-casino debt market, and putting terms on paper should calm investor fears.