Financial troubles continue for Connecticut’s Mashantucket Pequot tribe, owner of the Foxwoods Resort Casino, as the casino missed a deadline last month to repay a 0 million line of credit.
The line of credit, from a lender group headed by Bank of America Corporation and its Merrill Lynch & Company subsidiary, was most recently used to complete work on the MGM Grand at Foxwoods annex, which opened in May 2008. It is part of around $2 billion in total debt that the tribe is attempting to restructure.
“The tribal council remains committed to reaching a consensual agreement with its lenders,” tribal spokesman William Satti told the Norwich Bulletin.
There was no formal annnouncement as of press time that another deadline extension is being approved by the bank consortium. University of Massachusetts gaming analyst Clyde Barrow told the Bulletin the tribe may have to shut down large portions of the Foxwoods complex to pay down some of the debt.
Meanwhile, members of the tribe have learned that their monthly share of Foxwoods Resort Casino revenue will be eliminated at the end of 2010.
In a July 1 letter to members cited by the New London Day, the Mashantucket Pequot Tribal Council cited “the financial challenges the tribe has been facing over the past few years” in announcing that “incentive distributions will cease as of December 31.”
Representatives of the tribe told the Day that the final six months of payments are not guaranteed, and depend on the outcome of attempts by the tribe and its lenders to restructure the debt.
For some members, the per-capita payment is their only source of support. In the past, payments have ranged from $90,000 to $120,000 a year on average, a tribal source said last year.
In a letter to tribal members, councilors wrote, “We are personally aware of the confusion, disappointment and frustration that tribal members are experiencing as a result of this change. We will need to stay connected and help each other through the changes that lie ahead.”
The incentive distributions, also known as per-capita or “per cap” payments, are dispensed to members “to help advance their personal health, safety and welfare.” Under the plan, up to 30 percent of Foxwoods’ net gaming revenues can go to tribal members.
The tribe has been negotiating since late last year with the banking syndicate. The so-called “revolver” loan was due in its entirety last month, but the lenders, led by Bank of America/Merrill Lynch, are expected to give the tribe more time to pay.
The tribe’s senior lender, Kien Huat of Malaysia, which helped to bankroll the casino’s original construction, agreed last October to defer action against the tribe for defaulting on its loan. The forbearance agreement has been extended three times since then.
Under the tribe’s revenue-distribution system, all net revenue from Foxwoods (after operating expenses and payments to the state) goes to the tribe’s creditors. The remainder trickles down to tribal government and the per-capita payments.
In its July 1 letter, the council informed members that it will introduce a “Self-Reliance Initiatives Program” with workshops for tribal members and their spouses.