Foxwoods and Mohegan May Face Another Restructuring, Fitch Says

Owners of Foxwoods Resort Casinos and Mohegan Sun may have to restructure again after previous reorganizations failed to restore financial health, Fitch Ratings said.

The tribal casino operators “did not cut enough debt and a recovery” never materialized, Fitch said Wednesday in a report. Connecticut-based Foxwoods, operated by Mashantucket Pequot Tribal Nation, is “again in default on certain debt” less than two years after restructuring its borrowings, according to the report. Foxwoods agreed to revamp the $2.2 billion it owed to lenders in 2012.

Mohegan Tribal Gaming Authority, the operator of Mohegan Sun casinos in Connecticut and Pennsylvania, also faces the same risk, according to Fitch. The borrower in 2012 asked bondholders to refinance as much as $1.1 billion of notes in an exchange offer as part of a deal to renegotiate a credit line maturing that year.

Another go at restructuring may mean recoveries will be in the form of a debt exchange, which is typical for Native American-controlled casino operators, with creditors having no ability to seize a borrowers assets. Unlike corporate borrowers, U.S. bankruptcy law doesn’t apply to tribes, Fitch said.

Ashley Polo, a spokeswoman at Foxwoods, and Cathy Soper, a Mohegan spokeswoman, didn’t immediately return e-mails seeking comment.

Mohegan and Mashantucket are federally recognized American Indian tribes. Both operators were squeezed by the 18-month recession that ended in 2009 and faced competition from neighboring states as casino gambling expanded.

According to Fitch, the two casinos may collectively lose $136 million in earnings before interest, tax, depreciation and amortization after new gaming facilities, owned by MGM Resorts International and Wynn Resorts Ltd., opened in Massachusetts. Competition from operators in upstate New York and Philadelphia will also have an adverse effect.

Mohegan’s $500 million of 9.75 percent bonds maturing September 2021 last traded at 106.25 cents on the dollar to yield 8.48 percent today in New York, up from 102 cents a month ago, according to Trace, a bond-price reporting system of the Financial Industry Regulatory Authority.

Before it's here, it's on the Bloomberg Terminal.