Despite recent debt restructurings that trimmed their borrowing costs, Connecticut’s two casinos are still facing significant financial headwinds and they may be forced to renegotiate their debt again, particularly as competition from the Bay State heats up in the years ahead, Fitch Ratings warned Wednesday.
Fitch said Mohegan Suns’ and Foxwoods’ casino operations have not recovered in recent years, and the impending gaming market expansion in Massachusetts could take a $136-million bite out of their combined businesses.
Mohegan, which has lower relative debt than Foxwoods and gets less of its business from Massachusetts, is in a better position than Foxwoods to weather the headwinds, Fitch said.
The Mohegan Tribal Gaming Authority saved itself $16 million a year in interest by refinancing a portion of its debt in 2013, and its 15-year-old separation agreement with the company that developed and once managed the casino expired in January. That will save MTGA $50 million a year, Fitch said.
Mashantucket Pequot Tribal Nation, which operates Foxwoods, is already in default on certain debt tranches, the company noted.
Foxwoods also faces a greater impact from the impending Massachusetts gaming market, because nearly one-third of its customers come from the Bay State, compared to 18 percent at Mohegan Sun.
Assuming a 50 percent decline in business from Massachusetts, the two casinos could lose a combined $136 million from their earnings before interest, taxes, depreciation and amortization, Fitch said.
Debt defaults are unique in Native American-owned casinos, because creditors cannot seize assets and bankruptcy laws don’t apply, Fitch noted.
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