Published August 02. 2012 1:00PM Updated August 03. 2012 1:45PM
Mashantucket — A $2.2 billion debt-restructuring agreement would put the Mashantucket Pequot Tribe and its Foxwoods Resort Casino on "solid financial footing," the casino announced Thursday.
The deal, reached between the tribe and steering committees representing bondholders and other lenders, marks the culmination of nearly three years of negotiations since the tribe's August 2009 announcement that it was on the verge of a default that occurred later that year.
"We've been working on this for a long time," Scott Butera, Foxwoods' president and chief executive officer, said in a telephone interview. "It got to the point where we finally reached agreements with all the steering committees. Now we will go out to the remaining bondholders not represented by the steering committees. We want to get support from as many of them as we can."
The agreement, which Butera said involves significant discounts to the face value of notes held by junior bondholders, would "significantly reduce" the tribe's outstanding debt, which now totals $2.2 billion. The Wall Street Journal has reported that the debt could be cut to about $1.7 billion.
"There are three components to this," Butera said. "There are the discounts, the length of maturities and more favorable financing terms."
Under the agreement, the tribe's credit line with a banking syndicate and loans from Kien Huat, the Malaysian investment company that originally bankrolled Foxwoods, would be restructured into two term loans with five- and seven-year maturities, respectively. Senior bondholders would receive new securities with extended maturities of 13, 18 and 23 years based on the seniority of the existing bonds. Maturities would be set from the restructuring date.
In addition, Bank of America and Wells Fargo would arrange a $30 million working capital facility for the tribe with a 30-month term beginning on the restructuring date.
"The Mashantucket Pequot Tribal Nation fully supports the agreement worked out between the tribe, Foxwoods management and the steering committees," Rodney Butler, chairman of the Mashantucket Pequot Tribal Council, said in a statement. "It is fair and consensual, and implementation of the plan will help provide for the long-term financial stability of our tribal community as well as enhance the competitive strength of Foxwoods Resort Casino."
Austerity measures prompted by the tribe's debt burden and the casino's declining revenue in recent years have forced the tribe to discontinue the monthly distribution of casino profits to tribal members.
Butera said the agreement would provide Foxwoods with "significant capital to reinvest in the property." He said the casino's master plan calls for continued renovation of hotel rooms and makeovers of some of the casino's food-and-beverage and gaming spaces. He noted that the tribe has entered into an agreement with developers who will build an outlet mall linking Foxwoods' Grand Pequot Hotel to MGM Grand at Foxwoods, the freestanding casino that opened in 2008.
Butera pointed to such plans when asked about persistent rumors that Foxwoods management is planning to downsize its workforce.
"We're growing these development projects," he said, "so to do that and then have a major disruption in our workforce would be nonsensical."
He called speculation about mass layoffs "absolutely baseless."
"We've been reinvesting in the property since I got here (in 2010)," Butera said. "We brought in a new management team, and quite frankly there were a lot of wasted resources. All we did was right-size resources to the business. There have been no significant layoffs since I got here."
Southeastern Connecticut's other tribally owned casino, Mohegan Sun, announced in March that it had successfully refinanced more than $1.6 billion in debt, exchanging $1.1 billion worth of old bonds for new ones with extended maturities and, in most cases, higher interest rates. It also raised $225 million in new capital, using much of it to reduce a $675 million line of credit to $475 million.