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A credit-rating agency's analysis of the Connecticut casinos' attempts to expand northward suggests the stakes couldn't be much higher.
The title, in fact, of the "special comment" issued this week by Moody's Investors Service says it all: "Connecticut Casinos Need a Massachusetts Miracle."
Should the Mohegan and Mashantucket Pequot tribes, owners of Mohegan Sun and Foxwoods Resort Casino, fail to win licenses the Massachusetts Gaming Commission is expected to award next year, "there would be heightened concerns about each tribe's ability to service its debt ...," Moody's analysts Peter Trombetta and Peggy Holloway write in the report.
The analysis comes as Mohegan Sun is near to reaching a "host community agreement" with officials in Palmer, the western Massachusetts town where the Mohegans' nearly $1 billion resort casino project would include an aquatic park and two hotels. Palmer administrators are about to forward the agreement to the Town Council, which could act on it in the next week or two. The council is expected to schedule a referendum 60 to 90 days thereafter, perhaps pushing the vote into November.
A Foxwoods partnership, meanwhile, is negotiating an agreement with officials in Milford, the eastern Massachusetts town where the partnership plans a $1 billion project.
Both Mohegan Sun and Foxwoods face formidable competition in three-way races for the casino licenses they're seeking.
Massachusetts represents both an opportunity and a threat, the Moody's report concludes. Erecting facilities in the Bay State would enable the Connecticut casinos to diversify their businesses, helping them stem revenue declines brought about by increasing competition. Since January 2010, the Moody's report says, the Connecticut casinos' share of gaming revenue in the New York-Connecticut-Rhode Island market has dropped from about 60 percent to just under 40 percent.
While gaming revenue at Mohegan Sun and Foxwoods declined 10.2 percent to $1.2 billion in the 12 months that ended June 30, the combined revenues of New York City's Resorts World Casino and Empire City Casino in Yonkers, N.Y., grew 28 percent to $1.3 billion in the same period.
The Moody's analysts say the Connecticut casinos' plans for retail expansions and the introduction of other nongaming amenities are unlikely to offset the loss of gaming revenue. And, they say, if the Connecticut casinos don't get to develop casinos in Massachusetts, their prospects for expanding at home could be limited.
As a "single-asset operator," the Mashantuckets are more vulnerable than the Mohegans, the Moody's report says, because the Mohegans, in addition to their Uncasville casino, also operate Mohegan Sun at Pocono Downs near Wilkes-Barre, Pa., which has performed well.
Both Connecticut casinos have sought to further diversify by pursuing management contracts and consulting agreements with properties outside the state, the report notes.