Losses lead to talks between Foxwoods, lenders
Mashantucket — Acknowledging its failure to meet the terms of a loan agreement reached in July 2013, the Mashantucket Pequot Tribe, owner of Foxwoods Resort Casino, announced Thursday it’s exploring its options with senior lenders.
In a news release issued shortly after 4 p.m., the tribe said it had entered into discussions “as a result of its failure to comply with certain financial covenants in the Credit Facility,” a reference to the agreement between the tribe and Bank of America, N.A.
Scott Butera, Foxwoods’ president and chief executive officer, indicated he could not comment on the talks.
Earlier in the day, Foxwoods posted its quarterly report for the period that ended June 30. The casino reported that in April, May and June, EBITDA — earnings before interest, income taxes, depreciation and amortization — totaled $33.0 million, down $23.3 million, or 41.4 percent over the same period the previous year.
“We believe that consumer spending patterns remain challenging in our primary markets, particularly in the mass and mid-tier market segments,” the report says. “As well, competitive pressures continue to be impactful, both from the expansion of gaming and marketing activities, in the Northeast gaming market.”
The tribe defaulted on a debt of $2.3 billion in 2009, leading to a series of forbearance agreements with lenders and a debt-restructuring process that concluded more than 13 months ago. The resulting agreement enabled the tribe to exchange its outstanding debt for $1.7 billion in new debt.
“At the time, (Foxwoods) and its lenders agreed upon a financial performance forecast that was premised on improved economic conditions and a leveling out of competitive factors,” the tribe said in its news release Thursday. “Those developments have been slow to materialize.”
“Foxwoods’ underlying business remains strong and day-to-day operations continue as usual and without interruption,” the tribe said. “Moreover, the failure to comply with the financial covenants does not adversely impact Foxwoods’ projected liquidity.”
The tribe said it has continued to invest in Foxwoods despite the pressure on revenues. The casino has recently renovated hotel rooms and refurbished its retail and dining facilities. An outlet mall linking the original Foxwoods property to The Fox Tower, formerly MGM Grand, is scheduled to open in May 2015.
But the casino has also downsized its workforce in a bid to save on payroll costs. For the nine months that ended June 30, it employed the equivalent of 5,800 full-time workers, which is 9.6 percent less than during the same period the previous year, according to the quarterly report.
In June, Foxwoods curtailed weekday hours on a portion of its gaming floor.
“We believe, over the long term, that our focus on elimination of unprofitable lines of business and reinvestment in quality patrons will lead to a sustainable level of profitability,” the casino says in its report.
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