Moody’s Investors Service weighed in on southeastern Connecticut’s gaming tribes late last week, upgrading the Mohegans’ financial rating to “stable,” and attaching a “limited default” designation to the Mashantucket Pequots’ debt after the tribe secured a loan extension.

The tribes, respective owners of Mohegan Sun and Foxwoods Resort Casino, have faced severe financial pressures in recent months due to the COVID-19 pandemic’s impact on their businesses.

Moody’s upped the Mohegan Tribal Gaming Authority’s corporate family bond rating to “Caa1” from “Caa2” and its probability-of-default rating to “Caa1-PD” from “Caa2-PD.” The agency affirmed its “B1” rating on Mohegan’s first-lien revolver loan and its “Caa1” rating on Mohegan’s senior secured lien notes.

Moody’s investment ratings range from a low of “C” to a high of “Aaa,” which are judged to be of the highest quality, subject to the lowest level of credit risk. Obligations rated in the “C” range are considered speculative and highly risky.

In a rating action Friday, Moody’s cited the Mohegans’ Jan. 26 refinancing of a $262.9 million loan with a new maturity date of April 2023.

“This, along with Moody’s expectation that MTGA will generate about $25 million of positive free cash flow after interest, cash distributions and capital expenditures in fiscal 2021, will improve the company’s ability to manage through the coronavirus challenges and reduce its leverage over time,” Moody’s said.

“The elimination of significant near-term loan amortization requirements and term loan debt maturity allowed MTGA to circumvent a potential default later this year,” Keith Foley, a Moody’s senior vice president,” said in the rating action.

In an announcement Friday regarding the Mashantuckets’ debt, Moody’s said the “limited default” designation resulted from the tribe’s agreement with a bank lender to extend the maturity date of a term loan from Dec. 31, 2020 to Feb. 16, 2021.

While Moody’s said it considers the maturity extension to be a missed payment, the agency noted that the extension did not constitute a default under any of the Mashantuckets’ debt agreements. About $255 million of the loan’s original $275 million principal was outstanding as of Sept. 30, 2020, according to Moody’s.

“Without the extension, Moody’s believes that Mashantucket would not have been able to repay the term B loan in its entirety on December 31 given that present cash flows, while positive, plus available cash balances are not sufficient to meet all of the Mashantuckets’ debt service obligations,” Moody’s said.

The Mashantuckets have a “Ca” corporate family rating and a “negative” rating outlook. The tribe, which defaulted on $2.3 billion in debt in 2009, has been operating under a forbearance agreement with lenders since 2014 after failing to meet terms of a 2013 debt restructuring.

The forbearance agreement has been extended several times.

b.hallenbeck@theday.com