With a mid-July deadline looming for a big payment to its lenders, the Indian tribe that runs the nation's largest casino is in talks with banks and bondholders about how best to restructure more than $2 billion in debt that it can no longer afford.
The Mashantucket Pequot Tribal Nation, which owns and operates Foxwoods Resort Casino in Ledyard, Conn., wants bondholders to wipe out a significant portion of its roughly $1.3 billion in bond debt, in some cases paring the tribe's obligations by at least half, people familiar with the matter said....
...The talks have raised issues unique to Native American gambling that investors once dismissed, such as tribes' rights as sovereign nations. The talks also have broached questions about the way the Pequot tribe spends the income from its casino, which is the largest in the U.S. by space and gambling positions like slot machines....
...Over the years, investors paid little attention to the federal protections for tribes that can complicate relations with creditors. Tribes are sovereign nations and because they are the only ones that can operate casinos on tribal land, lenders can't foreclose on the assets and sell them off as they would do with other defaulting borrowers. Nor can the tribe file for bankruptcy, according to most analysts.
In addition, the Pequots, like some other tribes, use proceeds from the casino to fund a fully functioning government and society, including a post office, police force and community center. The tribe also pays out dividend-like checks—known as "distribution" or "incentive" payments—to its members from the casino's revenue.
Those individual payments have totaled as much as $120,000 for some members, according to some estimates, and became something of a lightning rod in restructuring negotiations....
