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The Deal: Foxwoods Restructures $2.3 Billion Debt After Four Years of Negotiations

NEW YORK ( TheStreet) -- The restructuring of Foxwoods Resort Casino's $2.3 billion in debt has concluded with an out-of-court agreement after four years of negotiations, eliminating $550 million in debt obligations and pushing back debt maturity dates.

The deal, announced on July 1 by the casino's owner, the Mashantucket Pequot Tribal Nation, was touted by sources familiar with the restructuring as the most complex restructuring involving a Native American tribe in history.
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"This was the most complicated deal we have ever worked on," said Soren Reynertson, a managing general partner at New York-based GLC Advisors & Co. LLC, which advised about half of the casino's creditors. "The sovereignty of the issuer meant we lacked many of the traditional tools available in a corporate restructuring, including certain points of leverage, a framework for negotiations and typical sources of value."

Although the parties eventually reached a consensual solution that more than 99% of bondholders voted to approve, the restructuring raised the specter of an even more complex outcome: the first-ever bankruptcy filing by a Native American tribe.

The Mashantucket Pequot Tribal Nation initially considered attempting an unprecedented Chapter 11 bankruptcy filing for the Ledyard, Ct.-based casino, sources familiar with the restructuring process told The Deal Pipeline.

The tribe was interested in filing for bankruptcy because it believed it would have more leverage against junior creditors in court, one source said. The tribe, however, nixed the plan because the legality was questionable and the creditors were all against it, making a bankruptcy court less likely to support a filing.

From a legal perspective, it's doubtful that a Native American tribe would be eligible to file for Chapter 11, since the U.S. bankruptcy code allows filings by people and corporations but not governmental entities. A federally recognized Native American tribe such as the Mashantucket Pequot Tribal Nation is classified as a sovereign nation.

Still, the case can be made that corporations owned by Native American tribes could file, according to Blaine Green, the head of Pillsbury Winthrop Shaw Whitman LLP's Indian law practice.
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The uncertainty, however, works in the tribes' favor. "The mere threat, possibility, and potential that a tribe could file for bankruptcy could be more effective and useful than an actual bankruptcy filing," Green said.
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