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

Prioritized slightly under the first tranche is the distribution to the tribe, which amounts to about $3 million per month, a source said. That distribution may increase if Foxwoods performs well.

Originally, the casino paid out dividends to individual tribe members, but under the restructuring plan, the payments will go directly to the tribal council to fund services such as the police force.

The next tranche of debt comprises the Special Revenue Obligation (SRO) bonds. Those bondholders, which include bond-insurer MBIA Inc. and Northwestern Mutual Financial Network, didn't take a haircut in the restructuring.

However, the holders of Subordinated Special Revenue Obligation (SSRO) bonds and 8.5% notes -- the two classes with the lowest priority -- did take losses, although the special debt instruments designed for the restructuring could help them perform well in the future. SSRO holders include distressed bond investor Fundamental Advisors LP, while 8.5% noteholders include Pioneer Asset Management and insurer Aegon Group.

Foxwoods is not the only tribe-owned casino to restructure its debt in recent memory. Mohegan Tribal Gaming Authority, which runs the Mohegan Sun resort in Uncasville, Conn., restructured debt through an exchange offer in January 2012. The Chukchansi Gold Resort & Casino in Coarsegold, Calif., restructured debt in 2011. The Lac du Flambeau Band of Lake Superior Chippewa Indians restructured debt related to their Lake of the Torches casino in 2011. The Mescalero Apache tribe restructured $200 million in 12% bonds related to its Inn of the Mountain Gods resort in Mescalero, N.M., in 2010. Also in 2010, the Pueblo of Pojaque's Buffalo Thunder Resort and Casino in Santa Fe restructured $245 million in senior notes.
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Even more restructuring may be on the horizon for tribe-owned casinos. New York and Massachusetts have both authorized new casinos in order to bring in more tax revenues, for example, but such new facilities will take business away from the casinos that already operate in the Northeast.

One source suggested that Mohegan Sun's 2012 restructuring was just a "Band-Aid," adding that the casino's capital structure may not be sustainable in the future, while another source who is familiar with Mohegan Sun's restructuring said the casino is not currently working with the advisor who designed its 2012 restructuring plan, Blackstone Group LP.
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