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The Deal: Mohegan Sun Operator Asks to Amend Covenant

Both Mohegan and Foxwoods are making plays to open casinos in Massachusetts, and another debt refinancing would put Mohegan in a better position to expand.

Pursuant to its consent solicitation offer, Mohegan's noteholders would receive $2.50 per $1,000 in notes tendered before the expiration date.

A source familiar with the offer said the primary purpose of the consent solicitation is to lower interest rates and potentially extend debt maturity dates. If the tribe gains consent, it will follow up with an exchange offer that would ask holders of its 10.5% notes and 11% notes to trade their subordinated notes for senior unsecured notes with amended terms.

The solicitation closes at 5 p.m. on July 30.

Credit Suisse Securities (USA) is the solicitation agent for the offer, while D.F. King & Co. Inc. is the information agent.

During its 2012 refinancing, Mohegan issued $200 million in 11.5% second-lien senior secured notes, $344.2 million in 11% senior subordinated toggle notes, $417.8 million in 10.5% third-lien senior secured notes and a $225 million, 9.5% first-lien term loan due 2016.

Mohegan's 2012 restructuring wasn't about reducing the debt load or giving out haircuts, the restructuring source said. "They've delayed the day of reckoning until a time when they'll have a better data pattern to work with," he said, adding, "No one incurred any pain or took permanent impairments." Although legally complex restructuring situations at Native American casinos such as Foxwoods Resort Casino and Chukchansi Gold Resort & Casino may make investors nervous, Mohegan looks like a safer bet.

The restructuring source believes Mohegan has one of the best reputations among tribe-owned casinos on Wall Street. "Mohegan gets the gold star for corporate citizenship," he said, explaining that Mohegan has been very transparent in terms of making SEC filings to release financial information, holding analyst days and being available to the investment community.

"When they get new financing, it will be cheaper than it would be if their financial situation was opaque," he said, adding, "Mohegan needs Wall Street to grow, so it will behave."

Blackstone Group LP advised Mohegan on its 2012 restructuring, while Wachtell, Lipton, Rosen & Katz provided legal advice.

Mohegan executives didn't respond to requests for comment.

-- Written by Lisa Allen in New York
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