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Tuesday, November 25, 2014
Financiers PUSHING Agreement at Chukchansi. WILL IT REOPEN? SHOULD IT?
Chukchansi Gold Resort & Casino’s financiers have been meeting with the tribe’s separate political factions in hopes of getting them to iron out an agreement that will generate enough peace and allow the Coarsegold facility to reopen.
picture from Fresno Bee
Without casino revenues, the tribe will be unable to meet its financial obligations, thus raising the specter — for the second time in three years — of default. Investors who have put more than $250 million into the hotel and casino are growing more nervous with each week the casino remains closed and the tribal infighting continues.
The longer the casino remains closed, the less likely that the development authority will pay its two annual payments on time. The next one is due at the end of March.
Three years years ago, Chukchansi Economic Development Authority was in danger of defaulting on bonds that paid for Chukchansi Gold Resort & Casino.
It was about the same time that tribal leaders were facing factional splits — the same problems that led to the closure of the Coarsegold facility last month. But despite the infighting at the time, tribal officials were able to rescue the financial notes in a complex restructuring deal that took months. But the restructuring put the casino and hotel at a financing rate of 9.75% because of previous financial issues that were in large measure due to the recession.
Under the 2012 deal, bondholders with about $303.1 million of debt agreed to the new payment plan. The tribe paid off nearly $40 million in notes with $30 million in cash. The tribe then exchanged $270 million in old notes for $250.4 million in new financing, Standard & Poor’s reported at the time.
Reggie Lewis, who represents the Lewis/Ayala tribal council that was managing the casino when the Tex McDonald group’s security forces took over the gaming office, said the tribe’s bondholders are increasingly concerned about the closure.
“Nobody cares what’s going on as long as they got their money, but they are concerned now, they realize until we get this all settled they will not be having their payments and their interest paid back,” he said.
The tribe’s payments to vendors and bondholders are monitored by a New York state judge, who is ensuring the bondholders’ investment is secure.
Lewis said time is money in this case; the bondholders may have to eventually weigh the risks of demanding a permanent closure and claiming pieces of the hotel and casino, such as slot machines, which would provide only “pennies on the dollar” for their investment.