Bloomberg News

Mohegan Seeks Refinancing With $1.1 Billion Exchange Offer

January 26, 2012

(Adds Massachusetts expansion in seventh paragraph.)

Jan. 25 (Bloomberg) -- Mohegan Tribal Gaming Authority, the operator of Mohegan Sun casinos in Connecticut and Pennsylvania, is asking bondholders to refinance as much as $1.1 billion of bonds in an exchange offer as part of a deal to restructure a bank credit line maturing in March.

The new notes, most of which will have higher coupons, will have the same principal amount as the prior issues and will remove “substantially” all restrictive covenants, Uncasville, Connecticut-based Mohegan said in a statement yesterday. The casino operator also is seeking to reduce the size of its revolving bank loan due March 9 by $200 million to $475 million and extend the facility’s maturity date to March 2015. That deal hinges on completion of the bond exchanges.

The casino operator is overhauling its capital structure after it warned that its failure to refinance debt last year raised “substantial doubt” about its ability to continue, according to a Dec. 29 regulatory filing. Mohegan had total debt including capital leases on Sept. 30 of $1.64 billion, with a $21 million interest payment coming due on Feb. 15 on $250 million of 8 percent bonds maturing in April.

Mohegan also will offer $225 million in new first-lien debt in a private placement. The proceeds will be used to repay a portion of the authority’s credit facility and cover other costs, according to the statement.

The casino operator said the debt exchanges are supported by a group of investors holding about $598 million of the bonds who agreed to tender the notes and not withdraw them. The exchange offers and consent solicitations expire Feb. 22, with investors that tender by Feb. 6 receiving cash consent payments.

Recession, Competition Pressure

Mohegan and Foxwoods Resort Casino, which is owned by the Mashantucket Western Pequot Tribal Nation in Connecticut, were squeezed by the 18-month recession that ended in 2009 and face competition from neighboring states as casino gambling expands. Aqueduct casino in Queens, New York, and Revel casino in Atlantic City, New Jersey, have recently opened, and Massachusetts approved gaming in the state last year.

Ameristar Casinos Inc., Penn National Gaming Inc. and Hard Rock International are among companies competing with Mohegan for a gaming license in Western Massachusetts, according to a Jan. 4 JPMorgan Chase & Co. report.

Mohegan “has entered into a lease agreement for a 152- acre site located in Palmer, Massachusetts, which would serve as a potential site for gaming development,” the company said in its annual report filed with the U.S. Securities and Exchange Commission on Dec. 29.

Mohegan is concerned with keeping bondholders content as it plans to expand into Massachusetts in mid-2014, Barbara Cappaert, an analyst at KDP Investment Advisors Inc. said in a telephone interview this month. State gaming commissions look closely at the treatment of creditors and scrutinize companies expanding into their jurisdiction for the first time, she said.

--Editors: John Parry, Shannon Harrington

To contact the reporters on this story: Joseph Ciolli in New York at jciolli@bloomberg.net; Krista Giovacco in New York at kgiovacco1@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.


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