UPDATED: Credit-rating agency: Mashantuckets likely to consider another debt-restructuring

Mashantucket ― One of the major credit-rating agencies has flagged the Mashantucket Pequot Tribe’s debt, issuing a “negative outlook” reflecting its opinion that the tribe, which owns Foxwoods Resort Casino, might again consider restructuring its finances in the next 12 months.

S&P Global Ratings has reacted in the last couple of weeks to the Mashantuckets’ move to push back the maturity date of a $275 million term loan from Feb. 16, 2025, to June 30, 2028. S&P said it considered the extension tantamount to a default.

As of last month, the balance of the loan was $112 million, according to S&P.

The tribe also faces nearly $2.2 billion in other long-term debt, Foxwoods’ latest quarterly report shows.

The tribe originally defaulted on its debt in 2009 soon after opening what became The Fox Tower amid the Great Recession. In a major debt-restructuring that took years to negotiate with lenders, the tribe exchanged $2.2 billion of debt for new debt totaling $1.7 billion. The deal was consummated in 2013.

On Aug. 14, 2014, the tribe acknowledged it was not in compliance with certain terms of the restructuring agreement, triggering a “specified default notice” enabling senior lenders to block cash interest payments to junior lenders.

S&P noted nearly $1.2 million of the tribe’s junior debt is scheduled to come due in 2026, making it likely the tribe will consider another restructuring. S&P believes the tribe’s capital structure is unsustainable.

On Aug. 7, S&P lowered its rating on the tribe’s term loan to “D,” its lowest designation, from “CCC.” Last Thursday, it raised the rating back to “CCC.”

“While we expect the tribe will generate sufficient cash flow to pay term loan ... interest and amortization, the ‘CCC’ issuer credit rating on the tribe reflects our view that Mashantucket will need some form of restructuring before the 2026 maturity that will likely impair creditors given the tribe’s very high leverage, a cash flow base that is insufficient to service all the debt in its capital structure, and likely inability to access the capital markets,” S&P said Thursday.

A week ago, Moody’s Ratings, another credit-rating agency, announced it regarded the extension of the Mashantuckets’ term loan to be a missed payment with respect to the loan principal. Moody’s had previously assigned a “Caa1” rating to the loan, signifying it was judged to be subject to very high credit risk.

Rodney Butler, the Mashantucket chairman, issued a statement about the credit-rating agencies’ announcements late Monday night from Chicago, where he was attending the Democratic National Convention.

“The early extension of our term loan was a great accomplishment by our team and provides years of additional stability to our credit facility,” Butler said. “The subsequent rating downgrade was temporary and was restored almost immediately. In addition, Moody’s made no adjustment to our credit rating.”

“The extension has been viewed positively by our insurers and stakeholders,” he added.

b.hallenbeck@theday.com

Editor’s note: This article has been updated with the statement provided by Rodney Butler, the Mashantucket chairman.