POJOAQUE PUEBLO AND LENDERS REACH SETTLEMENT ON DEFAULTED LOAN, REDUCING THE DEBT BY $80 MILLION
In 2006, the Pojoaque Pueblo was issued $240 million in bonds to construct the Buffalo Thunder Resort & Casino at an interest rate of over 9%. By June of 2009 the pueblo failed to make interest payments of $11.2 million, and missed 10 subsequent payments.
The restructuring of the loan recognizes that the pueblo was officially in default on the original loan. Part of the new agreement reduces the amount owed by $80 million, taking the debt down to $160 million. The lenders also insisted that an independent management company be brought on site to manage the casino/ hotel complex.
The new agreement saddles the pueblo with debt obligations of $112 million with an interest rate of 11 percent and a maturity at 2022. The remaining roughly $49 million would be paid depending on the financial success of the casino/hotel complex. There is no requirement that the pueblo pay any back interest.
This whole episode stands as a lesson for potential lenders to tribal casinos. The lenders lost $80 million off of the original loan, and has the same sort of guarantees of obtaining the newly contracted amount of $112 million that it had of obtaining the original $240 million. The lenders have no ability to seize property or assets of the casino, but the notes will be secured by “operating surplus. “The $49 million remaining debt has about as nebulous surety as can be imagined, so the lender will probably never see any of that.
An article about the settlement in the Santa Fe New Mexican can be read here.
In Las Vegas, 7 of the 19 Las Vegas major casinos are no longer operational. Atlantic City could end up this year with only six of the original twelve casinos in operation, despite the tens of millions in taxpayer money that Governor Christie has given as a gift to the casinos in an effort to keep them afloat. Delaware is also seeing the same transformation in their casinos.
Besides exploiting the citizens of the states where they operate, cannibalizing money out of the local business communities, it turns out that casinos are evolving into a losing business proposition, requiring state or lender subsidies to continue pillaging and plundering their neighbors.
Whether tribal or state, the promotion and protection of gambling is a failed government policy and should be ended.
