Debt is piling up in front of the Cowlitz Indian Tribe’s long-planned casino project near La Center, and the cash behind the plan is running low.
The gambling arm of the Connecticut-based Mohegan Tribe, the Cowlitz project’s main financier, is $1.6 billion in debt, federal records show. The Mohegans’ new chairwoman is talking about making fewer bets on the casino business.
$28.7 million: Mohegan Tribe’s investment in Cowlitz casino project near La Center, up to Sept. 30.
$1.6 billion: Mohegans’ debt load.
$10 million: New one-year loan from Mohegans to Cowlitz project.
15 percent: Annual interest rate on new loan.
12 percent: 2009 revenue drop at Mohegans’ main casino.
9: months before Cowlitz project’s new $10 million loan comes due.
“The wisdom in the past was that gaming was recession-proof,” chairwoman Lynn Malerba told the Associated Press after her Oct. 5 appointment. “Obviously, that’s not the case. … It makes sense to have a kind of balanced portfolio.”
$28.7 million: Mohegan Tribe's investment in Cowlitz casino project near La Center, up to Sept. 30.
$1.6 billion: Mohegans' debt load.
$10 million: New one-year loan from Mohegans to Cowlitz project.
15 percent: Annual interest rate on new loan.
12 percent: 2009 revenue drop at Mohegans' main casino.
9: months before Cowlitz project's new $10 million loan comes due.
The week before, though, Malerba’s tribe had waded deeper into the Cowlitz’s La Center project, which had already owed them $28.7 million.
On Sept. 30, Malerba’s tribe essentially cut a $10 million check to the Cowlitz project, enough to keep it from defaulting on a $23 million loan from Bank of America.
The interest rate on the Mohegans’ one-year loan to the Cowlitz project: 15 percent, or $1.5 million.
The figures come from the annual report of the Mohegan Tribal Gaming Authority, which reports its financial status to the federal government because its debt is traded publicly.
Most of the Mohegans’ money comes from the 3.1 million-square-foot Mohegan Sun casino complex halfway between New York City and Boston. The main casino there saw revenue and operating profit drop 12 percent last year as gamblers pulled in on their budgets, according to the Hartford Courant.
Time running out?
The Mohegans’ troubles are a backdrop for other drama surrounding the Cowlitz project.
The fields west of La Center’s highway interchange, where the new tribal casino is supposed to be built, have sat quiet.
But Seattle developer David Barnett, a Cowlitz member and the driving force behind the plan, is recovering from a near-fatal truck accident in November. Meanwhile, the Cowlitz have watched almost helplessly as Congress debates reversing a Supreme Court decision that blocked tribes from taking new land into trust.
If that bill isn’t passed, the casino plan might fall apart.
“We don’t have any money to spend on lobbyists or any of that stuff,” tribal spokesman Phil Harju said Thursday.
The Senate’s Indian Affairs Committee passed the bill, known as the “Carcieri fix,” on Dec. 17. The House of Representatives’ Natural Resources Committee hasn’t yet acted.
The Cowlitz tribe itself is not in debt to the Mohegans or the bank. Instead, that debt is carried by Barnett and by a third Indian tribe, the Paskenta Band of the Nomlaki Indians, who operate the Rolling Hills Casino in the Northern California town of Corning, about 100 miles north of Sacramento.
But a constant series of delays for the casino project has become expensive to the project’s backers.
The Mohegans, in fact, have written off $8.6 million, a third of their investment so far, on the expectation that the whole deal could fall through.
And the Cowlitz project’s new $10 million loan shows that its plans may be increasingly dependent on the Mohegans’ faith that the project will go forward.
Mohegans defended
Harju, the Cowlitz tribal spokesman, said everything is still on track.
“I think it’s clear that the Mohegans are a very well-run tribe,” he said. “I’m confident that we have the best partner in the world.”
He downplayed any possibility that the Mohegans might back off from new casino investments.
“Everyone in the country is tightening their belts,” Harju said. “I don’t think there’s any news there.”
An Oct. 15 report by Standard and Poor’s credit-rating firm graded the Mohegan Tribal Gaming Authority’s newest debt a B-, just above junk-bond status. The outlook, S&P added, was negative.
Even so, the Mohegan Tribe seems to be in better shape than its Connecticut neighbors, the Mashantucket Pequot.
Their casino, the Foxwoods, is the country’s largest. It defaulted on a major debt payment this fall, and its future is in question.
Harju said that his tribe and its investors need only wait for Congress to act, then for the Obama administration to finally grant a reservation to the landless Cowlitz.
“Once we get our land into trust, we’ll be able to develop the project the way they envisioned,” Harju said.
Michael Andersen: 360-735-4508 or michael.andersen@columbian.com.
