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Dec. 6: A Flexible Strategy
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Last login: Friday, October 1, 2010
Stumbled across your post(s) about the casino and their indebtedness and you wondering how they can accomplish building while in debt. In debt does not mean insolvent or unable to do business. Leverage is very important in the business world as it allows you to leverage your income potential by taking out loans (debt) in order to further your business, grow, etc. etc. The problems arise, just like the recent housing issue that we've been in, when your leverage (debt) climbs to a point where you can't manage it. Just because a company or corporation is in debt, doesn't mean that they can't operate ... it's a sound business tactic that the strongest entities should leverage themselves to grow or extend their reach. The more leverage you have though, the more susceptible you are should the economy or model change. I don't know the pure financials, income statement or balance sheet of the Mohegan tribe so I can't speak to their specifics. But being $1.XB in debt may or may not be a concern. As long as they can service that debt through future income, the debt isn't a current problem. However, if they take on another $500M in casino development debt and we slip into a double dip recession and patronage drops 50% ... there is then real concern, especially if it were a prolonged event.
October 1, 2010 at 11:06 a.m.
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