Apollo investing in Connecticut casinos

Nov 21, 2009 7:53 PM
Staff & Wire Reports | The investment company that bought out Harrah’s Entertainment might have its sights set on Connecticut’s largest tribal gaming operations, Foxwoods Resort Casino and the MGM Grand at Foxwoods.

Leon Black, who heads up Apollo Management L.P. of New York City, has been buying up the Mashantucket Pequot Tribal Nation’s debt, the New York Post reported this week. Both the tribe and a spokeswoman for Apollo declined comment on the report.

The tribe owns Foxwoods Resort Casino and MGM Grand at Foxwoods on Mashantucket tribal land in Ledyard, Connecticut.

At Standard & Poor’s, Managing Director Craig Parmalee said Black’s reported investment is unusual, because it doesn’t come with the same expectations associated with a traditional potential bankruptcy.

That’s because the tribe is a sovereign nation, and cannot be displaced from running the casinos. However, the maneuver could yield rewards for Black, he said.

"Often, when an investor purchases debt of a company who has defaulted, it’s some effort to have a controlling position in a bankruptcy," Parmalee told The Day newspaper in New York. "In the case of a tribal situation, that is not possible, because you have to be the tribe to operate Foxwoods casino. So, my guess is (Black) may just look at this at a good investment.

"And it might create an opportunity for him to generate a return on his investment."

The implications of Black’s reported actions for the tribe or the casinos are not clear.

According to the Post, Apollo bought Harrah’s, a commercial casino, last year along with two other private-equity firms.

On Tuesday, the tribe said it expects to default by Dec. 16 on the balance of a $21.25 million bond interest payment that had been due Monday. While the tribe emphasized the continued efforts to restructure more than $2 billion in debt won’t affect the casinos, it has not said whether tribal government or payments to tribal members could be affected.

And according to one financial source, a default on 8.5 percent notes would not necessarily cause the tribe difficulty because the distribution of gaming revenue to the tribe would not be severely restricted.