Analyst: Sun faces peril in loss to Wynn

Mohegan Sun’s failure to win the Greater Boston casino license could make it harder for its parent company, the Mohegan Tribal Gaming Authority, to manage its debt, an analyst told investors this week.

Keith Foley, a senior vice president of Moody’s Investors Service, issued a three-page “sector comment” in the wake of the Massachusetts Gaming Commission’s award of the Boston-area license to Wynn Resorts.

“This heightens our concerns about (the authority’s) ability to refinance at an interest rate and on terms equal to or better than its existing rate, particularly given the possibility that the highly leveraged MTGA could be facing a large amount of scheduled maturities when Wynn’s Boston casino is likely to open,” Foley wrote.

Wynn’s Everett casino is expected to debut by the end of 2017 at the earliest, while a significant amount of MTGA’s $1.7 billion debt is scheduled to mature by the end of 2018.

On Aug. 28, Moody’s lowered its rating on MTGA’s debt from “stable” to “negative” in anticipation of further revenue declines at Mohegan Sun in Uncasville.

“We are certainly aware of our capital structure,” Mitchell Etess, the MTGA’s chief executive officer, said Thursday. “I’m not so sure about the timing for the Wynn project. No one knows when the actual opening of that casino will be.”

Wynn’s $1.6 billion project is to be built on a contaminated site that must be cleaned before construction can begin. Mohegan Sun had proposed a $1.1 billion project in Revere.

“In addition,” Etess said, “we have many other projects in line, and none of our financial projections were based on our receiving the Boston license.”

He also noted that the authority’s cash flow will get a boost next year when it stops making “relinquishment” payments to Trading Cove Associates, the Mohegan Tribe’s original development partners. The authority has been paying Trading Cove 5 percent of Mohegan Sun’s gross revenues under a 15-year buyout agreement that took effect in 2000.

The MTGA is pursuing casino licenses with partners in New York state and Philadelphia. A decision on the New York license is expected this fall while no specific timetable for the awarding of the Philadelphia license has been announced.

“MTGA’s success at obtaining other gaming opportunities outside of Connecticut now becomes that much more important to the company,” Foley said.

Although Moody’s has taken a negative view of the outlook for U.S. gaming in general, it’s bullish on the Boston market.

“In our view, the Boston area is an ideal gaming market ,” Foley wrote. “Boston residents have a high propensity to gamble, as evidenced by the large number of Massachusetts residents that travel to Connecticut to gamble.”

b.hallenbeck@theday.com

Twitter: @bjhallenbeck

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