TLP: Sucks if They Were Gambling With the Rent Money

Wednesday, May 12, 2010 , , , 5 Comments

indian gaming investments
Indian get to play by their own rules. Sort of payback for all that unpleasantness 100 years or so ago. And they can play tough, especially when casinos and gambling money are involved.


A federal court has allowed an American Indian tribe to get out of a $50 million bond it owed to a private investor, raising concerns among other tribal-casino lenders.

The 3,500-member Lac du Flambeau Band of Lake Superior Chippewa Indians, in northern Wisconsin, said $782,000 in monthly bond payments were bleeding it dry. Last fall, it stopped making them, arguing that the deal was invalid. A U.S. District Court in Wisconsin last month upheld an earlier ruling that the bond deal, cut in 2008, violated federal Indian casino law.

The decision marked the first time a federal court has invalidated a bond because of a violation of Indian casino law, experts say. If the decision stands on appeal, it is unclear how the lender, Saybrook Capital LLC, will be able to recoup its $50 million. The ruling sent lenders and tribes, a few of which are struggling to make payments, rushing to determine whether it could set a precedent that could impact other deals as well.

"Every single lender that I know went through their entire portfolio," said Kristi Jackson, chief executive of the financial-advisory firm Tribal Financial Advisors and the former lead banker for tribal casino financing at Bank of America.
It sounds like the Wisconsin case is a unique deal and the judge's ruling focuses on "faulty" fine print allowing the tribe an out that could come at a pretty steep price for the investors. But it's a big country and the WSJ says casino lending to Indian tribes is a $20 billion market.

If those investors don't start smoking the peace pipe, they'd better start smoking something.

The Lazy Paperboy

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Jonah Gibson said...

Pretty far out on a limb, perhaps, as I haven't read anything about this case other than what I see here, but I have to think that any deal that bankrupts a tribe while taking advantage of its sovereign status to build and operate a casino sounds unconscionable. It may have been a 100 years, but apparently this judge thinks we're still screwing the Native Americans. Then on the other hand, who haven't the banks taken advantage of?

Rob said...

What does a 19th-century image of scalping have to do with today's Indians? Stereotypical much?

Scalping? Come on, Rob. That's a $50 million haircut.

Anonymous said...

Who is screwing who? The tribe's outside real estate investments sucked the tribe dry of money, not the casino. The tribe promised one thing and then used its sovereign immunity to pound the lender into a corner...


Wait a minute, but the Lac du Flambeaus entered into a business contract - assuming the terms were acceptable at the time they signed on the dotted line. So regardless of how OTHER tribes are treated by these evil evil capital pushers, the reality is that THIS tribe entered into an agreement which it then decided it was sick of being in. That's not how contract law works and if you're going to play with the money, you better do so by the money's rules.


I am not defending the lenders. Just sayin.