TLP: Sucks if They Were Gambling With the Rent Money
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.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.
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.
If those investors don't start smoking the peace pipe, they'd better start smoking something.