A Bad Bet (Part 2)

Foxwoods’ bankruptcy means trouble for more than just the State of Connecticut.

Foxwoods Casino is one of the largest gaming operations in the U.S. It now may become the biggest tribal company ever to default. In a recent email, Michael Thomas, a leader of the tribal council who is seeking reelection, told tribal members that they would be paid before banks or bondholders, if revenues run short.

That’s not very smart. Creditors can’t take over assets or operations on tribal lands, but what goes around comes around. If U.S. Corporate law suddenly doesn’t apply, lenders will just vote with their wallets and find better places to put their money to work.

This would be a disaster for the tribe. They still need up-front capital to build an attractive business. If the Pequots restructure and put the tribe ahead of the lenders, businesses on tribal lands across the country will have a hard time getting loans.

There hasn’t been a Native American uprising since the disaster at Wounded Knee in 1973. Everyone’s watching what the Pequots do. If they’re smart, they’ll bury the hatchet.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-04T19:34:15+00:00 August 31st, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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