Wilton Rancheria signs Boyd Gaming as casino manager, but who finances construction is unclear

November 8, 2018 |   As has been widely reported last week, the Wilton Rancheria has received approval from the National Indian G...

November 8, 2018 |  

As has been widely reported last week, the Wilton Rancheria has received approval from the National Indian Gaming Commission (NIGC) for a management contract with Las Vegas-based Boyd Gaming for their proposed $500 million casino in Elk Grove. While the management of the proposed entertainment venue is a significant step for the Wilton Rancheria, who will finance construction of the proposed facility is unclear based on statements from Boyd Gaming's chief executive officer.

The agreement is for management of the casino that is proposed for a 36-acre site directly adjacent to unfinished Outlet Collection at Elk Grove shopping center. The 36-acres for the proposed casino was purchased almost two years ago from the Howard Hughes Company (HHC) and was a portion of the unfinished shopping facility owned by HHC.

“We are humbled and grateful to receive this approval, as we reflect on the positive impacts the National Indian Gaming Act has had for Tribes across the country,” Wilton Rancheria Chairman Raymond  Hitchcock said in a press release. “We thank the Commission and Chairman Chaudhuri for their leadership and efforts as our Tribe continues its path forward to achieve self-sufficiency for our people.”

Accompanying the management agreement between the Wilton Rancheria, was a statement of support for the projects environmental impact statement. The parcel was previously placed into federal trust as part of

“Approving this management contract does so much more than create a business partnership between Wilton Rancheria and Boyd Gaming,” NIGC Chairman Jonodev Chaudhuri said upon release of the agreement. “This management contract supports the tribe’s efforts to better their community in many ways ranging from investing in schools to providing medical support for their people."

Although the Wilton Rancheria has expressed confidence the project could break ground next year with a 2020 opening, the project is still the subject of litigation brought by the Indian gaming watchdog group Stand Up For California. That litigation is currently pending in U.S District Court in Washington DC, and regardless of who Judge Trevor McFadden rules in favor of, the case is expected to be appealed.

In a ruling issued on Wednesday, May 30, 2018, U.S. District Judge Trevor McFadden ruled SUFC was entitled to several documents they had been previously denied in their ongoing legal battle. McFadden agreed with the argument that the U.S. Department of Interior had withheld specific administrative information after the attorneys for SUFC argued that the government had omitted document used in making a draft environmental impact statement, and withheld or redacted information from several emails.

While Boyd Gaming has been approved for the operation of the proposed gaming facility, it is unclear what further role they will have with financing the construction of the facility. In a quarterly financial analyst conference call held by Boyd on October 25 that focused extensively their purchase of gaming facilities which has saddled the Las Vegas-based casino operator with $3.05 billion in long-term debt.

Even though Boyd's new purchases and debt loaded were of primary interest to the analyst participating in the call, the proposed Elk Grove casino was brought up twice during the hour-long conference. 

First, Keith Smith, the Chief Executive Officer of Boyd, Keith Smith, mentioned the proposed Elk Grove facility it in his opening remarks as one of the company’s growth initiatives. Smith stated that Boyd is working closely with the Wilton Tribe to finalize the design of the facility and expects to get financing and start construction in 2019.

Smith was then asked by an analyst from Jeffries, about further capital expenditures for the next several quarters, and what role would the Wilton Rancheria have in those expenditures.

"In terms of tribal the tribal advances [to the Wilton Rancheria] that we made, they are not going to be meaningfully different than what we have done to date," Smith answered. "We've advanced about $70 million or so about half of that was for the purchase of the land, we acquired in January of 2017, and then, but you know it's going to be another $5 or $10 million generally is what we expect."

Although Boyd is carrying $3.05 billion in long-term debt as of their most recent quarterly report, the company has lowered its debt load from one year ago when its long-term obligations were $3.6 billion.  

In a story published one year ago on SimplyWallStreet.com, one analyst expressed concern with  the effects Boyd's long-term debt could have on it's ability meet debt obligations. The analyst said "Our analysis shows that BYD [Boyd] does not have enough liquid assets on hand to meet its upcoming liabilities. Though this is a common practice, since cash is better utilized invested in the business or returned to shareholders, it does raise some concerns for investors should adverse events arise." 

Boyd's most recent bond issue in June 2018 for $700 million, primarily for expansion purposes, was rated B3 by Moody's. The B3 rating is regarded as junk meaning that higher interest rates are paid given the greater risk taken on by bond holder that Boyd could default. 

Links to the conference call can be found at Boyd's website

Click image to enlarge. 

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D.J. Blutarsky said...

..."We've advanced about $70 million or so about half of that was for the purchase of the land, we acquired in January of 2017, and then, but you know it's going to be another $5 or $10 million generally is what we expect."

$70 million plus another 5-10 million? Those buffets are gonna be mighty expensive I'm afraid!

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