Odawa Casino and Resort restructured finances with bond-holders, deal agreed on
PETOSKEY, MI -- A Northern Michigan casino that opened just 3 years ago has come up with a plan to solve its financial troubles and stay open.
When the $122 million Odawa Casino opened in 2007 they thought they would rake in the profits, but so far that hasn't happened.
They fell behind on paying back their debt, but instead of closing, they've spent the last 15 months coming up with a new plan.
That process ended Tuesday.
Odawa Tribal Leaders and the casino's bond-holders had to work together to find a way to save the under-performing casino.
They knew investing this much money would be a gamble, and they're determined to come out ahead.
In 2007, the Odawa Casino and Resort replaced the former Victories Casino in Petoskey. The pricetag -- $122 million. Loans were used for construction, and at more than 10 percent interest, the interest alone was a huge number to pay. The projections were high, the casino under-performed, so, payments were halted as of February, 2009.
"The interest continued to grow and there was an understanding of what the interest was, and there was also an understanding of what the realization of the true debt that could be serviced, and that's where we've come today," said LTBB-Odawa Tribal Chairman Ken Harrington.
"We said, 'Look, let's go to the table, we both took a gamble here, literally speaking, and you need to take just as big of a bite of the apple as we have, and it worked out,’" said Tribal Council Treasurer John Bott.
Here's what the tribe did. In exchange for the $143 million they owed for the opening of the casino and the accrued interest to bond-holders, they agreed to pay a lump-sum of $23 million and pay nine percent interest on $40 million, which will be due in 2020.
"There were some poignant moments you can say, but we've come to an agreement, and it's going to be good for both sides," said Bott.
"They’re gathering a great portion of their principle, but they'll be suffering on the interest," said Harrington.
Doing this, the tribe is bucking the trend of failing casinos. Harrington says several other tribes are throwing in the cards, using their sovereign rights, and just not paying anything to bond-holders. He says it's not right, so that's why it was important for the tribe to come to an agreement.
“We're obligated to pay, so we've come to an understanding to restructure a fair amount," said Harrington.
In a statement, the investment group representing 87 percent of the bond-holders said they're satisfied.
Odawa Casino and Resort did mention that closing down the casino was discussed, but would have been the last step because of the job loss that would have created and the trickle-down effect it would have on the local economy.
