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Seminole Slot Machine Bond Rating Drops

The Seminole Tribe of Florida has seen their bond rating drop recently, which will affect the slot machine casino in its business dealings. Fitch Ratings has dropped the slot machine casino’s rating from A- to BBB, citing the recent purchase of the Hard Rock International by the tribe. The tribe recently purchased the slot machine casino conglomerate for $965 million.

The tribe has also been placed on a “rating watch negative” until the ratings agency can evaluate how the addition of the Hard Rock group to the tribe’s business will affect it – and how bondholders will be affected. By taking on the Hard Rock group, the Seminoles are showing a “more aggressive growth strategy and willingness to incur additional debt at the expense of existing bondholders,” reported the agency.

The deal does not include the slot machine and gambling casino/hotels in Las Vegas and London, but does include the rock memorabilia collection, restaurants around the world, hotels, and concert venues. Other ratings agencies reevaluated the slot machine group after the Fitch Rating came out, and confirmed the BBB rating. As far as slot machine and gaming bonds are concerned, it is still a very high rating.

Fitch was also concerned in regards to the tribe’s attempt to buy out their development contract with Power Plant Entertainment as it would reduce debt service coverage levels. The Seminoles also sold two sets of bonds worth $730 million in 2005 to buy back $560 million in tax-free municipal bonds that they used to finance their slot machine casinos. The IRS determined after the fact that slot machine casinos did not qualify for tax exempt status.

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