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Economy

Hellenikon Casino Bid Winner Mohegan Faces Default Risk

ATHENS – The Connecticut-based Mohegan Gaming & Entertainment (MG&E), awarded a license for a casino when development begins on the long-delayed 8-billion euro ($8.68 billion) abandoned Hellenikon International Airport, is at risk of default, said Moody's Investors Service.

The ratings agency downloaded MG&E – which it continues to refer by an earlier acronym, MTGA – into speculative territory with a “negative” outlook, said Casino.org, lowering the mark on the company's bonds to Caa2 from B3, meaning there are just three lower grades that could be assigned to the debt. Bonds with any of the three Caa grades are deemed to be in poor standing and carry “very high credit risk.”

MG&E won the casino license in Athens after the only other bidder and rival Hard Rock International (HRI) was knocked out by a technicality, but is appealing and said it would ultimately win, and said it had a substantially better financial standing and international experience, even before COVID-19.

Like other businesses not operating during lockdowns aimed at preventing the spread of the COVID-19, especially in areas where large groups would gather, the casino and related companies have taken a major hit in revenue losses, closed for six weeks as of April 28.

“The disruption in casino visitation is pressuring earnings and results from efforts to contain the spread of the coronavirus…These efforts include mandates to close casinos on a temporary basis,” noted Moody's.

Despite its bid being disqualified earlier in the process, the Florida-based HRI expects a court challenge will bring the company the license for the casino.

“Hard Rock International will ultimately win the competition for Hellenikon…Hard Rock is the only company to have developed a project like this before and they will do it again,” a spokesman for the company, Michael Karloutsos, told The National Herald.

He said once Greece begins to gradually ease out a lockdown the country will need the economic bump the seaside project will bring.

“Hard Rock International is the only contender with a recognizable global brand and a world-wide network with staying power that can attract much needed additional tourists to Greece,” said Karloutsos.

Greece's highest administrative court was to hear HRI’s appeal, which had already been rejected by the Preliminary Appeals Authority and the Hellenic Gaming Commission.

“COVID-19 might have something to say about the timing of this going forward but I assure you that Hard Rock International is prepared to present our case and ultimately win either way, whether it is here in the Greek Supreme Administrative Court or the European Court,” he said, a prospect that could tie up the development further.

The Hellenic Gaming Commission’s board – the state’s regulator and contracting body for gaming, threw out HRI’s bid and awarded the license to the Mohegan but that has been put on hold by the appeal and now COVID-19 is focusing attention on saving lives and the economy. The business newspaper Naftemporiki earlier said, citing unnamed sources, that HRI sent a letter of guarantee outside the specified time frame and didn’t have enough construction experience to get the casino up and operating and not enough financing – all points challenged by HRI based on its official statements and releases citing its experience, credit agency reports, and communications with Greek authorities.

HRI also claimed that the seven-member gaming commission (HGC) ruled that while its appeal includes “specific reasons and arguments” for contesting the rejected tender decision, the HGC said HRI didn’t specify the reasons and arguments, although HRI charged that “serious irregularities” were among them, the paper also had said.

Earlier this month, MTGA missed a $19.7 million interest payment, and while that’s not seen to indicate an imminent default, financially sturdy, highly rated companies rarely avoid debt or interest service, the site said.

“In Moody’s opinion, MTGA’s failure to make the scheduled interest payment of approximately $19.7 million due on April 15, 2020 with respect to the company’s 7.875% senior notes due 2024 reflects in part MTGA’s highly uncertain operating environment,” said the credit rater.

Mohegan said it didn’t make that payment because it’s looking to conserve cash, and that it believes it will be able to cover that $19.7 million before the end of a 30-day grace period. The operator had $187 million in cash on hand as of March 30, according to Moody’s.

Experts believe Mohegan Sun and Nutmeg State rival Foxwoods can endure the downturn, but both carry massive amounts of debt, the gambling news site said, with no indication whether it would affect the Greek endeavor.

The firm’s speculative “ratings also reflect the negative effect on consumer income and wealth stemming from job losses and asset price declines, which will diminish discretionary resources to spend at casinos, including MTGA’s casino properties, once this crisis subsides. Additionally, because of approaching October 2021 maturities and weak earnings, MTGA’s refinancing and default risk is high,” according to Moody’s.

“More specifically, MTGA’s continued exposure to travel disruptions and discretionary consumer spending have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, and makes it vulnerable should the outbreak continuing to spread,” said Moody’s.

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