The management of Mohegan Tribal Gaming Authority says its casino resort in South Korea is facing challenges with meeting some performance targets related to debt covenants, but gave assurances those hurdles were “not related to a failure to meet our payment obligations at Inspire”.
That was according to Ray Pineault, president and chief executive of the United States-based casino group, trading as Mohegan Gaming & Entertainment. He made the comments during a conference call with analysts last week, following the announcement of the company’s results for its fiscal fourth quarter ending September 30.
Aside from operations in the U.S. and Canada, Mohegan also runs the Mohegan Inspire Entertainment Resort (pictured) with foreigner-only casino at Incheon, South Korea.
Earlier this month, Mohegan said the group would be in default under the terms of a loan related to Mohegan Inspiire.
The company said that under the terms of the loan, it was required to satisfy certain financial covenant tests with respect to the period ended September 30, 2024.
“When the results of the financial covenant test are delivered to the lender following the issuance of this report, certain of the financial covenant tests will not be met, which will be an event of default under the terms of the agreement,” stated Mohegan.
The casino firm also said it would need to refinance a KRW1.04-trillion (US$706.8-million) credit facility, which matures in November 2025.
“Without such refinancing it is probable that Inspire Integrated Resort will not have sufficient liquidity to meet its debt obligations under this facility when they come due,” said the parent company.
Speaking on the call last week, Mr Pineault said the challenges related with performance targets at Mohegan Inspire were “not related to a failure to meet our payment obligations”.
“Despite these near-term hurdles, we fully believe in the future potential of Inspire and remain committed to its success and we continue ramping the resort,” he stated.
The CEO added: “The Mohegan leadership team has been working diligently over the past few months to achieve a resolution with our Inspire local lender and remains actively engaged in our efforts to implement a solution that is in the best interest of all stakeholders.
Ari Glazer, Mohegan Gaming’s chief financial officer, also said that the issues around the group’s South Korea property were “not related to a missed payment of principal or interest”.
“The loan documents contain provisions that require us to achieve financial targets that were agreed upon prior to Inspire’s opening,” he told analysts, adding that the September 30 covenant test was the “first covenant test” under the term loan since the property’s launch in November 2023.
“As is customary, we have negotiated in good faith to amend the covenants and give the business more time to ramp up and achieve its potential,” said Mr Glazer.
The CFO stated: “I can share that Mohegan has made multiple proposals to the HoldCo lenders with respect to an amendment, however the conditions required by the lenders have not been acceptable.”
He added: “We continue to negotiate in good faith with the HoldCo lenders to identify a solution although we cannot guarantee that we will be successful in doing so.”
Mr Glazer observed that a “default or an acceleration of obligations” related with the term loan for Mohegan Inspire “does not constitute a default under any of Mohegan’s other debt agreements or any of its subsidiaries in the United States or Canada”.
