Gaming board declines to extend revenue deadline
December 13, 2006
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BY MARGARITA BAUZA
FREE PRESS BUSINESS WRITER
The Michigan Gaming Control Board rejected Tuesday a request by Greektown Casino LLC to extend deadlines it has to reach revenue goals.
Greektown expects to fall short of its revenue target in 2009. If it misses the goal, it must put itself up for sale, according to a financing agreement the casino reached with creditors and the state's Gaming Control Board.
A shortfall also hurts the casino's credit standing and its ability to secure favorable interest rates on future loans.
Greektown officials say construction delays -- for which it blames the City of Detroit -- will hamper its ability to open its permanent facility on time, making it impossible to reach the revenue goals established in a 2005 accord.
The agreement sets revenue targets the casino must meet each year. Those goals are established depending on its debt.
The casino projects it will be $23 million short of the goal mandated for 2009.
On Tuesday, Greektown Casino attorney Eric Eggan told regulators that the Sault Ste. Marie band of Chippewa Indians, which owns the casino, would be willing to put up the $23 million in 2009 if the board extended the deadlines.
The board rejected the plea to extend deadlines by 12 months in a 4-0 vote, arguing that if the tribe was willing to come up with the money, there was no need for the extension.
The tribe says it would rather use the money for health care and other tribal expenses.
Eggan, an attorney with Honigman Miller Schwartz and Cohn LLP, argued that the deadlines to reach revenue goals should be extended because they were set to coincide with the opening of the casino.
The deadlines were based on assumptions that a 20-story, 400-room hotel complex would open on time and generate the estimated profits.
A 2005 financing deal between the casino and the gaming board led to the approval of a $675-million financing package to build a hotel and casino.
The casino was slated to open in January 2008. Now it is expected to open in September 2008.
Board President Damian Kassab told Eggan he wasn't comfortable moving the deadlines.
"If we keep pushing back targets, where does it end?" he said.
Board member Barbara Rom told casino officials that there would be plenty of investors interested in buying the casino if the tribe couldn't handle the responsibility.
"Nobody forced them to buy this casino," she told Eggan.
Eggan told regulators that it sounded like the board had a bias against minority ownership, which angered board member and retired Wayne County Circuit Court Judge Michael Stacey.
"What did you just say? Are you accusing us of some sort of anti-tribe bias?"
Eggan told Stacey he took it back.
Warren Beatty, a Greektown casino investor and owner, said casino officials would meet to discuss future options.
"Greektown Casino and its construction is not in trouble," Beatty said. "There is an issue of a potential shortfall based on a covenant that we felt should have never been there in the first place."
Contact MARGARITA BAUZA at 313-222-6823 or
mbauza@freepress.com.
