Moody’s has upgraded the Seminole Tribe of Florida’s bond ratings, thanks in part to improvements at its two Florida casinos and also to the tribe’s continued payments to the state for banked card games, including blackjack.
The Seminoles have continued to make the payments even after a federal judge ruled last year that the state had breached a provision in a 2010 agreement that gave the tribe “exclusive” rights to offer the card games. State gambling regulators breached the exclusivity provision in the agreement, called a “compact,” by allowing pari-mutuel operators to conduct controversial “designated player” games, also known as “banked player” games.
U.S. District Judge Robert Hinkle ruled last fall that the tribe is entitled to continue running the games for the remainder of the 20-year compact. The provision allowing the banked card games expired in 2015, but the compact included language permitting the tribe to continue to operate the games if the Seminoles lost exclusivity.
Last week, Moody’s Investor Services upgraded the tribe’s existing term debt and bonds to Baa2 from Baa3, and its Special Obligation Bonds to Baa3 from Ba1.
The upgrade was based in part on the Seminoles’ investments in the tribe’s two biggest casinos — both in Florida — and its continued payments to the state, according to a press release issued by Moody’s Thursday.
“The one-notch upgrade of the Tribe’s ratings reflect Moody’s expectation of continued exceptionally strong credit metrics along with further and substantial investment in the Tribe’s two largest casinos that will help the Tribe maintain its dominant market position over the long-term,” Keith Foley, a Senior Vice President at Moody’s, said in a press release Thursday. “Even with the significant planned capital investment, the Tribe will be able to maintain very low leverage, at less than 2.0 times,” added Foley.
The tribe’s two “largest casinos” are the Seminole Hard Rock Hotel & Casino Hollywood, in Broward County, and the Seminole Hard Rock Hotel & Casino Tampa, on the other side of the state.
The revamped bond rating also takes into consideration the tribe’s continued payments to the state — in excess of $150 million — for the card games, according to the press release.
“The upgrade also considers Moody’s favorable view of the Tribe’s decision to continue to make revenue payments to the State of Florida despite a ruling in the Tribe’s favor that entitles the Tribe under the existing compact, which expires in 2030, to withhold revenue share payments. The ruling is related to the State’s decision to allow others (other than another Indian tribe) to conduct banked card games. As a result of that lack of exclusivity, the Tribe is entitled under the existing compact to conduct banked card games at all of its 7 casinos through 2030 without having to share revenue with the State. Despite the ruling, the Tribe continues to make revenue payments to the State and has not offered banked card games beyond the original 5 facilities allowed by the compact,” the June 15 release reads.
The tribe was unable to strike a new deal with lawmakers and Gov. Rick Scott during the regular session that ended in May. Scott and tribal leaders inked an agreement late in 2015, but the Legislature failed to give it the requisite approval.
Fitch Ratings also affirmed the Seminoles BBB rating last week.
The Seminoles’ “gaming division continues to experience steady, positive operating trends compared to more flat growth seen in other U.S. gaming markets,” Fitch noted in Thursday’s statement.
The Tribe and Seminole Gaming hailed the financial market news.
“The ratings upgrades, affirmations and strong new ratings are great news for the Seminole Tribe of Florida as we look toward a solid, stable future for the Tribe,” Chairman Marcellus Osceola Jr. said in a statement. “It means our Tribal members, employees, customers, vendor partners and community residents can count on many good years ahead.”
Seminole Gaming CEO Jim Allen said, “These improved and renewed investment-grade ratings will save millions of dollars by helping to keep borrowing costs low. They will help Seminole Gaming to continue as one of the world’s most profitable gaming enterprises.”