In recent history, declining Tribal gaming revenues have forced the question whether or not American Indian Tribes and their casinos can file for federal bankruptcy in the United States. As “Domestic Dependent Nations,” it is not clear if tribes who own and operate casinos fit the necessary conditions to apply. Recently, the Mashantucket Western Pequot Tribal Nation, who own and operate the Foxwoods Resort Casino in Ledyard Connecticut, have reportedly become insolvent, and are at serious risk for defaulting on their considerable debts. The Mashantucket credit rating has been lowered to CCC by Standard and Poor’s, and they have been placed on credit watch. This development has put a lot of focus on the issue of dealing with filing bankruptcy among Tribal groups.
Tribes seemingly have fewer options available to them in these kinds of situations. They are unable to swap debt-for-equity or sell off assets on Tribal lands to refund creditors. On the other hand, creditors do not have the right to take over control or assets of Tribal owned businesses. As such, there is almost no precedent for handling a case of this size, in which tens of millions of dollars are owed to a variety of groups.
With practically no recourse for obtaining the funds needed to repay the debt, and no enforced change-of-ownership possible, it remains unclear what the best course of action is. Obviously, complete cessation of operations will do nothing but increase the debt with no possibility of repayment. The Tribe has cut hundreds of jobs and reduced benefits and pay for others, but there seems to be no foreseeable way for them to pay back the over 1 billion dollars they owe to Bank of America and Wells Fargo as well as private foreign investors.
This bankruptcy issue is of great importance moving forward as a struggling economy has hit the Native American community as hard if not harder than anyone else. The Federal Government need to come to terms with the Native American Tribes so that amicable and helpful solutions can be found.