BRADENTON, Fla. — Fitch Ratings on Wednesday downgraded the Seminole Indian Tribe of Florida to below investment grade because of spending irregularities cited in a recent notice of violation by the National Indian Gaming Commission.
The tribe, which does not publicly disclose its financial records, has a combination of municipal and corporate debt outstanding. A tribal spokesperson estimated the Seminoles’ outstanding municipal debt at $534.5 million. Information about its outstanding corporate debt was requested but not released.
Fitch dropped the tribe’s issuer rating to BB from BBB-minus, its special obligation bond ratings to BB from BBB-minus, it gaming division bonds to BB-plus from BBB, and the rating on a term loan to BB-plus from BBB.
Standard & Poor’s placed its BBB issuer credit rating and its BB corporate rating on negative credit watch Wednesday.
Moody’s Investors Service in early June placed the tribe’s corporate and municipal ratings on review for possible downgrade. Those ratings range from the B1 corporate rating to Baa3, which is the highest rating assigned to some of the outstanding municipal debt.
Analysts from all three rating agencies said they were concerned by the notice of violation the Seminoles received from the gaming commission on June 3 that alleged violations of the Indian Gaming Regulatory Act, commission regulations and the tribe’s own gaming ordinance.
It details six instances in which tribal members were provided with funds from gaming operations for non-permitted purposes. Analysts said the Seminoles have a history of similar problems.
The gaming commission ordered the tribe to correct the violations within 60 days.
In a statement Thursday, the tribe said it is committed to “good governance and to resolving all issues” in the notice of violation.
“To that end, the tribe will submit a detailed response and list of corrective actions taken, in advance of the August deadline,” the tribe said. “The six violations total less than $200,000 and are not material when compared to the tribe’s annual gaming revenues.”
The Seminoles own seven gaming and resort facilities throughout southern and central Florida. It also owns Seminole Hard Rock Entertainment Inc., which owns and operates Hard Rock cafes in North America, Europe, Asia, Australia, and the Caribbean, according to Moody’s. The Seminoles do not publicly disclose their tribal finances, Moody’s said in a recent report.
The tribal website says the Seminoles employ more than 7,000 employees in their casinos, hotels, and other enterprises and purchase more than $130 million worth of goods and services a year. Their businesses include cattle and citrus operations.
“The specific violations noted relate only to governmental operations of the tribe and have no connection to the operations of Seminole Gaming, which continues to produce strong financial results,” the tribe’s statement said. “The violations also have no connection to Hard Rock International, which is owned by the Seminole Tribe, but which is managed by an independent board of directors. Hard Rock International also has its own chairman and its own CEO.”
Information about the amount of the tribe’s outstanding debt was requested but not released.
In 2005, the Seminoles refinanced all of their tax-exempt debt due to an adverse determination by the Internal Revenue Service that it improperly used tax-exempt bonds to finance its hotel, convention, and gambling operations in Tampa and Hollywood.
The Seminoles privately placed $730 million of taxable gaming division bonds to settle the IRS dispute.