Financially squeezed Northeast states are chasing revenue from gambling in a fast-changing market with increasing competition among both casino operators and states.

Competitors in this supersized dominoes contest include Massachusetts, which is gearing toward casino openings amid licensing delays while Rhode Island makes countermoves; New York, which is pushing for full-scale private casinos, and New Jersey, which wants to add team sports betting at its Atlantic City casinos in the face of a legal challenge from the professional and college sports establishment.

All the new entrants threaten Connecticut's two massive Native American tribal casinos, which already have trouble servicing their debts.

"Certainly the Northeast has become a lot more crowded in the last couple of years as states have added or expanded gaming options," said Standard & Poor's analyst Melissa Long. "States know their residents are leaving to play in other states and would rather keep those tax dollars in-state. As gaming in the region has expanded, existing operators must compete more intensely for customers' discretionary dollars."

The maneuvering includes debt restructuring and merger and acquisition plays by Native American tribes that operate casinos. Notably, the Mashantucket Pequot Tribal Nation, which runs Foxwoods Resort Casino in Ledyard, Conn., last week announced a $2.2 billion corporate debt restructuring with steering committees of its lenders and bondholders.

The compromise ended three years of negotiations between creditors and the Pequots after they defaulted on a $7 million interest payment on $500 million of debt.

"This represents a critical step for our business," said Foxwoods chief executive Scott Butera. "It provides for a capital structure that will support significant investments in our gaming and hospitality businesses."

Expect more moves and countermoves throughout the region to drown out that sigh of relief.

Massachusetts, which passed enabling legislation last year with an eye on a potential $2 billion in annual wagers, formally began its application process recently.

Two weeks ago the state signed an agreement with the Mashpee Wampanoag Tribe, which plans a casino in Taunton, near the Rhode Island state line. The next step is approval from the U.S. Department of the Interior.

But Massachusetts casino doors may not open until 2015 or 2016, as commonwealth's new gaming commission's licensing process is moving at a cumbersome pace. Officials there carved three districts, with eyes cast on such border markets as Rhode Island and Albany, N.Y.

"In Massachusetts, the timing is certainly up in the air. Dealing with multiple levels of government adds a level of uncertainty regarding when the licensing will be done," Long said. "This will give existing operators in New England a chance to plan for the impact of competition. In Rhode Island, you have table games as a defensive play. The delays will also give existing operators a little more time to recover somewhat from the recession and improve balance sheets ahead of additional competition."

Rhode Island's legislature passed an end-of-session bill two months ago that would give the state 18% of the take from table games such as poker, blackjack and craps at its Twin River and Newport Grand facilities, should voters approve an enabling referendum in November.

Moody's Investors Service warned in a report last year about a "keeping-up-with-the-Joneses" mindset that it said "will only further deluge a market that is already saturated and forced to reach out to farther distances to attract the same number of customers."

In New York, Gov. Andrew Cuomo trumpeted his casino initiative in his state of the state address last winter, although he later dropped plans for a casino resort and convention center in New York City's Queens borough at Aqueduct Racetrack. That facility added slot machines last fall.

Another story with national implications is playing out in New Jersey. Proponents of Atlantic City sports betting say the Garden State could generate money that now goes to illegal bookmakers and offshore gambling websites.

On Tuesday, the major sports leagues and the National Collegiate Athletic Association sued in the U.S. District Court in Trenton to keep New Jersey from launching sports betting. The sports leagues say the law Gov. Chris Christie signed in January violates the federal Professional and Amateur Sports Protection Act, which bans betting on team sports in all states except Nevada, Delaware, Montana and Oregon.

Meanwhile, Christie signed a bill on Wednedsay allowing mobile gambling devices in the state.

"New Jersey recognizes how crowded the field is and they're pursuing a new outlet with sports betting. But New Jersey will not get this up and running without a lot of legal challenges. This battle will be interesting," said Bob Boland, academic chair of New York University's Tisch Center for Hospitality, Tourism and Sports Management.

Boland said a growth in team-sports betting could produce joint ventures for casinos. He cited Mohegan Sun's ownership of a Women's National Basketball Association franchise, the Connecticut Sun, which plays its home games at the casino complex.

"This is a case where sports and casino are a combined business," Boland said. "You have a cross-pollination. One promotes the other."

Many observers say Atlantic City gambling is already at overcapacity. No casinos have closed there, however, and the new Revel opened June. Last week, the other tribally owned casino in southeastern Connecticut, Mohegan Sun in Uncasville, announced plans to take over management of Resorts Casino Hotel in Atlantic City. That would situate Mohegan between its Connecticut and Pocono Downs facility in Wilkes-Barre, Pa.

Moody's called the agreement credit positive for Mohegan. "If the company can boost Resorts' financial performance in a challenging market like Atlantic City, MTGA will likely attract additional management-contract business," the rating agency said Monday.

Foxwoods' three-year battle to restructure debt has cast a spotlight on tribal-owned casinos.

"They compete against commercial operators. In some ways that's a challenge and in some ways that's a benefit," said Fitch Ratings analyst Michael Paladino. "What happens with the Native American operators is that they typically have some set of exclusivity provisions set up within their state gaming compacts."

But they're still vulnerable to competition beyond state borders, he said.

Under the Foxwoods restructuring, Mashantucket will rework its senior-secured debt facility and loans from Kien Huat, the Malaysian investment company that originally financed the casino, into two term loans with five- and seven-year maturities, respectively.

Mashantucket bondholders are to receive new securities with lengthened maturities of 13, 18 and 23 years based on the seniority of the existing bonds, with maturities set from the restructuring date.

Holders of Mashantucket's subordinated special revenue obligations and 8.5% notes will receive new debt at a discount to face value of accrued principal and interest, Foxwoods said. Bank of America and Wells Fargo will arrange a $30 million working capital facility for the tribe, with a 30-month term beginning on the restructuring date.

The steering committees include Bank of America as administrative agent to Mashantucket's senior-secured credit facility plus representatives for other lenders and bondholders at each level of the capital structure.

Foxwoods' negotiations with creditors were highly complex. "There were numerous creditors in the capital structure and that's why it took so long. We're in three years of post-default now," said Paladino.

Mohegan officials acknowledged the regional elbowing in a recent conference call with investors.

"Frankly, our table games are being impacted more by Aqueduct than we anticipated," Mitchell Etess, chief executive of parent company Mohegan Tribal Gaming Authority, said while reporting what he called lackluster results for the quarter ended June 30. Mohegan's $9.4 million net income for April through June was down about 68%, and its $344 million revenue was down 4.7%.

The conventional wisdom that Native American businesses are government units ineligible for federal bankruptcy protection could face a test in a Southern California courtroom.

Santa Ysabel Resort and Casino filed under Chapter 11 last month in the U.S. Bankruptcy Court for the Southern District of California in San Diego.

Secured creditor Yavapai Apache Nation has filed for dismissal, arguing that by tribal ordinance, the casino is part of the Iipay Nation of Santa Ysabel and not a separate legal entity. Judge Peter Bowie has scheduled a Sept. 4 hearing.

The results of that case could resonate nationally.

"It will be interesting to see how that plays out," Paladino said.

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