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River Rock Casino misses bond payment


In another sign of the economic impact from a rival casino, the Dry Creek Pomo tribe failed Thursday to make a scheduled interest payment on bonds used to build the 12-year-old River Rock Casino near Geyserville.

The tribe is now exploring its options to repay investors and lure back customers who jumped to the new Graton Resort and Casino in Rohnert Park, which opened in November.

"We took a significant hit to our revenues," said River Rock General Manager David Fendrick.

River Rock's revenues declined by more than 30 percent after the rival casino opened, the Dry Creek Pomos' chairman, Harvey Hopkins, said in March.

River Rock will make use of a 30-day grace period to seek ways to reduce costs and to have "significant dialogue with our bondholders," said Fendrick, who also is CEO of the tribe's entertainment authority.

"We're going to evaluate where we are for the next four weeks or so before we make a final decision on what we're going to do," he said.

River Rock opened in 2002 as the county's first tribal casino. To finance construction of the facility on a hill overlooking Alexander Valley, the tribe sold $200 million in senior notes to investors at 9.75 percent interest.

In 2011, the tribe restructured the debt after two rating agencies warned that the business otherwise faced a high risk of default.

By March, about $50 million of that debt had been repaid, Hopkins said at the time.

But the tribe has acknowledged that it now faces stiff competition.

The $800 million Graton casino sits closer than River Rock to Highway 101 and to the population of the greater Bay Area. And the 340,000-square-feet complex outside Rohnert Park dwarfs River Rock's 61,000-square-foot facility.

As a result of Graton's opening, the Dry Creek Pomo tribe has reduced per capita payments from River Rock's profits to its 640 members.

On Thursday, the tribe's River Rock Entertainment Authority told investors it would miss the interest payment due that day on two outstanding bonds: its outstanding 9 percent Series A Senior Notes and its 8 percent Series B Tax-Exempt Senior Notes, both due in 2018.

Thursday's missed payment "raises the eyebrows of the creditors," said Alex Bumazhny, a director with Fitch Ratings in New York who specializes in analyzing the Indian gaming market.

If River Rock fails to make Thursday's scheduled payment by May 31, it will be in default.

However, unlike with a normal loan default, creditors of tribal casinos can't seize assets, Bumazhny said.

If River Rock doesn't make up the May 1 interest payment, he said, it likely will once more restructure its debt. In some instances, creditors of tribal casinos have accepted cuts to principal and to the interest payments of the restructured debt.

Since Graton's opening, River Rock has sought to draw in more customers and to reduce expenses, Fendrick said. The casino has increased marketing efforts that announce its looser slot machine payouts, new giveaways and increases to its rewards program.

The casino also has reduced its staff to fewer than 500 employees, he said. That amounts to a cut of about 120 workers from the peak.

Despite the missed payment, Fendrick emphasized that the casino is generating sufficient funds to pay all its vendors and employees.