S&P rates Graton Rancheria bonds as higher risk for default, higher potential for yield

  • Looking east towards Rohnert Park, the Graton Rancharia Rohnert Park casino construction is taking shape along Wilfred ave. Walmar and Best Buy can be seen at the top left.

The tribe building a Las Vegas-style casino next to Rohnert Park is seeking $800 million in financing, according to Standard & Poor's, which has given the tribe's bonds a higher-risk credit rating.

That's the largest sum yet stated for the Federated Indians of Graton Rancheria project on Wilfred Avenue — one of Sonoma County's largest-ever developments.

The financing is detailed in a Standard & Poor's report this week that gave a "B" rating to the tribe's financing arm, the Graton Economic Development Authority. The rating also extended to the securities that the tribe would use to fund the project.

The B rating means bonds are considered to have a higher risk of default but also a higher potential yield, a designation often applied to junk bonds.

It is a common rating for casino projects, said primary Standard & Poor's credit analyst Michael Halchak.

The financing for a major project in an industry under some strain due to the economy and online competition will test a sophisticated investor market with an appetite for such high yield securities.

"There really hasn't been a transaction of this size, with this development risk, for some time, so it's hard to say what the market's going to be like," said Michael Paladino, senior gaming analyst with Fitch Ratings in New York.

The report said it expects the casino, set to rise on 64 acres just south of Home Depot, to earn $440 million a year by 2016. That's more optimistic than projections in the contract signed in March by Gov. Jerry Brown that allows the tribe to run the casino. That contract estimated the enterprise would bring in $392 million in its seventh year.

Standard & Poor's also identifies Kenwood Investments No. 2, a real estate development partnership, as a consultant to the tribe. Darius Anderson, an influential lobbyist and part of a group that in April bought the Sonoma Index-Tribune newspaper, is a Kenwood partner.

Anderson, who has a home in Sonoma and whom the tribe hired in 2003, could not be reached for comment Wednesday about his current role.

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