The Indian tribe that owns Red Hawk Casino made a deal with one of its key creditors Thursday, bringing the troubled casino a step closer to a critically needed overhaul of its debts.
The deal between the Shingle Springs Band of Miwok Indians and Lakes Entertainment Inc., the Minnesota company that runs Red Hawk, calls for the tribe to take over management of the casino.
The Shingle Springs band promised to give Lakes a $57.1 million lump-sum payment by Dec. 31 to retire a startup loan.
That represents a discount of about $9 million to what the tribe owes Lakes, according to recent Securities and Exchange Commission filings by the Minnesota company.
But AmyAnn Taylor, the tribe's general counsel, said the true discount is considerably higher.
Despite the casino's considerable financial woes, Taylor said the tribe is confident it can pay the $57.1 million. "We wouldn't have done the deal if we didn't think we could come up with the money," she said.
The Dec. 31 deadline could be extended by 120 days. By restructuring its Lakes debt, the tribe is closer to wrapping up a financial makeover that could prove essential to the tribe and the casino.
The Legislature has approved a new gambling compact that significantly reduces the percentage of slot-machine profits the tribe must ship to the state.
The new compact says the change is essential. Red Hawk "cannot currently or in the coming years generate enough revenue for the tribe to cover its financial obligations," the compact says.
But the compact doesn't take effect until the Shingle Springs band restructures other debts.
With the Lakes debt restructured, the tribe has one crucial step remaining: dealing with its $450 million casino bond debt.
Taylor said, "We're just starting that process now," but the tribe hopes to have a deal with bondholders in a couple of months.
Red Hawk opened during the depth of the recession, in late 2008, and has fallen well short of its goal of lifting the tribe out of poverty.
The casino took in only $214 million in gambling winnings in 2010, according to trial testimony in a dispute between the tribe and a former business partner. That was about $100 million less than forecast when the casino was in development in 2007.
In some months, the casino has been barely able to generate the $500,000 in minimum profits guaranteed to the 500-member tribe.
Red Hawk's profitability has improved somewhat in the past year or so, according to Lakes executives. But the casino still needs debt relief.
Tribal officials said they were eager to take over management of Red Hawk after the debt to Lakes is paid.
"The tribe is fully confident in its ability to operate and manage Red Hawk Casino," said tribal Chairman Nick Fonseca in a press release.
Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.