Conversations with the River Rock Entertainment Authority

September 11, 2011

Update: There is a new article pertaining to the default and proposed exchange offer here.

As I’m sure most of you know, the River Rock Entertainment Authority has $200 million in bonds coming due at the beginning of November of this year, and although the company has expressed confidence that a refinancing will occur, time is growing short and a definitive announcement has not been made. If you didn’t know that, you do now.

These facts have understandably weighed on the market price of the bonds, particularly as no Indian casino has ever tested the bankruptcy courts and the customary bankruptcy remedies would be unavailable even if they had.

The latest conference call contained little in the way of new information, but in response to a question River Rock management did answer that they had an “underwriter” that was shopping the deal around. As I said at the time, the engagement of a specific investment bank is an early step in the refinancing process, but the fact that they have found one is a positive concrete development.

Last week, I was informed via email that a reader of my articles and a member of the investing website was in a position to pass on information from a conversation between another member and a senior employee of River Rock. In this conversation, the employee identified the underwriters as BofA-Merrill Lynch and Credit Suisse. This struck me as unusual; those are after all very large investment banks–both of them in the “bulge bracket”–and I am surprised that they are taking such an interest in our little casino. CIBC, the investment bank that handled the offering of the bonds originally, is less than a third the size, based on assets, of Credit Suisse, the smaller of the two new banks. This employee also agreed with most of us that River Rock has sufficient cash flows to obtain a refinancing, and that many of the issues are “political,” a topic I will address later.

Curiously, this employee did also mention that he feels that 51% of bondholders would be likely to approve an extension of the maturity date. Obviously I don’t know what manner of canvassing River Rock has done on this matter, but I am concerned that his volunteering of this information could imply that an extension is the new plan, rather than the backup plan.

Following this conversation, this reader then telephoned this same employee for further information. Mostly the conversation contained the same information, but a few interesting highlights did emerge. First was an idea from Merrill Lynch about taking advantage of the Build America bonds program, as much of the borrowing went towards building infrastructure (although the employee may have been thinking of a different stimulus program, based on what I’ve found Googling for the Build America bonds). He also clarified that the political issues mentioned above pertained to the casino’s discussions with Sonoma County, which have now been resolved now that the land on which the road is to be built has been purchased.

As for a possible tender or extension offer, the employee stated that the extension proposal would have a definite maturity, as the bondholding community is understandably wary of an open-ended commitment, and that it would be possible to sweeten the deal with a small increase in coupons. He also added that any definite plan to deal with the upcoming maturity would be disclosed via an 8-K filing, most likely before the November deadline.

The employee also reiterated that River Rock’s cash flows are excellent and in fact the casino’s financial ratios are the best in the country. This is probably a true statement at least for certain financial ratios; River Rock offers better free cash flow coverage of interest than, say, the Mohegan Tribal Gaming Authority, which I have discussed elsewhere on this site.

So, those were the key points of the conversation, and here are my thoughts. I am intrigued about the use of stimulus programs; it would make a refinancing deal more marketable, and a subsidy on part of the borrowing would make the interest coverage on the remaining part, which would consist of ordinary high yield debt, look much better on an interest coverage basis. However, qualifying for the program presumably adds an extra quantum of time to the refinancing process.

One thing that is conspicuously absent in this conversation, I notice, is the possibility of a bridging loan. If Merrill Lynch or Credit Suisse are genuine underwriters, meaning that they will assume the risk of having to keep unsold bonds, this is an expression of their confidence in the value of the new bonds. As such, they might be willing, for an appropriate interest rate and fee, to lend River Rock the money it needs to pay off the old bonds against the proceeds of the sale of the new bonds. Obviously, the new bond deal would have to be pretty definite at that point, but it is a presumably viable option and I am surprised not to hear it discussed.

The main takeaway from this conversation and the current situation, though, is that we bondholders are certainly at the point where we must consider the shape of the extension offer. Certainly the bond prices already indicate that this possibility has been priced in. First off, I am convinced that the issue is one of time and not ultimately one of solvency; River Rock does have sufficient cash flows to support the debt in my opinion, and I do think that an extension at a slightly higher interest rate would not significantly increase the risk of a permanent loss of value.  I would probably vote in favor of an extension with my own bonds if November 1 passes with no refinancing and I haven’t closed my position before then. I would say that the extension, if it proceeds along the lines described above, is certainly preferrable to forcing the company into default, which would certainly hamper any refinancing deal in process, and even taking an optimistic view of the River Rock Entertainment Authority’s waiver of sovereign immunity, there are nowhere near enough seizable assets to satisfy the bond issue.

So, the situation is certainly not ideal for River Rock’s bondholders, but the continuation of interest in an extension offer would make the offer more palatable, and River Rock’s cash flows are still clearly capable of supporting the refinancing, which still may happen on time but I would not rely on it. Naturally I am worried about the future course of bond prices if an extension offer is made, but based on River Rock’s financials I am not greatly concerned about an ultimate impairment in value.

I would like to once again express my gratitude towards the Valueforum member who communicated these conversations to me, and I hope that this signals a trend of River Rock’s management being more forthcoming.

Disclosure: At the time this article was written, Geoffrey Rocca owned bonds of River Rock Entertainment Authority.

171 Responses to “Conversations with the River Rock Entertainment Authority”

  1. What do you readers think of Fructivore Investments? He probably works for RRA. Frutivore Investments just reported his belated opinions which everyone knows. This site doesn’t have anymore insight than my dog. You readers have more insight in the ramifications of RRA. In summation, I pity the fools that continue to follow Fructivore opinions. Can one person tell me what he or she learned from Fructivore most recent article about RRA? His opinion is late and useless. Good luck readers.

  2. The idea that I am employed by River Rock is patently ridiculous considering how many other items I cover on this site. And I naturally assumed that with so many visitors complaining about a tight-lipped management that the words of management would be of interest.

  3. I am benefit from this website .I may not agree with all of his pinon but I really learn a lot form this website.

  4. fructivore is a genius. geniuses aren’t perfect, but I wouldn’t be surprised if he’ll make out fine with River Rock bonds

  5. I appreciate the legwork done to analyze these prospects and the follow up digging for updates.

    Sorry you lost money, man, but he didn’t make you invest.

  6. thanks for the info..

    keep us posted as Nov 1 closes in on us.


  7. what a day, we hit 500% yield for the first time. Impressive!

  8. As someone mentioned on the previous much richer discussion thread, it’s surprisingly quiet out there.

    Everybody hunkered down hoping not to become another stinking indian casino debt corpse littering the already over-littered landscape. Not a mouse stirring, other than some minor noise from some musty federal appeal court.

    A brief review of the said landscape:

    One default already apparently consummated, not even an attempt at restructuring. (the case still in courts though, see below).

    Two defaults restructured on extremely disadvantageous to the bondholders terms, 65% loss of principal and more.

    Another default and the largest of them all, Mashantucket Pequot Tribal Nation, two years in default already with a comprehensive (and as above extremely disadvantageous to bondholders) restructuring proposed late last spring with NO movement on it since.

    And Mohegan Sun with their massive bond coming due next year that nobody knows how they are going to refinance.

    So all eyes on us now, that is the River Rock Casino, with the fear factor visibly growing day by they.

    To wit: some poor schmuck decided to dump his 266 bond stash at Fidelity for a mere $68 (600%+ yield) a few days back with no takers so far.

    Default or a major haircut decidedly in the air. But you knew that already.

  9. In view of the above, that is in view of the likelihood of default or usurious restructuring conditions , let us review the option of a legal action against the tribe and their casino.

    There is SOME hope minor as it is, contrary to what I wrote before and that’s because of the recent court decision in the Lac du Flambeau Indian “band” case.

    Some background:

    This Wisconsin indian casino outfit needed money in 2008 to continue their operations (old debt, some expansion). Not much $50M, still they had no takers, the outfit was that fishy, until Wells Fargo found them somebody who was willing, sort of.

    To get it though they had to throw everything and the kitchen sink into the agreement:

    – waiver of tribal sovereignty,

    – no payments of any kind to the tribe before bond holders were paid in full,

    – aggressive amortization scheme (payment of some part of the principal with each interest payment),

    – right of the bondholders to install their own management,

    – right to reposes physical things from the tribe,


    Needless to say the tribe promptly defaulted on the debt, everything, interest, amortization, principal payments. While the casino continue to operate and produce some income.

    To the great credit of Wells Fargo they took them to the Federal court, which equally promptly (in two weeks time) decided that the bond contract was illegal from the point of view of Indian law (two managerial, requiring pre approval of the National Indian Gaming Commission which was not given).

    Thus they ruled invalid, void from the conception. And said that that $50M is the tribes’ to keep.

    To the STILL GREATER credit of Well Fargo they decided to appeal it. The appeal court sat on it for months, but finally a few weeks back, agreed with the lower court decision (contract null and void) but hedged a little by stating that it is not rally sure the tribe can really keep all that $50M. So the case is now back in the lower court.

    This is what gives us some hope that the case against the River Rock Casino and their tribe may have some chance in federal courts. We clearly have no “managerial” abuse of Indian sovereignty here, thus our band contract is not null or void, the question is whether courts will agree we have valid financial pursuable claim here.

    But before we get there somebody will have to sue them.

    Usually that’s the bank that handled the issue. In our case that is unfortunately not Wells Fargo, but some small Canadian investment bank that may be extremely hesitant to get itself involved with US courts.

    Understandably so. So it looks we are hosed legally speaking.

  10. … final minor observation …

    The case I described above is the only one that has been litigated in federal courts so far. And I don’t know why. For example, one of the tribes that defaulted on their bonds, the Pueblo in New Mexico, issued their bond with zero chance of ever paying it back.

    Their numbers just didn’t add up at the time of issuance.

    “We made the first interest payment after the casino opened, and it nearly broke us,” said George Rivera, the tribe’s governor. “We didn’t have enough for payroll.”

    What kind of utter financial stupidity (or bad will, or fraud) is it to enter into a debt arrangement w/o calculating first that they will be able to cover at least interest payments.

    And what kind of investment bank allows such a transaction to go through. The tribe and certainly the investment bank should had had the total s.t sued out of them here by bondholders.

    Clear financial fraud, total breach of fiduciary responsibility.

    Still they agreed to restructuring where they lost almost everything.


  11. I agree with Craig’s message of Sept. 12, above. However well-spoken, Mr. Grocca’s commentaries on his site herewith have been borderline useless, and, non-deliberately I hope, misleading in their casting of the RREA bonds in a rather positive light. Perhaps idealistically so, too. This latest one sounds, at best, like a lame pledge to capitulation of all of us to the RREA coercion into a maturity extension. I say the lack of courtesy shown by this management towards investors all along (no refi news whatsoever with a month to go, etc.), along with the chairman’s disregardful comments, are telling in what to expect going forward. I don’t do business with that kind of people. I say standing firm and taking this casino to court if necessary will give us an equal or better chance to recouping our money than dragging it out with an extension to nowhere, then another.

  12. I am agree the INdia casino manager has a problerm. that is why the debt price is low . if that is oridnary company and oridinary industry. it is has no problerm to refinance .
    the problem is whether the risk is worth or not .
    at this time there is very few information . since there is only one month to go ,I think they will default .

  13. This article may help calm investors.


    River Rock engages BofA to boost refinancing efforts as maturity clock ticks

    Story: River Rock Entertainment Authority has engaged Bank of America Merrill Lynch
    to assist in its effort to refinance a USD 200m 9.75% senior unsecured note that
    comes due on 1 November, said a source close to the situation, an industry banker
    and two sellside analysts.
    BofA’s mandate complements the company’s ongoing engagement with Credit
    Suisse, the sources said. River Rock is also being assisted in its refinancing efforts
    by Stuyvesant Square Advisors, said the source close an industry banker.
    The 9.75% bonds last traded at 83 on 21 July, but broker-dealers have been
    quoting the bond in the 70s recently, said two sellside analysts.
    In addition to the near term bond maturity, River Rock’s tribal owners the Dry
    Creek Pomo tribe also have a USD 30m-40m tribal credit facility backed by BofA
    that matures next year. BofA and CS, as joint book-runners, are proposing a refi
    that takes out the 9.75% note as well as the tribal debt obligation, said the source
    close and the industry banker. The financing is expected to include a “first out”
    credit facility provided by BofA and CS and a new secured bond issuance to take out
    the notes, the source close and banker added.
    Such a strategy is a deviation from a previous attempt by Credit Suisse, which had
    been aiming since last year to takeout the 9.75% notes with a new high coupon
    bond deal, said one of the sellside analysts.
    As reported, River Rock’s efforts to refinance its debt have been hampered by the
    specter of the Federated Indians of Graton Rancheria and Station Casinos opening
    a casino-hotel complex halfway between San Francisco and the River Rock property.
    Station has already helped the tribe develop the project and will manage the
    property for its first seven years once the property opens, according to SEC filings.
    The threat of more competition has caused investors to dial back EBITDA
    projections for River Rock even though details are scant on the scope and timing of
    the Graton Rancheria project. Nonetheless, investors are bracing for an opening
    within roughly three years that will dilute River Rock’s earnings potential, said the
    sellside analysts.
    River Rock finished its second quarter with net leverage of roughly 2.94x based on
    LTM EBITDA of 55.14m, USD 199m in debt and USD 37.16m in cash, according to
    SEC filings.
    The first out bank debt would provide lender-friendly features such as aggressive
    amortizations in the first few years of its inception, potentially offsetting any
    concerns about the Graton opening, said one the sellside analysts. However, the
    real test would be finding buyers comfortable with taking the junior tranche of that
    note offering, whether it comes in the form of a second out note or second lien
    note, he added.
    “They would really have to get their existing bond holders on board with this and
    offer a big original issue discount in the subordinated piece,” said the first sellside
    Messages left for officials at River Rock, Stuyvesant Square Advisors and BofA were
    not returned. A spokesperson for Credit Suisse declined to comment.
    by Jon Berke
    Source: Debtwire

  14. Well thanks very much for that, much better than that email to Grocca from an unknown friend of a friend of a friend of somebody who presumably talked to somebody at the casino. On the phone, believe it or not.

    That email could have been written by anyone, somebody trying to play a game with him and his readers for example. Me or anybody else for that matter, thus I consider his original post a little bit irresponsible. Repeating unsolicited totally unverifiable hearsay.

    To continue in a suspicious mood – how do we know Grocca isn’t some 12 year old kid, having a time of his life playing a financial expert and a lawyer. His syntax, his adolescent writing style desperately trying to sound adult and professional, seem to suggest that.

    Also his excitement discovering a payment to some bankers, $8k in the latest RREA quarterly. $8k is what an average lawyer in this field spends on summer camps for his kids, and (separately) on their pocket money and (separately) on their Christmas gifts.

    Hope I’m wrong, just for my self esteem.

  15. BTW the trading is crazy on this thing. Just today and yesterday, low 58.5, high 73. That correspond to 1200% to 600% yield, respectively.

  16. Assuming that source can be trusted and I don’t see why not, they are preparing us for “a big original issue discount in the subordinated piece” meaning, if that’s not obvious already to everybody, a MASSIVE HAIRCUT on this bond. So what will we get, 35c on the dollar?

    Sue them I say!

    P.S. Feeling sorry for those trading currently at 72.

  17. Well, on the second thought ““a big original issue discount in the subordinated piece” could be interpreted completely differently. Could somebody translate it into English, please?

    BTW, how is the tribe supposed to pay back that new “first out bank debt” especially with aggressive amortization. Their only income is $12k per head ($12M a year total) from the casino and some federal handouts most likely just some government cheese ? Are banks willing to take that?

  18. “To continue in a suspicious mood – how do we know Grocca isn’t some 12 year old kid, having a time of his life playing a financial expert and a lawyer. His syntax, his adolescent writing style desperately trying to sound adult and professional, seem to suggest that. ”

    I might ask you the same.

    Some people seem to be under the impression that River Rock is the only thing I’ve ever written about, despite the 130 or so other articles that appear on this site and at Suffice to say, I am who I say I am, and my email correspondent requested to remain anonymous, and it would seem from the article that the specifics, including the identities of the investment banks involved, that my correspondent had accurate information. These accusations of yours are unworthy of a serious-minded market participant.

  19. Again I may be wrong, and if I am please correct me, but my reading of the situation is that they are trying to screw us up completely.

    Basically by issuing a new note (bond?), divided into two tranches. The first tranche to cover the tribe’s private debt to them, that is to the banks. They the banks will finance that part, and in return they will get the absolute priority on whatever the entire casino income in the future is. Until they get paid full interest plus their principal, the latter on the accelerated basis.

    Thus the banksters will come extremely nicely ahead on the deal. Get back all their money from that “defaulted” private tribal loan plus decent interest. Not a penny lost.


    The second tranche of that nominally the same note will be subordinated to the first one, that is whoever buys it, invests in it, will get paid only after the banks get paid on their trance.

    The point is they have no intention of investing any of their own money in it, they want to find an external buyer for it which they anticipate they will be unable to do (obviously, given the terms) unless we the bondholders agree to a major haircut on what the casino owns us. How major they ain’t saying but it will be undoubtedly major.

    So in the essence, the banks are attempting to capture whatever income the casino is producing to cover their losses on their private loan to the tribe, that is the income that previously was used to pay us the bondholders. Which is exactly what I predicted they would do. As I wrote:

    For a while I thought the casino had a decent chance to refinance (i.e. roll over) their bond, but now with the discovery of that private tribal loan I’m pessimistic. Whatever the legal aspects of this, in the final accounting it will be the casino i.e. us the bond holders that will bear the full brunt of that private tribe loan.

    All this, however you look at it amounts basically to a daylight robbery on us. They profit, don’t lose a single penny, we lose a lot. Could be as high as 65% of our investment.


    Any law firm out there willing to defend us?

    Would be richly rewarded I believe, if we win in federal courts and win we may given the recent developments.

    I would suggest thinking twice before accepting any haircut offer.

    Also Mr. Grocca could you please share with us your ideas?

  20. So is it correct to assume that we, the bondholders, will have only 3 options?

    1. Accept the 65% haircut.
    2. Don’t accept the 65% haircut and get nothing.
    3. Don’t accept the 65% haircut, get nothing, but collectively join together to file a lawsuit.

  21. wg,
    i’d be surprised if a bank would attempt the sort of scam you are suggesting, unless the private loan is senior to whatever you bought and owed by RREA (legal entity), rather than the tribe. you are basically speaking incoherently.

    On the other hand, the tribe is basically a little sovereign nation that can do almost whatever the hell it wants; these are the people you should be worried about screwing you over.

  22. george – those are basically your choices IMHO, except I don’t know where you got that 65% loss. They did not say anything specific yet, 65% is the top cut Foxwoods casino bond holders are supposed to be hit with. And don’t forget all this is based on one article on Debtwire sourced mostly by unattributable, industry though, sources.


    superpatrol – illegality of the “scam” (your evaluation) that they appear to be proposing:

    a) this proposal is exactly the same as the number they are proposing to pull on Foxwoods Casino bondholders. (not consummated yet). Google for this archived WSJ story “Proposed Foxwoods Deal Is Gamble for Creditors”

    The situation there is almost identical, massive credit line (and maxed out two years ago and in default since) the tribe has no chances of ever paying it back from their own resources, that is from what the get from their casino in the normal course of event that is after the bondholders.

    And the casino and their external bond obligation. Precisely like Rock Creek.

    The difference is they have several classes of bonds. The proposal is: tribe’s debt to the banks gets paid from casino receipts from now on, in full, ASAP, the bondholders get their old bonds replaced with new ones worth 72% or 35% of the original depending of their seniority. (We have only one bond here in River Rock.)

    So if this is a SCAM, it is a one that is widely practiced everywhere. Sorry Virginia.

    b) I haven’t seen the terms of the private loan between the banks and the tribe (they are private), but as you said the casino belongs to the tribe, they are sovereign, they can do anything with it. Also the casino is the only thing they’ve got to their name, no question in my mind they used it to collaterize their credit line. They can piss on our bond agreement if they want to,unless some court convince them otherwise.

    And finally you say …the tribe is basically a little sovereign nation that can do almost whatever the hell it wants; these are the people you should be worried about screwing you over…

    I’m aware of it.

    Again all this is based on my reading of that one short wire posted here and I’m not the financial expert by any stretch of imagination. If you read it differently please share it with us.

  23. It certainly sounds like these bonds are going lower. Recovery to holders in the scenerio you speak of can’t be any higher than 20 or maybe 30c, and that will probably be only AFTER the banks get their money out of the tribe. Might just be time to admit that this is not working out. 70c seems a pretty generous price at this point.

  24. ger – sorry, you do have one more option, sell them now.

    Whether that make sense depends on how much you can get for them now and what the final offer from that ugly consortium of banks will be. I for myself have no idea other that I’m sure their terms will be usurious. Maybe Mr. Grocca does. But I would agree with the poster above – 70c seems generous now depending on your entry point. If you can get it of course!

  25. I’m not a lawyer so treat everything below accordingly.

    If that ugly consortium does propose a haircut of whatever size, step extremely carefully.

    Here is why. The casino solemnly and in writing promised in 2004 that your notes (bonds)

    … will be secured by a first priority lien on substantially all of the Authority’s revenues, furniture, equipment, accounts receivable, inventory, deposit and security accounts, and other tangible and intangible personal property; …

    Thus regardless what the banksters will be telling you, all future revenue of this casino, all their cash, etc is yours under the current contract, the tribe or banks have no title to it whatever.

    If you sign on any haircut you will be giving up that exact right, all of the sudden all their future revenue, everything they own will go to the banks (thus to the tribe) first. You will be degraded to collecting scraps from the floor not to mention losing a major part of your money.

    Think again, if they manage to pull this off, the situation will be this. The banks will be in the clear, the tribe will be sitting very pretty on 30-40m of free money they took from their credit line not having to pay it back now. And the casino will get untold millions as a free gift from you from the haircut you accepted.

    Thus you will be like totally taken to the cleaners. An ultimate sucker.

    I say, let us stick to the original agreement, that is to the fact it is us who have the first priority lien (claim) on everything this casino generates and owns. Not the tribe or banks.

    Sue them I say, the casino first for going back on their written obligations to us. Should be extremely easy given the agreement they signed.

    Then, let’s go after Bank of America for extending that 30-40m credit line to the tribe. With the tribe’s only income 12M a year, they knew or should have known that the tribe would have no chance of paying that debt ever, thus the knew that the tribe would have to force us, their casino’s bond holders to pay that 30-40m for them sooner of later. Had they refused them that credit line we wouldn’t have the present default situation. Thus their action at least constituted a breach of financial responsibility. Peachy actionable, I think.

    Parenthetically I wouldn’t go after the tribe (whatever the real role of theirs was in here), the country has the same problem with them as Germans with their Nazi past. So regardless whether they are genuine or not I would not touch them.

    Two legal targets, should be enough. One deep pocket, one only so so, but it should be sufficient.

    Again, remember you give up totally on all your right under you current bond agreement if you agree to any haircut or modification of the original terms.

    Let’s get some lawyers on it. The chances of prevailing are more that good IMHO.

  26. Doing:

    a) trying to find out who at U.S. Bank National Association (actually just a bank) is handling our case. To notify them of potential default.

    This bank is the official Trustee for our bond, that is they are the people who are supposed to represent us if we default.

    Their statutory responsibilities is to assure that our collateral is safe and protected. That means: current and future full revenues of the Casino, their furniture, accounts receivable, etc.

    To remind you – the casino is in automatic default if they don’t pay us our 200m back plus the accrued interest within 30 days of 11/01.

    So far I found only their general fax number and address – 651- 495-8097, 60 Livingston Av., St.Paul, MN 55107, Specialize Finance Department.

    They have been already paid to protect our interest if River Rock defaults. Will see. (To be truthful I don’t count on much help from them, they are just another banksters).

    b) trying to find out who handles for Wells Fargo that pending tribal bond case in the Seventh Circuit. Once I know, will write them to see if they would be willing to take our case.

    c) wrote the two exceedingly nice gentlemen running our casino, David Fendrick, CEO, and Joe Callahan, CFO, to remind them of their obligations to us under our agreement with them. (tried to consult that letter with a real attorney, our gracious host, to no avail). You can read it here. Maybe worth your time.

  27. Found that law firm (point b above) nd wrote them. The text below so you can add your point of view if you disagree with the position I’m taking:

    Dear Mr. X.X

    I’m a private investor, writing to you because it appears one of the tribal casinos (River Rock Entertainment Authority) appears to be on the verge of defaulting on their 11/01/2011 bond issue*.

    They are rumors that their owner, the Dry Creek Rancheria Band of Pomo Indians, is trying to propose a restructuring on terms extremely unfair to the current bond holders, basically totally reneging on their original promise that their notes “will be secured by a first priority lien on substantially all of the Authority’s revenues, furniture, equipment, etc … “.

    The overall structure of their current proposal appears similar to the one proposed in the Foxwoods Casino case, two tranches, the first one to cover tribe’s bank debt (in default), and a subordinated one to cover the original casino debt, the latter after a severe haircut. This creates the situation where the tribe and their lenders are in the position to capture the entire casino income stream to which they were previously not entitled and which was used to cover solely bond interest payments. The tribe and the casino have granted a limited waiver of sovereign immunity and expressly consented to legal proceedings in case of a default. The original trustee is U.S. Bank National Association.

    Just hoping you may consider taking this case in addition to your current (Lac du Flambeau) as it appears to match your legal field of interest perfectly.

    Sincerely your,

  28. Thinking aloud. There are two problems here, a) what to do with that tribe’s debt, and b) what about 200m they owe us?

    a) normally I would have no problem with spreading the pain of that tribal atrocious recklessness equitably, say they owe 40m to BaA. OK, 10m contribution from all of us and we have the problem solved, i.e. 10m from the tribe to come from their 12m next year casino profit share (that should teach them a lesson), 10m eaten by the bank, 10m from the casino cash hoard and 10m from us (200m -> 190m).

    But the situation is much different, BoA gave the tribe (12m year income) 30-40m credit line, that’s like giving somebody who makes 12k a year a line of credit of 30-40k. That is unheard of on this planet. You would be lucky if BoA didn’t sic their security dogs on you if you came asking for any credit with that kind of income.

    They need to pay for their unbelievable irresponsibility, i.e. BoA needs to write off all that 30m – 40m, won’t kill them, pocket change for them. The tribe could try though to sooth their pain by sending them whatever government cheese they will manage to get their hands on in coming years.

    b) far more significant problem is with our 200m. The problem is that with the present expense structure in three years this casino will be marginal.

    (new one is being built much closer to SF their main market. Plus, their clientele isn’t likely to get any richer in coming years, they are mostly all ladies betting their last 100 bucks from their 1k Social Security checks, bussing there with their last pack of cigarettes and an oxygen bottle in their handbags. Whatever wealth is still being produced in this country goes to the the upper one fifth of the society not the lowest 2/5 which is who their people are.)

    Thus very tough problem.

    Possible solution:

    First, cut the yearly tribal stipend to say 5m (from the present 12m) and reduce casino management compensation by a least 50%. That should put the casino on much firmer financial footing for at least the next 10 years.

    Two, exchange our bond for a new one, same amount, same interest rate, maturity 10 years say, but with two new provisions however a) no new tribal debt under any circumstances and b) dynamic amortization, that is half of casinos yearly income (after our interest, county and tribal payments) goes back to paying back our principal.

    This plan should leave them with some surplus to add a machine or two, a room or two gradually to their casino, maybe even a new floor in a couple of years.

    In ten years we should have our money back, and the casino should be nicely in black and could go back to paying the tribe a significant stipend again, 30M or more a year possibly.

  29. So what happens next?

    If they default (either on interest or principal) which we will know for sure by 12/01, mediations starts.

    (No you cannot drive to the casino on 11/02 and start stripping their furniture, window frames, toilet seat, etc, and impounding their cash boxes and bank accounts).

    U.S. Bank National Association will be representing you in mediation proceedings, most likely very poorly as is their history.

    If they are unhappy with the outcome (unlikely) they can sue the tribe and the casino in federal courts like Wells Fargo is suing (successfully so far) that other tribe/casino combo.

    If they sue they have two issue:

    a) can the tribe, their lenders really encumber the casino and their bond holders with their old private debts? (50/50 I think)

    b) even if they can, can they claim any seniority over the secured (first priority lien) casino bond debt? Extremely unlikely, unless the judge is corrupt.

    (Note parenthetically that in the proposal they are floating the banksters are claiming our bond is unsecured. That is a total BS, shows you who are we dealing with.)

    The final court decision holds, unless appealed. Most likely the decision will be – both debts are valid but must be treated equally in restructuring.

    All this may take many, many years during which time the Trustee is supposed to be guarding and collecting all available Casino assets including all future income that can be potentially used to satisfy our claims. Yes the tribe gets nothing from the casino for all these years but neither do we.


    This of course would be the worst outcome for the tribe and their lenders, so they will be proposing very soon that we settle amicably. Which to them will mean forget a major chunk of what we owe you (up to 65%) and take a new inferior bond in lieu of the rest.

    They will count on your ignorance, most bond holders usually accept. When they do they lose all the protections of the original agreement (mediation, lawsuits, seniority, etc), they go out of the window permanently.

    You will of curse have an option of not participating in that offer. Their proposal (filed with SEC) will spell out in clear what will happen to you if you elect not to take their offer. There are numerous examples of people not taking these offeres happening historically. (Argentina the most famous one).

    BTW, I already wrote the Trustee, notifying them of the potential default and demanding contact information for lawyers that will be handling this case.

    (Mr. Grocca, sorry for all these posts, and many thanks for your gracious hospitality, will shut up for a while unless something major happens. Can be reached in the meantime at

  30. BTW, for the record I do own a number of these bond.

  31. Can U.S. Bank National Association also be sued, if they decide not to represent our interests as they’ve been paid to do?

    > They have been already paid to protect our interest if River Rock defaults. Will see.

    Seems like they are another faction that our future lawfirm could go after, if it decides to take our case. There might be some incentive for U.S. Bank to fulfill their obligation, or at least help fulfill, if they knew in advance that they were on the hook for a separate lawsuit.

    But, like you say, would have to go after them for an amount that is more than just chump change. Like, maybe, the full 200m plus interest and court costs?

    Who to contact at US Bancorp? Don’t know, but I did find a potential lead at this website

    I’ll contact her and see if maybe she can simply provide an address for the indenture trustee dept. If a letter is written, I do think that it should be sent both email and certified mail, to get a bit more attention.

  32. Maybe Ana would even be interested in taking the case? She looks pretty impressive, in more ways than one.

  33. WG –

    Get a grip.

  34. I would suggest learning more about high yield covenants if you are going to write a blog. In a typical indenture, the maturity date can not be extended without the consent of each holder affected by the extension. So even if 51% of the holders consent to an extension of the maturity date, that won’t effect the right of the remaining 49% to get paid in November. And it only takes 25% of the holders to accelerate and end the party. Beware, Inn of the Mountain Gods!!!

  35. Why haven’t the bonds been downgraded further?

  36. This dialogue is very impressive and at least offers some opinions if not perfect information on the current status.

    I would add to these opinions that we must get INFORMATION from the RRA regarding everything from financials to status of repayment (with ~ 2 weeks to go). I would assume that the Bond documents (which of course I didn’t read having bought mine on the secondary market via Fidelity) have an information rights requirement. IE: as bondholders we are entitled to certain info rights (not unlike shareholders) and these rights may be enforced by the SEC.

    I found the phone number of the CFO, Joe Callahan (707) 857-2777 x2716 and suggest that everyone on this thread call him. I left a msg a few days ago but didn’t hear back. He also has a linkedin profile If everyone called him (including broker representatives likes Fidelity, Etrade, etc) that might force them to put out a news release or give some answers.

    Then we could make a more educated decision…

    thanks all

  37. – Re suing U.S. Bank National Association if they don’t discharge their duties appropriately. Sure why not, anybody can sue anybody in this country (except Indian tribes), the question is, will it be cost effective. Generally it is not, the coutry would be a total wreck if it was that easy to sue.

    — no, you cannot sue the tribe or the casino privately. From the bond agreement: … With limited exceptions, we and the Tribe have not waived sovereign immunity from private civil suits, including violations of the federal securities laws. . Only the Trustee, U.S. Bank National Association, can sue them, and only after a meaningful attempt at mediation.

    — the crucial phase is, as I said long time, mediation. That is after rejecting first any haircut or seniority downgrading proposals from them.

    As pointed out in the link posted by Jim (thanks), the Inn of the Mountain Gods case was resolved more or less satisfactorily (i.e. w/o any loss of the principal), because of the heavy involvement of firefighters’ and teachers’ pension funds. Again the critical issue at this juncture is finding who the majority bond holder is, and trying to get them to defend their (and implicitly our) rights aggressively. I don’t know how to go about it.

    In other words we need a strong bondholder ad hoc committee to be involved in mediations with the tribe and their casino from the very beginning.

    — formal default is not a pretty prospect from any point of view, both for them and us. Tons of shady unscrupulous lawyers, questionable advisors and other hyaenas will swoop down to feed on the carcass of this bond if the casino defaults on it.

    — i’m not sure they have any obligation to keep us up on minutiae of what they are doing. Still one could make a serious case out of the casino people not reporting that tribal private loan, but I’m not sure what end that could serve.

    — they usually change grades only when the situation changes substantially, and little has changed since our latest downgrade.

    — I’m sorry valuehound, I find your comment offensive.

  38. ends and pieces

    Jim says “Beware, Inn of the Mountain Gods!!!”.

    I agree, despite highly unusual (these days), and apparently bondholder friendly 100% preservation of the principal in that restructuring. Here is why.

    Because they RISK a lot, 60% of what they got is in the so called PIK bonds (payment in kind), that is bonds that do not pay any interest in normal sense. That is, they nominally accrue some interest, but that interest gets paid only at maturity (in 10 years here) and only after all other debt has been paid back.

    Huge risk that they will see nothing, no interest, no principal.

    Why did they agree to that? Likely because the bond was almost entirely held by pension funds and the funds wanted to keep it at par on their books, no need to explain to the membership losses that would come if they accepted an outright haircut.

    (My suspicion that that the original bond was held entirely by pension funds comes from the fact that the actual terms of that PIK bond are private, nobody is willing to say anything and I tried 3 different sources including i-Deal LLC the official Exchange Agent and Information Agent in this deal. Was flatly refused, even their interest rate.)

    “Inn of the Mountain Gods” is far from ideal, but that’s one of the things we may get. I sympathize with those who say “I want my money back and I want it now”, but that is likely entirely impossible here, I’m afraid.


    Congratulations to ger on his taste in women – I agree Ana “looks pretty impressive, in more ways than one” but aren’t we looking here for a lawyer not a date, as awesome the latter would be?


    I get a sense from the amount of trading that there is no dominant holder here, thus not fund or some investment mogul to represent us here, as above or in that Lac du Flambeau case.

    We still need an ad hoc committee, I think, just in case.


    And finally I’m positively impressed by the recent trends in prices on these bonds. Maybe the message is getting through. Maybe.

  39. WG said: “…that is after rejecting first any haircut or seniority downgrading proposals from them.”

    I agree. If any legal action takes shape, please post the information. Lesser bondholders like me (40) might want to add their names to it.

  40. Looks like the Red for a new deal has hit the Street. 205MM of senior notes split between a taxable and tax-emempt note and an additional muni-sub note to take the Tribe out of their debt. Sounds like the Sub has already been placed. This appears to be coming together nicely.

  41. They seem to have substantially perfected issues that plagued the outstanding debt. The Tribe has taken a clearly subordinated position with respect to the Senior debt, so there is no priority of claim issue; BAC appears to have rolled their existing credit line; and they appear to have clarified the language as regards collateral and sovereign immunity. Clearly all done in concert with current bond holder concerns, which suggests most if not all will roll their positions.

  42. Can you point us to any details that have been posted online, valuehound?

  43. The devil is usually in the details, but the overall structure rumored above is a significant improvement over the first “proposed” restructuring (Debtwire) published here some time ago. Will see!

  44. I dont beleive there is anything currently on the web, but they are publicly marketing the deal, have released a RED, and have their lead underwriters, CS and BAC, actively seeking sponsorship for the two Senior tranches. The JR tranche has already been sponsored by BAC. They are using a muni tranche under the Tribal portion of the Build America program, which should open them up to a new buyer base, and actualy provide some relief in terms on interest expense. The better optics of interest expense and more clarity as to seniority on the taxable tranche would make this a pretty easy sale I would think.

  45. The “overall” structure is actually almost exactly what Mr. Grocca suggested some time ago; which was then repeated almost exactly in the debt-wire story…..which, apart from the slight fold of using the Build America program, is pretty much how every high yield deal ends up getting done. Feeling a little silly about some of your misquided barbs against Mr. Grocca and your wildly crazy conspiracy theories WG? How do we know you don’t occupy a podium and a bull horn at the OWS protests? Hmmmm? How do we know?

  46. The debt-wire story talked, valuehound, about a subordinated tranche to cover, that is to take out, the old (i.e. our) bond and that they “… would really have to get their existing bond holders on board with this and offer a big original issue discount in the subordinated piece, …”

    Is that, the subordination, and a big original issue discount, still in the RED* that you report here as circulating in the community?

    How do we know? — Of course you don’t know, as much as we don’t know where you are hailing from.

    * short for “red herring”, bond community lingo for “a preliminary official statement”, I believe.

  47. this sounds like good news. I wish the best for all of you that have a lot of dough on the line.

    of course, if this works out, I’m sure wg will be very happy to apologize to grocca :) let’s hope he gets the opportunity!

  48. Great, super great, we have an official announcement from the RREA that they are offering a new note, with proceeds to be used to retire our bond.

    COULD not have asked for a better resolution, and thus wish them the very best in placing it!

    Also it appears that this entirely new offering is restricted to institutional investors only, thus no need to roll our old one over. Ideal. More than ideal, perfect!

    Re Mr. Grocca, look, the issue here was always much bigger than his or mine ego, your and my money was at stake. Just think Foxwoods casino bondholders. They could have pulled an identical number on us.

    I have and never have had any beef with Mr. Grocca, and wish him many many years of happy and profitable financial advising.

    Hopefully he will grow, mature a bit, became less naive or amateurish in his writings.

    Again my best wishes to him. Truly.

    Myself I learned a lot too, although I admit, in the field, I never thought I would be interested in. Strange paths the life sometimes takes you through.

    Again, hope and pray they will be able to place this bond w/o much struggle.

  49. “BofA and CS, as joint book-runners, are proposing a refi
    that takes out the 9.75% note as well as the tribal debt obligation, said the source close and the industry banker. The financing is expected to include a “first out”credit facility provided by BofA and CS and a new secured bond issuance to take out the notes, the source close and banker added. ” – from the debt wire story…

    And this is exactly what is happening. The sub-debt is being “sold” to BAC. The proceeds from the sub-debt, along with some cash, are being used to pay down the bank-debt first….ie First Out. BAC will be left with a new sub-note, maturing in ’19, that is behind the new senior. That will give new creditors comfort that they have a secured priority claim, but technically, the existing bank debt got out “first”….the remaining 205MM still needs to be placed, but the cap structure is now clean; there are clear cash-flow and performance covenants for the subs; and substantive issues such as “collateral” have been cleared up. The use of the muni tranche also answers the question of why the Authority was waiting on that piece of the puzzle to be solved, as the proceeds of the muni piece can not be used to fund “gaming” ops but must be used to fund infrastructure and other capital improvements. You don’t have to believe me, you can just go to the River Rock web site and pull up the press release. Once you read through it, I think you are going to find that Mr. Grocca and the writers at Debt-Wire were well our front on how this would shape up, as were the institutional holders of these bonds who, you should have observed through the last month, have not sold a single bond.

  50. I am pleased with this announcement, and although placing is still an issue a formal offering is a vital step, and the timing may be close enough that the bridging loan I’ve been thinking of might occur even if the placement is not accomplished on time.

    Regarding the offering being limited to qualified institutions, it is not uncommon for a bond issue to be placed with qualified institutions only and then the company files the paperwork with the SEC to create identical bonds that may be publicly traded, and then makes an exchange offer, in order to create a secondary market.

    As for my writing, it won awards in law school and on the investing side three articles I’ve published at have been selected as “editor’s picks”.

  51. If I were wg , I will say thanks for Grocca .I do not think Grocca is perfect man but his investment opinin do help me a lot .


  52. wg

    >> Myself I learned a lot too, although I admit, in the field, I never thought I would be interested in. Strange paths the life sometimes takes you through.

    I appreciate the work you did here. If nothing else, it might have put some pressure on the clowns running this show to point out the skepticism of the general public. And how people might band together if they decided to ignore their obligations.

    But I guess have to wait for things to complete before declaring victory. They could still have tricks up their sleeve. They normally do.

  53. I sincerely do not intend this to be a slight to anyone, but if you guys can’t get a slightly better grip on the drivers and procedure that usually accompany refundings and negotitations in the HY and distressed market, you really shouldn’t be putting capital at risk. You are going to come out on the wrong side of one of these and lose a lot of money. The very simple question to ask yourself on this one is, “who wins if they blow up the financing for the RREA?”
    The simple answer, no one. Non payment of debt would make operating the casino nearly impossible. The management would likely be out of a job; the Tribe would be out of income; and creditors would crystalize a loss. Nobody wins. The inability to file Chapter 11 is both a curse and a blessing, as it gives the debtor equally limited choices. There is no conspiracy here. There is a very minimally levered entity needing to refi HY debt in a very uncertain and tricky environment. Management and the Tribe have done what they need to do to clarify outstanding issues of priority and security. Bank lenders have agreed to go to the back of the line. Now bond holders are being asked to buy a new issue that using a muni stub will carry a coupon that is both attractive to holders, and manageable as regards cash flow. There is, and never was a conspiracy to defraud anyone. The thesis Mr. Grocca laid out many months ago is proven correct, because at the heart of all of this is a company that is in relatively sound shape. Calling bond trustees, blogging about law suits, and exclaiming wild theories about the desire of Bank’s to defraud people didn’t advance this cause one bit; the economics did. They always do.

  54. I see no reasons to start contemplating flagellating myself in the public. The deal hasn’t been done yet as ger observes, besides, I wouldn’t change my approach one bit if we were to travel on the same road again.

    The intention here was to apply MAXIMUM pressure, legal, moral, ethical to dissuade the Casino and the Tribe from doing what EVERYBODY else has been doing for the last several years, left and right, i.e. stiffing their bondholders to the max.

    Just think Foxwoods Casino, 500m bond and their bondholders who haven’t seen a red cent in two years. They are simply trying to wait them out while dangling a totally unacceptable restructuring proposal in front of them. I give them (Foxwoods bondholders that is) another year to give up (you would too if you didn’t see a penny of your investment in 3 years) to accept whatever scraps that casino is offering them.

    Or all other massive losses out there.

    I will apologize more than happily however to the RREA management and the Tribe if the final resolution is as decent and responsible as it’s promising now to be.

    Keep in mind, however, neither I nor any other rational person could have assumed that RREA and the Tribe would act that differently from all other casino/tribe combos. There were massive failures of financial responsibility and stiffing of bondholders wherever one looked, without a single exception AFAIK.

    Plus they floated a TOTALLY UNACCEPTABLE proposal at least once (Debtwire) contrary to whatever spin our friend from the financial community, valuehound, is trying to put on it now.

    The RREA and this Tribe promises, to be the first Indian casino in many, many years to handle its financial obligations honorably and responsibly. That is outstanding.

    Will be more that happy to tip my hat to them. And thanking them for setting an excellent example for others to follow.

  55. Last reported trade was 150 @ 88.00.

    Thanks, valuehound, for your insight. Are you a HY bond trader?

  56. Re valuehound’s spin on debtwire. Well this can go on forever, let me close it on my side with this.

    I still think, or better yet, all the indication still are, that the original intention here was to stiff us. Stiff us mercilessly. They, the valuehound friends, simply got caught with their pants down IMHO.

    Me, hopefully smiling to the bank, you valuehound not so much.

  57. Nobody acted honorably; everybody is acting precisely in thier own self interest. Mohegan and Foxwoods are levered to the hilt. This is a company with 40MM in cash; 240 of debt; and trough EBITDA of 50MM bucks. As management; as the Tribe; as a Bank loan officer; and as a bond holder; wouldn’t you rather sweat that asset than blow it up?

  58. S&P has spoken on this new issue.

  59. wg, you are disrespectful and pathetic. Have you read the insane bullshit you’ve posted here? I have no personal interest in RREA bonds, and don’t know grocca outside of this blog, but know that he is a far better writer and value investor than you are. Do yourself a favor and learn something about cash flow, or just invest in treasuries.

    I can only suspect that you bought this bond at par or higher, while grocca got in in the low 80’s. I don’t think you understand the debtwire release either.

  60. Oh, the charms of free speech, what would we do w/o it?

    “River Rock makes last-ditch effort to refinance debt” says local press, nothing new there.

    So will they, or will they not place? Should we start taking some bets on it?

    11* days only to go! Real cliffhanger this thing, ain’t it?

    If they do, this will be the fastest bond placement in the WIild Wild West in anybody’s memory. Veritable Willy E. Coyote of bond placements!

    * actually they have an extra 30 days before technically declared in default per the indenture (bond agreement). Again a default here will be NO, really NO GOOD for the Casino, the Tribe and us.

    Only for lawyers, investment banks and such. And other tribes who will look not so good if this works out.

  61. Management and BAC held a call to market the muni tranche today. They put together a compelling flip book and management was a bit better than usual at addressing some of the issues. The most notable points to come out involved the Rohnert Park competition concern, and the sinking/cash flow sweep element of the new debt. They make a pretty compelling point when they show that 74% of current clients will actually still be closer to River Rock AFTER Rohnert Park is built, as a huge part of the client base is either local or from the East. They think it takes Rohnert 3-5 years to come online, which sounds correct, and with the cash-flow sweep in the new deal, you are going to get a lot of cash and coupons back before 5 years passes. I would be surprised if muni guys dont find it a compelling buy in the mid 8s/low 9s sort of coupon range.

  62. many thanks for this, valuehound!

  63. Actually, 8-9% range, tax free, with amortization, is a damn good COMPELLING buy. Where do I sign up?

  64. Here is s question that’s been gnawing at me lately.

    Is a partial placement possible here?

    That is, can they come back in 10 days and say, sorry guys, we tried our best but nobody was willing to take that second tranche, so you need to kiss that other 55% of your investment a nice good bye.

    In other words can they pay us 90m (from that likely entirely placable muni tranche) and have us forfeit the other 110m? That is a haircut via the back door, but haircut nevertheless?

    Just wondering.

  65. ( most will want to skip this over, technical drivel follows)

    What they are doing here is known as tranching, a relatively recent invention of financial industry. The idea is to muddy up the legal situation so much that there will be nobody to defend the interest of bondholders in the future. In the memorable words of L. Ranieri: .. The problem now (that is with multi tranche issues) … (is the situation) … where structurally nobody is acting as the fiduciary. Fiduciary is somebody who is legally obligated to protect your financial interest. Penalties follow otherwise.

    Another lovely scheme of our banksters, although one could justify it with a lofty “desperate times call for desperate measures”.


    Our old bond is a single tranche, thus we do have a fiduciary – U.S. Bank National Association who could be effective it they wanted too.

    The question is who decides what they are supposed to do, sue, not sue, accept a haircut or not, etc. Two different points of view were posted in this thread before, Mr. Grocca’s and Jim’s. The issue AFAICT is not really clear in spite of or maybe because of some recent judicial rulings.

    For starters most bonds these days have the so called “collective action clause” that allows a “supermajority” of bondholders to agree a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring. If the clause is present, the issue is moot.

    We do not have that clause, thus the issue remains. The precedent is in the direction of Mr. Grocca’s position. Specifically, in a far reaching (and shockingly cavalier IMHO) decision a Court held that if a bondholder claims:

    The Indenture did not authorize the Trustee to compromise the claims of the Bondholders for principal and interest without the consent of each affected holder.

    the following applies (inter alia):

    • the Bond Trustee has the sole power to commence remedial procedures, subject to the direction of a majority of the holders.

    • the power to compromise is inherent in the power to prosecute the litigation. (this makes no sense unless the court meant the power to mediate)

    • the non-impairment language was … not intended to preclude a compromise subject to judicial review and approved by a majority of the Bondholders.

    • the terms of the Bonds … could unquestionably be impaired in the bankruptcy case.

    That court decision despite of the explicit non-impairment language in the original indenture:

    … the right of any Holder of a Security to receive payment of principal and interest on the Security … shall not be impaired or affected without the consent of the Holder.

    So that’s were we are, folks.

  66. WG – Come clean. You are writing this drivel just to illicit a response right? You went to law school with Grocca? Just want to take the piss on his chat while he sweats his River thesis? Becuase I don’t beleive its possible you are this poorly informed, or capable of so little thought. I don’t buy it.

    Ranieri was referring to residential mortgage bonds, not a corporate capital structure. Tranching is just a word for offering varying slices of risk or priority in the same deal, usually under the same shelf filing, with the only benefit in this case being a simplification of the underwriting process; it in inself implies nothing about the strength or the incentives of the various parties involved. Tranching has no consequence here as the seniority of the two bonds being offered are identical, and rarely is it of consequence in any issuance and sale of corporate debt. Residential mortages, which Ranieri was referring too, are wholly different. But that is not a result of “tranching,” so much as a result of securitization. The issue becomes one of not having a clear process to by which to negotiate with or sway the behavior of the borrower, because there are hundreds and thousands of them. Pair that with a structure where you have multiple attachment points to recovery, and you have the problems Ranieri is addressing.

    Corporate capital strucutures are rarely comparable. We know who is borrowing the money; we know where our loan will rank in priority with other loans by the same creditor; we have covenants; we have regular financial reports; we know that the “equity” and management of this company can lose their material interest if they don’t service their debts; and we know we have a sophisticated and profit motivated Bank owning debt JR. to us.

    You would do well to get an updated copy of a finanical dictionary. You are having trouble with several key concepts; Trustee vs. Fiduicary; Indenture vs. Prospectus; Priority of claims; Jurisdicition of claims; Waterfall; Capital Structure; Debt; Sub-Debt; Preferred Securities; Equity; Bank Debt; Revolver; Loan Agreement; Underwriter; Syndicate; Refinancing; Reorganization; Bankruptcy; Pre-Packaged Bankruptcy; Claim; Trade Claim; Default; Event of Default; Terms of Default; Recovery;….that should keep you busy for a while and I would offer that you might, inter alia, get ccmfortable with these concepts before you show up at RREA’s door threatening action; engage Trustee’s and attorney’s to pursue litigation; or “blog.”

  67. Man, what is it? Have I hit some raw nerve here accidentally?

  68. Does anyone have any updates?

  69. Well, wg is quiescent after the spanking he just received from valuehound. Therefore, you must wait for wg after he stop hiding from under the rock.

    Grocca usually comes with his tardy generalizations after the cat eats the food.

    Grocca, please give us an update on the RREA bonds!!! Just joking.

    RREA is attempting to consummate a deal similar as described above but it is definitely not a done deal as wg underscored. RREA will probably make the interest payment due on 11/1; however, the fun starts later.

    RREA is expecting some of the large bondholders to participate in this refinancing transaction. Therefore, if you see the bond price spike near par, the deal is done.

  70. I’m wondering about updates too. I guess everybody is just watching the price bob up and down and waiting for the Halloween Passover.

  71. I will give you an update when there is something to update you about. Tell me, Craig, what has been your contribution to the universe of knowledge about these bonds?

  72. I talked to my Fidelity helper, they said they don’t get advance notice, if it’s being paid the funds come in to them and out to the accounts the same day. However they did say, the debtor must file a “material event” notice with the SEC as soon as they believe they will not be able to pay.

    So no news is good news. But some are trading below par, so who is selling?

  73. WG, in response to your most recent question, I’m sorry, but what I think it is (mostly), is stupidity on your part. I especially enjoyed your inane ramblings on tranches, as there are no tranches here- only two seperate issues, one corporate and one tax-free. To paraphrase your October 23rd post, most will want to skip over any posts you make, as they are drivel, technical or not.

  74. Also WG, re your Oct 5 ost “BTW the trading is crazy on this thing. Just today and yesterday, low 58.5, high 73. That correspond to 1200% to 600% yield, respectively”. You might study “bid” and “ask” in the aforementioned dictionary. And you might wrap your head around the concept that there are several traders, not just one.

  75. Me hiding? Didn’t I post here my email some time ago, for those who feel they need to talk to me? Like Craig. Besides what’s here to add?

    Glad somebody is happy with the help they are getting from Fidelity bond people. My experience with them is decidedly mixed. They are usually either bored to death, or ridiculously haughty. Was trying to buy 018805200 through them (very solid deal (at < 25 that is) -when was last time you saw something rated in the A+ range paying 8%?), no luck so far.

    Got so far one miserly quote in several attempts. And I know this thing is trading. Went so far as to provide them with the phone number of the market maker. Didn't help!

  76. Do we really need personal attacks here?

    – tranches were reported by the man in the know, valuehound. As in here: … they are …. actively seeking sponsorship for the two Senior tranches. The JR tranche …, etc. See his post.

    – yield is a simple mathematical concept, bit messy to calculate though in case of existing bonds. You will find a useful calculator on the sifma site, under “run calculations” next to each listed trade.

    Good luck everybody!

  77. WG, as to yield- if you see bonds priced at (for example) 88, but an offer to buy those bonds at 80, that does not mean that a particular trader is marking them up 10% and making what would be a nearly infinite yield (considering that in that scenario, both trades could happen nearly simultaneously). While it might be the case that both sides of offers and asks are the same trader, it is likely they are not. Further, it is quite possible that bids bought today (from the client) may sit in inventory for a substantial period of time before they are sold. Now, if you are seeing actual trades and see a trade for 50 bonds at 80 followed immediately (or proceeded by) a trade at 88, it is possible that the first is a buy from a customer and the second is a sell to the customer. Let’s assume that is the case. In the buy from the customer, the broker has commission, the trading desk has some kind of mark-up, the bond trader has some kind of mark up, and there may be some ECN fees involved. Add all of those up, and they may equal 3-5% (depending on the maturity). So, if the customer rec’d 80, the buyer may have actually paid around 82.5 or 83. If the customer buying the bonds at 88 paid the same costs, the bond seller actually might have rec’d somewhere around 84.5 to 85.

    As to yield calculations- they are anything but messy. They were messy before the advent of computers when traders had to keep big reference books or very sharp pencils. Today, anyone with a Texas Instruments BA II plus can run a yield calculation in about 22 seconds.

  78. down to CCC as everybody already knows I assume.

  79. NEW YORK (Standard & Poor’s) Oct. 28, 2011–Standard & Poor’s Ratings Services said today that it lowered its existing ratings, including its issuer credit rating, on Sonoma County, Calif.-based River Rock Entertainment Authority (RREA) to ‘CCC’ from ‘B-‘. All existing ratings remain on CreditWatch with negative implications, where they were placed on Dec. 9, 2010.

    Our preliminary ‘B-‘ issue-level rating on RREA’s proposed $205 million senior notes, consisting of $110 million series A senior notes due 2018 and $95 million series B tax-exempt senior notes due 2018, remains unchanged. In the unlikely event RREA is successful in executing the proposed transaction, we expect to raise our issuer credit rating to ‘B-‘ and finalize our issue-level rating on the new notes, pending our review of final documentation. If RREA pursues an alternative refinancing or restructuring plan, we expect to withdraw this preliminary rating.

    RREA was created to operate the River Rock Casino for the Dry Creek Rancheria Band of Pomo Indians (the Tribe).

    Our ‘CCC’ issuer credit rating on RREA remains on CreditWatch with negative implications, reflecting RREA’s refinancing needs associated with its $200 million senior notes due Nov. 1, 2011, as well as other debt held at the Tribe. The proposed refinancing would address both debt issues.

    “Given the very short timeframe to execute the proposed transaction and the fact that RREA has not reached an agreement on the terms of its proposed notes issuance, we believe there is a high likelihood that RREA will need to pursue a restructuring to address the maturity,” said Standard & Poor’s credit analyst Ben Bubeck.

    In the unlikely event of a successful refinancing, we expect to raise our issuer credit rating to ‘B-‘ and assign a stable rating outlook. We believe that, despite the threat of new competition entering the market over the intermediate term, RREA will generate sufficient cash flow to support the proposed capital structure. Last year, the Department of the Interior granted land into trust for the Federated Indians of Graton Rancheria (Graton Tribe), a federally recognized Native American tribe. We believe the Graton Tribe intends to build a casino in Rohnert Park, Calif., approximately 35 miles from the River Rock Casino. Although the Graton Tribe must negotiate a compact with California and obtain financing before moving forward with the casino and there’s limited clarity around the size, scope, and timing of the project, we view the land-into-trust decision as significant progress toward the casino opening. Our rating incorporates a scenario in which the Graton casino opens in 2014 and RREA’s EBITDA subsequently declines in the mid-to-high 30% range because of this new competition. Management believes that EBITDA declines will be somewhat less and that its mitigating actions could bring the net impact below 30%.

    Even though we expect RREA to experience a meaningful decline in EBITDA should new competition enter the market, we believe RREA should generate sufficient cash flow to service the proposed capital structure. We base this opinion on our performance expectations for RREA and the terms of the proposed $205 million senior notes. The proposed notes require significant mandatory amortization in the form of a 90% semi-annual excess cash flow sweep, as well as restrictions on the amount of tribal distributions, both of which tighten in the event EBITDA declines below certain thresholds. We currently expect EBITDA generation to remain relatively stable over the next few years, which should facilitate meaningful debt repayment and leave RREA better positioned to absorb the impact of new competition.

    We believe the level of tribal distributions permitted under the proposed notes offering is likely sufficient to fund the Tribe’s current budget needs. However, the majority of the Tribe’s budget is supported by these distributions, and, despite limitations on distributions within the proposed indenture, it is unclear how willing or able the Tribe would be to reduce distributions should operating performance materially decrease.

  80. So default it is. Let’s be fair, valuehound gave us plenty, plenty!, of warnings about this thing defaulting. Now when the deed is done (~100%), those who haven’t heeded him have only themselves to blame.

    Time to go read that indenture again, carefully this time, before I call the Trustee first thing Wednesday morning.


    In the meantime it will be interesting to see if they pay the last coupon or not. 50/50 me thinks.

    Also the market appears to expect 60-65% recovery rate. I still think (and will insist) the Trustee should sue if that’s what the Casino will propose. They will prevail only if they can muster sufficient majority. And that is the biggest question at this point.


    I’m somewhat puzzled though (as valuehound must also be) that they didn’t find any takers for that muni tranche, although on the second thought, 90% of their current excess cash flow ain’t really that much even with a 50% cut in tribal transfers and management compensation.

  81. Maybe they created that new bond offering as a smoke screen. To make it look good when, in actuality, they knew they were going to default?

  82. Also worth analyzing Friday afternoon FINRA data to see if any insider trading activity can be spotted.

  83. this space intentionally blank

  84. … Sharing some thoughts upon the first re-reading of the Indenture (our bond agreement). If liable to hurl vile, semi illiterate abuse at me (many examples above) skip please.

    Things look tough in the sense of our ability to influence things now. For these reasons:

    a) Courts generally hold that:

    … the Bond Trustee (bank representing us, the bondholders) has the sole power to commence remedial procedures, subject to the direction of a majority of the holders

    which is nice in theory, but not practice. Why? Because the Indenture states that:

    … the Trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any holder of new notes, unless that holder has offered to the Trustee security and indemnity satisfactory to it against any loss, costs, liability or expense that might be incurred by it in connection with the request or direction.

    Thus practicably no bondholder individually or collectively will be able to instruct the Trustee to do anything because they are that horrendously expensive. Only big pocket institutions with sufficient resources.

    b) it is up to the Trustee to decide if they want to subject this to a binding arbitration. We the bondholders have no say here.

    … Disputes relating to the new notes for which we and the Tribe have waived our sovereign immunity must be resolved through arbitration, if elected by the Trustee, rather than through litigation in court.

    c) Going to arbitration will preclude future litigation as:

    Federal and state courts typically are required to enforce a proper arbitration award without a re-examination of the merits of the decision.

    So basically, the Trustee is free to do whatever they want subject only to a nebulous requirement that:

    … will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of its own affairs.

    We all are prudent, but I’m sure opinions differ greatly on how to proceed in this situation.

    My strong preference, as is Mr. Grocca’s I believe, would be for refinancing in the sense of an extension of the maturity date. Because I think the Casino will have enough cash flow to pay the current interest rate for the foreseeable future. And I can wait.

    Even to those who cannot wait, the extension would be still preferable I believe, they could simply sell their shares at prices better that what we will likely get with restructuring.

    Of course the haircut will be/is massively preferable to the Tribe and the Casino. All of the sudden 100m plus of their debt magically disappears.

    But the gruesome reality appears to be that even if the “extend the maturity date, preserve the principal, don’t stiff me” crowd constitutes a majority, there seems no way that majority could legally/realistically force things to go their way.

    What remains? Well, just waiting for whatever scraps they will be willing to throw our way. That is waiting for their restructuring/haircut proposal and acceding to it, sheep wise.

    Can’t win with corporate lawyers or tribes, apparently.

    P.S. Some input from professionals would be nice at this point, I’m sure we have some here, outside valuehound of course. For example, I still believe the Trustee is obligated to collect and protect any current and future casino assets, other that the so called “Permitted Payments”, which would put massive pressure on the tribe and the casino to fulfill their original obligations or at least to extend. Am I right?

  85. Unfortunately, but clearly, BAC could not get over the hurdle of getting the muni tranche placed. While the optics and revised terms of the deal (it was reduced in size and benefitted from a more aggressive cash flow sweep) looked very good; RREA simply didn’t leave themselves enough time to educate a buyer-base that was up until last week, wholly unaware of the credit. There are two interesting aspects to what happened over the week. First, the current institutional HY holders of the debt appear to be willing to support the new issue (given the shaky state of the HY market, this is no small positive). They appear to have signed up to buy new notes to replace their old; negotiated for some very pragmatic changes to indenture, and in the final push were willing to see their cash-flow sweep deteriorate from 50% to 40% to try to facilitate getting the muni piece done. Additionally, BAC showed great support for RREA and the Tribe when they agreed to purchase the sub notes. So all is not lost by any stretch, and clearly the important partners in this deal are focused on finding a solution (which is a lot more than half the battle). The really interesting part of what we learned this week centers right here on this forum. The portion of these bonds held by “retail” is making a restructuring difficult. That holder base holds small individual positions, but is proving to be much larger in aggregate than BAC and RREA realized. What that means practically, is that there really is no one to negotiate with as regards the old deal; and a really limited ability to sell a new deal. BAC and CS are simply not going to take the liability of offering a tribal gaming credit to retail given the current tensions and various litigations between what are perceived to be “sophisticated” and not-so sophisticated investor classes. This is proving to be a real issue in getting this deal done.

    It seems that there is a pretty likely path to restructuring in all this. One track that might be likely: RREA and the Tribe pay interest due on November 1st and enter their 30 day grace period. With a deal having been tried, and failed, they could seek a formal “restructuring” that would have current institutional holders rounding up greater than 50% of the “votes’ necessary to push a plan through. The “plan” might simply be an extension of the debt along the lines of what the new debt envisioned. The restructured note could benefit from a cash flow sweep; I suspect the Tribe would have to give a bit more on the distribution front; and using their “collective” powers to force a deal on all holders, the restructuring would have the benefit of rounding up all the retail notes. RREA was, I think, really trying hard to get these notes out of the hands of retail as it makes any future negotiations or restructuring very difficult, but my guess is that they are going to move toward something that simply looks to drag this investor class along. They have little other choice.

    Clearly this scenario is not as clean, or beneficial to current holders as getting a new deal done, but the economics should be just fine. Its important to remember that absolutely nobody benefits from blowing this thing up. The key is to preserve RREA’s ability to generate earnings, which will be the source of future coupons and pay-downs. Earnings only come from a functional casino, and a functional casino needs some degree of CAPEX and certainly needs to fund vendors and employees in the short-run. As I have argued before, sweating this asset is highly preferable to ending up in some sort of more formal bankruptcy process, and with the modest degree of leverage and solid operating results of the current entity, ought to be possible.

    Everyone’s interests seem aligned here, and that is a very big positive.

  86. Valuehound, Grocca…Please comment!!!

    Your insight is valuable and appreciated!!!!

  87. I have been reading this board for a while and though I would chime in. Relative to the indenture itself, I believe it is fully securitized (senior secure debt) with the casino as the colleral. The actual language in the indenture is “The notes are secured by a first priority pledge of the casino’s revenue and substantially all of the casino’s existing and future tangible and intangible personal property”. So to the extent RREA pays off on Tuesday or defaults and the trustees willingness to sue to take title to the casino (which would put the tribe out of business for all intensive purposes). Granted we don’t want to go there, but that option is available and the cash flows of the casino are good as has been noted. As far as any proposed casino by the Graton Tribe, if RREA defaults I can not see anyone at any price funding it so it is would be a dead proposal.

  88. Thanks very much for the insight

  89. BAC taking care of that tribal loan was exceedingly nice of them, wonder though who and how is paying it now. But I understand it is subordinated.

    I still don’t get why that muni tranche didn’t go through. The terms were very good, some would say even too good, and financial people are usually pretty quick on their feet when something that good comes up. Something fishy here.

    The overall path valuehoud has sketched above looks very sensible IMHO, doable even theoretically at least. The hitch is to get somebody with sufficient votes to represent us in negotiations with the Casino & the Tribe. (as I said again and again)

    If the institutionals don’t have it (as I expected) why don’t they form a formal ad-hoc committee and start soliciting our support. The Trustee should know how to reach us. Send out the description of the initial negotiating position (e.g. no haircut, 10 year extension, some indenture modifications, otherwise little change), state out the rationale, solicit their (bondholders) input and finally their support. Nothing could be simpler. And I would be the first one to support it, and I suppose, a majority of people here.

    The thread of litigation is really overblown. The defenses erected in the Indenture, the legal system and the legal precedent are so formidable that legal action would be really irresponsible here. Financially for starters. Not saying, not doable, but really no need to worry that much about it.

    And finally I do not got get this fear about people trying to blow it (i.e. force bankruptcy) instead of “sweating it (as an asset that is)” to the mutual benefit. Nobody on this forum advocated bankruptcy, ever, au contraire, all, including myself warned repeatably about the evils of it. For both sides. All we want is a) not be stiffed and b) the successful, long term robust, profitable Casino supporting equally happy and prosperous Tribe. Too much to ask?

  90. Given I have 5k in notes, I’m going to head up there on Tuesday and grab a slot machine. Anyone need a ride from SFO?

  91. two notes:

    a) preparing a short letter to the CFO of RREA reminding him that that 29+M private issue they recently placed (to cover that old private tribal loan) is subordinated to their 2003/4 senior 200M, 9.75%, 2011 issue. Requesting thus that no payments under this new subordinated issue be made before the Casino pays back the holders of its senior issue in full, principal and interest.

    (in other words, no penny to BAC before we are made even)

    b) the general Indenture Trustee law stipulates that any 3 bondholders (each with 6m tenure at least, I don’t qualify) can request that the Trustee provides them with a list of all bondholders for the purpose of communicating with them. The Trustee has that information because the Casino has to provide it to them every 6 months. Thus if anyone out there wants to form an ad hoc committee, you will know how to reach the rest of us.

  92. Who in their right mind would lend any money to the Graton Tribe to build a start-up casino near the River Rock casino?

    “Although the Graton Tribe must negotiate a compact with California and obtain financing before moving forward with the casino and there’s limited clarity around the size, scope, and timing of the project, we view the land-into-trust decision as significant progress toward the casino opening. Our rating incorporates a scenario in which the Graton casino opens in 2014 and RREA’s EBITDA subsequently declines in the mid-to-high 30% range because of this new competition”

  93. Trading at $57.00 today

  94. valuehound, on the subject of how much is held by non-institutional parties. If BAC and CS sell (or rather, had sold) all of the $205 million new notes they therefore have the money to pay off the old notes. So the $$ in retail hands are only an issue if/when they default tomorrow, it seems to me.

    Any idea how much is in fact in retail hands?

    And why hasn’t RREA issued another “material event” notice? The Oct. 20 document didn’t say “we’re at risk of default on the old notes”, at least I didn’t see it there.

    Finally why doesn’t Bubeck at S&P specifically refer to any party (RREA, CS or BAC) as having advised S&P of no pricing agreement. Or is that just not done.

    Just wondering how us retail investors might have understood it all better.

  95. Sending in Mario, the repo man tomorrow.

    On a serious note, if RREA defaults the Trustee should seek an immediate court order to insure no Casino asset (including cash on hand) is used for any other purpose other than running the Casino to the benefit of the Bondholders, who techically, have rights to take the keys on December 1. That IS the difference between unsecured, subordinated debt and debt secured by specific assets and future cash flows generated by the assets.

    I have no doubt RREA can find some loan shark to fund a mezzanine type bridge loan to pay off the bondholders. To me, it just seems like they have not looked hard enough. If they have to pay short term interest rates of 20% and there is no extra cash flow to distribute to the Tribe, I sympathize but the bond indenture is clear as to how owns the assets upon a default. It will all go down in flames, and everyone will lose, if the bondholders really have to step on and assert their rights.

  96. Hello, I am responding to KB’s remark:
    “… sue to take title to the casino (which would put the tribe out of business for all intensive purposes). Granted we don’t want to go there, but that option is available and the cash flows of the casino are good as has been noted.”
    It’s my understanding that no one but the Tribe can run the Casino. Also, the land is US Federal Govt-owned.

    I hold 23K Face of the 2011 Bonds

  97. Unincorporated instrumentalities of Indian tribes formed pursuant to tribal law, such as the Authority, have sovereign immunity under federal law and may not be sued without their consent. We have granted a limited waiver of sovereign immunity on behalf of the Tribe and expressly consented to legal proceedings by the Trustee to interpret or enforce the terms of the Indenture or the Senior Notes as against any of our assets and revenues and against the revenues of our casino and related amenities. Express waivers of tribal sovereign immunity generally are valid if properly made, and if such waivers of sovereign immunity are held to be ineffective investors may not be able to enforce their rights and remedies under the Senior Notes or exercise any remedy for violations of federal securities laws.

    Read more:

  98. Pop the champagne!

  99. The above msg was sent at 2:04 am DST. Pay out just showed up in my account as it is 11.01.11 here

  100. LH, interest only, correct?

  101. I said this two weeks ago:

    … RREA and this Tribe promises, to be the first Indian casino in many, many years to handle its financial obligations honorably and responsibly. That is OUTSTANDING.

    Will be more that happy to tip my hat to them. And thanking them for setting an excellent example for others to follow.

    Well the miracle and an OUTSTANDING one at that has happened, almost unbelievable in this day and age. You Pomo people and your Casino management Messrs. Fendrick and Callahanare are my heros now, and the pride of the entire Indian gambling community from one shining sea to another.

    So I tip my hat to you as promised, as deeply, as respectfully as possible and as I has have tipped only very, very few people before. You are an absolute credit to the Community especially in these difficult times where it feels no longer business can be run honorably without swindling other people out of their money, where keeping your promises is considered a sign of stupidity or lack of business acumen. Where people’s signatures are not meant to meant anything.

    I wish I knew how to say “Thanks” and “You have my deepest respect” in your own language.


    People of SF area and its environs – please go reward them with your patronage with your gambling & entertainment business as often as possible. They will need it now more than ever. And deeply deserving it.


    P.S. (very quietly) where did they get that 200M from? Where from? Discovered a gold mine nearby, hit an oil or diamond patch nearby? BAC/CS had a change of heart, felt they couldn’t live with the image they were acquiring in the run up to this on this forum, or that they just felt they weren’t up to tussling with the crankiest, legal fire breathing, toughest, smartest bunch of bondholder this side of the Mississippi and decided to open their purses to put a stop to it. Will know soon.

    P.S. Also Thanks everybody for contributing, everybody is a winner here, expect a few vulture lawyers, consultants and advisors who lost a lot of business that would be there for grabs if the Casino defaulted. To feed on the carcass of our loan.

    Smiling to the bank!

  102. LH–who is your broker? I have heard that a “payout” was posted to Fidelity accounts, but not to Schwab or TDAmeritrade accounts as of 8am ET on 11/1/11. Fear is that your broker posted the payoff ASSUMING it was coming. It may get reversed out.

  103. The payout appeared in my fidelity account. However, Fidelity preposts such payments which means they post them when they are due not when the payment is recieved. They posted interest paymenst from Newpage bonds as well that were due today but will be reversed as Newpage is bankrupt. You would need either some confirmation that the payment was made or to wait a few days to sse whether it is reversed to be sure.

  104. what is latest news

  105. Payout of the full amount of principal? According to my quote screen, there is 500K offered at a price of 80.
    It’s possible that your brokerage firm may have payed out in error and will take the money back.

  106. this board sure got quiet :-)

  107. Should be real. S&P rating agent shows that

  108. The broker dealer where I hold my River Rock bonds just informed me that they were notified that River Rock did not make the interest or principal payment. My interest payment will be reversed as it was automatically posted in error.

  109. Sorry S&P didnot said that. In fidelity issure events “full redemption”

  110. Showed up (Fidelity), then was reversed. Interest did post (has not reversed yet).

  111. Waiting for an official announcement like everyone else. The following is from Fidelity and could be automatic:

    11/01/2011 6:22 AM EDT
    AMOUNT OUTSTANDING 0.00 AS OF 11/01/11

    11/01/2011 6:20 AM EDT

  112. Same here, posted very early morning, reversed later, coupon is still there. Fidelity people aren’t committing themselves to anything, sound too apologetic so I think THEY screwed it up, not the bumblers from RREA. They say we are still working with RREA, stay tuned and tomorrow everything should be clear.


  113. My broker said, from his perspective, it looks like they made the interest payment, but not the principle payment. The principle payment was at first added in to my account but later reversed. Hopefully the interest payment will remain and not later be reversed.

  114. He who giveth, taketh away! The payout just got reversed. The interest has not been reversed yet. My broker is Fidelity. So now what?

  115. everything reversed!!

  116. Fidelity reversed principal and interest in my account. Of course no news from River Rock.


  117. FIdelity just reversed the coupon. I guess their computers automatically executed those transactions given no advance recall from RREA. Also RREA would answer no question from me.

    (Another question is how do I recall my congratulations to them? My only and way too feeble excuse is that it was too early in the morning, before my first coffee.)

    BTW, old dirt on them is starting to show up now: “Another Tribal Casino Facing Financial Distress – This One May Have Been Its Own Worst Enemy”

    P.S. Beating our chest angrily will not resolve anything, empty threats won’t accomplish anything, they must be firmly based in existing law and the Indenture.

  118. When the RREA issued the 10/19 press release, they seem to have hired an IR/PR firm, with a contact of:

    Don Duffy
    ICR, LLC

    Has anyone on this thread spoken with them?

  119. may I suggest to Mr. Grocca to post a new entry on this blog so a new thread can be started. The present one is already too long, thus unwieldy.

  120. look, the guy who runs this site did not do it to screw anyone. He thought things through. I had Mohegan and River Rock but I dumped my positions except for 3k in RR
    He was incorrect in that Indian Casinos (sorry if anyone is offended by that..I am that they don’t pay)Bon Ton, who knows?
    I have been doing this for 15 years.
    The ones I find myself seem to do ok. The ones like Dynergy, suggested by CNBC does not. Cut the guy a break. No one was forced into buying these. I will humbly admit it is my own fault for not DOING MY OWN WORK

  121. note – I think I finally found out why valuehoud of BAC (likely) keeps talking about “blowing things up” versus “sweating it”. Turns up that … following “an Event of Default” .. it takes only… 25% of bondholders to “direct the Trustee to cease the disbursement of funds in the (Casino) Revenue Account to pay Operating Expenses”.

    So in theory we could shut their casino down almost instantly. That’s why they are so scared. Why anyone would want to do it though, I have no idea, must be paranoia on their side.

    But, and far more importantly, the above quote from the Indenture implies that following Default, the Trustee acquires tremendous powers down to the level of controlling casino revenue account which could go tremendously long way in obtaining some cooperation from them and the Tribe re repaying our bond. However how to induce the Trustee to do anything, especially something that proactive, I do not know.

    In other words I’m totally at loss how we can proceed now w/o separate, competent and aggressive legal representation. BAC has valuehound (deployed here) and many others, same with the Tribe and the Casino, we have got nothing, other than nominal Trustee representation.

    Experienced legal help is desperately needed here, so if there is a legal firm out there with the requisite expertise, consider approaching us (via Mr. Grocca – assuming he agrees). I’m sure expenses of professionals working for ad hoc bondholder committees get compensated handsomely in the end. And most people here would be open to sensible suggestions I believe.

    The Indenture could unquestionably be on our side in the hands of a skillful practitioner. Beating ones chest on this blog will not advance our agenda one bit regardless how vigorous or angry; only people with aggressive professional legal representation do have a chance of being ahead in this game.

    P.S valuehound’s input here was fascinating given that is was coming from where the action presumably was, but I would be extremely careful taking him at face value, he most likely works at or represents BAC and if so knows who butters his toast every day and what he’s expected to accomplish here. I’m sure he’s ain’t active here to help you just from the goodness of his heart, his loyalty is (as it should be, nothing wrong with it) to his employers, you are only the material he works with.

  122. wg—You finally woke-up. I’m not going to solve the puzzle for you but please peruse valuehound’s comment in this blog. You should have known that he was a fraud. Actually, I thought that he was Grocca but Grocca never talks about any details. Grocca just copy his excerpts from the Sunday paper. One of the other readers mentioned earlier that valuehound’s assessment was no more than a dog and pony show.

    I expected RREA to pay the interest but time will tell. We will see about the interest payment. It is obvious that RREA management team is incompetent but I was hoping that they weren’t also crooks.

    wg–Please read Grocca prior articles. After perusing his past article, you will notice that he doesn’t have anymore insight than you.

    In summation, I still believe that RREA shall pay the interest. If they don’t pay the interest, I was completely wrong on my assessment here. Would you trust a company with the cash on hand to pay interest but refuses. Time will tell. If the interest is paid, my prior opinion on the bonds shall remain the same; otherwise, I was just dead wrong.

  123. Surprising that there is not a peep out there in the mainstream and not so mainstream media on this default. Google returns nothing. Indian casino defaulting on a 200M bond not meriting a mention? What’s going on here?

  124. Valuehounds toast is buttered by Mrs. Valuehound and he doesn’t so much as have a checking account at BAC let alone a job. I can’t figure out who gets the prize for incompetence on this credit; the dope retail investor WG who thinks corporations and capital markets act out of some sort of honor code rather than a profit motive; the brain trust management of RREA who sat idly by during one of the best HY issuance markets in recent memory over the summer of 2011, postponing a vital refinancing in order to work out the details of a 5mm dirt access road; or the clowns at BAC who couldn’t sell a 9 percent, tax free, covenant heavy, secured first lien note with a 60 percent cash flow sweep and a four year average life in a .18 percent Fed Funds world. But there certainly is a fairly broad confederacy of dunces involved in this thing. Bondholders should now control their own destiny. The Tribe and this clown management team will get pushed to the back and we will amend and extend with a very healthy cash flow sweep. 50mm in EbItda less 3mm for Sonoma County, 5mm for capex, and a couple of million for thenTribe leaves plenty to pay down the notes. Don’t fret it, sweat it.

  125. Easy to see that everybody is pissed about today’s outcome, especially after the head-fake payoff maneuvers to the brokerage accounts. Any possibility that Mr. Grocca can create a petition website for us retail investors to mobilize against RREA? He has the opportunity to take his thesis article to another level.

  126. so what next. what will happen now.

  127. I would ask again, Craig, what has been your contribution to the universe of knowledge regarding this bond? As far as I can see, the only thing you know is how to complain.

  128. practical industrial ethics 101 for valuehound:

    there is a difference between think and hope. I don’t think financial bond issuance industry operate on some kind of honor code or sense of greater societal benefit (for that go listen to your buddy Jeffrey Sachs at one of the OWS rallies, or current occupant of the White House) but certainly hope there are not completely void of them. Otherwise we would be just vultures stealing from each other, constantly, completely irresponsible inhabitants of our communities .

    Example, when people enter into financial transactions, they check the economic viability of the partner, the completeness of formal legal protective structures in case something goes wrong, but they also try to assert who their future transactor is, i.e. what his value system, internal honor code, are. Will he stiff you given first opportunity or not. To reduce your chances of having to go through courts later on. Thus Virginia, higher order codes, that is not just legal (call them moral, honor) circulate in financial communities too.

    On a simpler level, so it’s easier to digest, when you lend money to somebody, you thank them when they return it to you; why, because you know how strong the temptation was for them not to return it and you want to encourage repeat performance, reinforce their honor code, so you don’t have troubles in the future. Sure you could threaten them with legal consequences, drag things through courts, but what kind of life would it be if we had to sue each other all the time.

    Thus dopes like me tend to expect/encourage others to follow some sense of mutual accommodation, some honor/ethical codes. Those that make life a little more bearable, flowing a little bit more smoothly. And thank them for that following.


    On “Bondholders should now control their own destiny” and “we will amend and extend”.

    How exactly do you propose we will control our destiny, we aren’t operating in vacuum, but in a cryptic legal system even lawyers find confusing ?

    Besides who is we, you and your institutional 20% buddies, or the ragtag of dopey retailers like me and the rest of us here to be organized by you?

  129. ger and wg are from what planet? One of you fellows, please give me just one piece of valuable information that you obtained from Grocca. Please take your hands off his private. If you are seeking legal advice from Grocca, I have a S & L on the moon that I’m selling.

    Valuehound’s last post is accurate. This was my opinion from the beginning. Grocca, go and read my previous posts. The charlatan lawyer agrees with RREA.

    Please read Grocca’s writing about the S & P downgrade. S&P divulge the problem from the onset but Mr. Charlatan Grocca said that S&P had gotten their facts wrong; however, he misled his misinform readers who were so gullible.

    WG is all over the universe. Whenever valuehound spinks him, he grabs his private and whenever the Charlatan makes an incorrect post, he grabs his private. Go and wash your hands wg because they are sullied with stain.

    Lastly, my opinion is as describe by valuehound’s latest post.

  130. I’m sorry, ’cause we’re all “not so happy”…
    but the posts on here are (almost) entertaining enough to be worth it all!

    “Valuehound” has one up one me: Even though I also have a Mrs. Steve, I have to butter my own toast.

  131. Nobody including the brokerage company knows what is going on with these things. I was told yesterday that the money was in the account along with interest. Today no sign of anything. I agree that River Rock is entirely to blame for their incompetence and should be made to pay. I guess we will own a casino?

  132. Guys, I don’t know whether to laugh or laugh. Some of the comments here would be funny if they weren’t so ill-informed. WG- why whould you post a link to some bottom-feeding law firm angling for contingency clients? And why are you carrying on about the need to hire legal counsel? It is the Trustees responsibility to represent the bondholders. In the event counsel is ultimately needed, the trustee will bring a candidate to the holders. Trustees also have funds set aside for such contingencies. Bondholder approval is required for the Trustee to have the authority to spend those funds for counsel. So, if it comes to that, the trustee will contact bondholders and have a conference call. You guys sound like a bunch of farmers, wringing your hands over everything. Either it’s raining, and you complain it’s too wet; or it’s not raining and you complain it’s too dry. This deal is far from over. If the Authority gets refinanced during the grace period and you’re all made whole, then you’ll be back to singing songs of the great honor and perseverance the tribe has displayed. If they ask for a forebearance and are granted one, then successfully refi, you’ll still be singing. If it all falls apart, the tribe has to go get a job and they don’t want that. So, cheer up and get some perspective. Some traded today at 80 and change, so the world doesn’t seem to think it’s all over but the crying.

  133. Somewhat off-topic, but does anyone know the status of William Lyon Homes which is the other California issuer of corpoarte bonds that did not make a payment that was due 11-1-2011 and has not filed any information about it with the SEC?


  134. “interested Party”

    Question- Where do you see that there were trades in the 80s?

  135. Great with this place overflowing now with excellent, guaranteed to work ideas, and personal assurances from valuehoud “our destiny in his hands” and Craig “the dirty privates guy”, that everything will work out just right, that some nice people are working tirelessly behind the curtains this very moment so those reversed deposits will reappear in your bank accounts any minute now. Dream on. You will know whose privates to squeeze if this doesn’t  work.
    Ad hock bond holder committees typically majorly lawyered up are routinely formed  when they are several institutional investors, basically to synchronize their positions and to make sure the trustee does something. Would not  hurt to have one here, and who says it should be represented by some slimebag?
    Since some think the Trustee will be our salvation, go and register yourself with them so you are on their mailing/voting list. Probably important if you bought late.
    In approx two weeks  RREA will issue its next 10Q, something should be there.

  136. Talked to the Trustee.

    a) they are (very much I was told) aware of the fact that RREA is not paying, but no, they have not received any formal notice from them yet. When they do you will be notified.

    b) if you own your notes through your broker there is no need to send them your address, your broker will receive all the communications from them. Contact them otherwise.

    * technically RREA has 30 days to remedy the situation with missing coupon, but they are already technically in default re the principal.

  137. For what it is worth to you folks out there: I have talked with the bond department of my brokerage, a well know national firm. They were well aware of the River Rock skipped payments of both principal and interest, but had little info. At my urging they contacted someone( according to them) at River Rock Ent. auth and learned that they are still trying to get funding for a new bond issue to pay us all back, HOWEVER, they say they were told if RREA fails in this then they plan on seeking some sort of bankruptcy protection. That is the extent of what I was told, the broker said they were given no other information period. Hope that helps in some way. JB

    November 2, 2011
    River Rock Entertainment Authority Announces
    a Strongly Supported Forbearance and Support Agreement
    with Majority of Senior Noteholders
    Geyserville, CA. November 2, 2011—River Rock Entertainment Authority (the
    “Authority”), the operator of the River Rock Casino in Sonoma County, California, today
    announced that it has, together with the Dry Creek Rancheria Band of Pomo Indians (the
    “Tribe”), entered into a Forbearance and Support Agreement (the “Forbearance and Support
    Agreement”) with holders in aggregate representing in excess of 60% of the outstanding
    principal amount of the Authority’s 9 ¾% senior notes due 2011 (the “9 ¾% Senior Notes”).
    The Forbearance and Support Agreement provides for the operations of the River Rock Casino to
    continue as usual. While we restructure there will be no changes to the operations of the River
    Rock Casino or impact on its customers, employees, vendors and suppliers.
    Under the terms of the Forbearance and Support Agreement, holders representing in excess
    of 60% of the outstanding principal amount of the 9 ¾% Senior Notes will forbear from
    exercising their respective rights and remedies in connection with defaults relating to the
    Authority’s failure to pay amounts due under the indenture governing the 9 ¾% Senior Notes
    while the Authority pursues the restructuring strategy agreed upon in the Forbearance and
    Support Agreement. We plan to make the terms of the Forbearance and Support Agreement
    public as soon as practicable.
    As contemplated by the Forbearance and Support Agreement, the Authority expects to
    launch an exchange offer (the “Exchange Offer”) for the 9 ¾% Senior Notes for new senior
    secured notes (the “New Senior Notes”), and to issue $27.6 million in aggregate principal
    amount of new subordinated notes (the “New Subordinated Notes”). The proceeds of the New
    Subordinated Notes will be used by the Tribe to retire certain of its existing debt. The Exchange
    Offer will be open to all qualifying holders of the 9 ¾% Senior Notes. The Authority expects to
    launch the Exchange Offer by November 18, 2011, and consummation of the restructuring is
    expected to occur in December 2011.
    The Forbearance and Support Agreement provides a framework under which the Authority
    will seek to restructure the 9 ¾% Senior Notes consistent with its long-term growth and
    development strategy. The Authority and the Tribe are pleased to be working with the
    Authority’s noteholders to reach an amicable restructuring of the Authority’s debt.


    OK, so they do have 60% of votes at their disposal. That’s new. Consummation expected in December, Craig please get ready.

  140. WG – Were you beaten by an Ad Hoc committee of creditors as a child? Bullied on the playground by Trustee? Did you mother roll up an indenture and spank you? ‘Cause you seem awfully paranoid and strangely defensive. Why, exactly, do you think this is not working out very well for all involved? RREA attempted and failed at a refinancing; absent funds to pay outstanding debt, they have agreed a stand-still with the majority of the creditors (I know this will come as a shock to you, but the 200MM is not held by 40,000 individuals, but a very small collection of institutional holders representing about 70% of the outstanding, and then a collection of “retail” accounts holding the balance). The 60% was easy to come to, and they probably could have rounded up a super-majority had they needed. Those are the same institutional creditors who signed on to buy a new, secured, first lien deal in the refinancing. They will seek the same terms here, and RREA will give that to them, because that is what’s in everyone’s interest. Creditors will have a current, high-coupon, piece of paper that will amortize down quickly; RREA will de-lever in an orderly and effective way, and the Tribe will be taking a very healthy piece of the Casino’s ample earnings in 3-4 years time without creditors breathing down their necks. No one has to sue anyone; no one declares bankruptcy; everyone reaches a rational and mutually beneficial outcome.

    There is one interesting element here that is worth mentioning. One of the things that has become clear over the course of this refinancing/restructuring is that there is a healthy short base in these bonds. Some covered when the news of an attempted restructuring broke, but many did not and are now out bidding in the mid/high 50s to cover. DONT GIVE IN TO THESE RATS. The exchange will be a very compelling one. I am convinced of that, and you will do very well to hold on and participate. Additionally, the shorts will either get bought in; or will “exchange” into a new short. Their roll into a new short is going to be painful for them. This is going to be a good bond. It is going to have a coupon north of 9%; it is going to have great security; it is going to have an aggressive cash flow sweep; it is going reside at the top of the capital structure (with BAC taking first losses below it); and its going to have a clear call on collateral. Point being; it will trade very well, and the shorts will chase it; and that will give some of you who want out of the credit, an opportunity to do so at a very good level. So be patient; don’t freak out; let the large creditors craft a good deal and a compelling exchange. You will do just fine. There IS NO REASON TO HIT A 50-something bid.

    Don’t get jumpy when the road gets bumpy. This is a very good result.

  141. What are you talking* about valuehound?

    An exchange always was what I considered the most realistic and fairest solution for both sides. Wrote here one month ago, 10/08:

    … exchange our bond for a new one, same amount, same interest rate, maturity 10 years say, but with two new provisions however a) no new tribal debt under any circumstances and b) dynamic amortization ….

    The casino put itself in a technical default, realized finally the horrible pickle they were in and negotiated an emergency agreement with the bondholders to give them more time to arrange for an exchange. Thank God they had that 60% to negotiate with!

    Thus could not be more pleased with this announcement. The most logical, rational step they could have had taken under the circumstances and a good progosticator.

    The hurdle of finishing the deal however remains, this simply buys them more time. What worries me somewhat is what Jay B. reports above viz. “if RREA fails in this then they plan on seeking some sort of bankruptcy protection”.

    Indian casino going into bankruptcy protection WILLINGLY would be quite an event, and not very good for us. We are better protected under the Indenture.

    Thus I sincerely hope they will be able to successfully complete this proposed exchange, assuming of course that the exchange itself will be fair, the terms of it still unknown.

    * valuehound wrote this a few days ago: The portion of these bonds held by “retail” is making a restructuring difficult. That holder base holds small individual positions, but is proving to be much larger in aggregate than BAC and RREA realized. What that means practically, is that there really is NO ONE TO NEGOTIATE WITH with as regards the old deal … (emphasis added)

  142. Been lurking for a few months since I bought 115 of these bonds in August @ 72. I have really enjoyed the banter, almost worth the potential loss. A data point of interest is that my ETrade account posted $5600 interest payment early this morning and it is still there as of this writing. Maybe they’re just slower than Fidelity to reverse the payment?ETrade also has the bonds listed in their inventory, 78 @ $78 buy and 5 @ $45 sell and they are listed as trading flat DEFAULTED.

    WG get a grip. As a retail, minority investor you have no say in the outcome of these negotiations. Just sit back and enjoy the ride, there are other parties that will do the work you just need to pop a cold one and enjoy the show.

  143. thanks, but frankly I don’t like this going personal. Enjoy though, kind of, the spectacle of financial professional unhinging into juvenile personal attacks when you expose their shenanigans.

  144. Am I to believe this or what? Full Payout Redemption is back into my Fidelity account. I was not expecting anything this soon. No interest has shown up yet.

    Anyone with any creditable info to shed some light? Thanks!

  145. I’m now convinced of valuehound’s street cred; I don’t think amateur investors know what hitting a bid means.

  146. hmm interesting got back the funds.

  147. I have Full Payout Redemptions in two of my Fidelity accounts as well, however, there is not coupon payment but this time (as opposed to last time) it is showing up as a settled trade.

  148. The interest is still in the ETrade account. I believe it will stay as they don’t seem to post interest early on a bond like I’ve read here about fidelity. Once I called them because a payment was 3 days late and they said “we post it when it comes in” and it came in shortly thereafter.

  149. Back in my Fidelity Account also, with no interest.

  150. the Full Payout Redemption was taken out again from my Fidelity account

  151. Full Payout Redemption is back out for the second time. What a bunch of idiots.

    Anyone have a clue when the “plan” mentioned in the 8-K will be released.

  152. as expected

    NEW YORK (Standard & Poor’s) Nov. 2, 2011–Standard & Poor’s Ratings Services today said it has lowered its issuer credit rating on Native American casino operator River Rock Entertainment Authority (RREA), as well as its issue-level rating on RREA’s existing $200 million senior notes, to ‘D’ from ‘CCC’. The rating actions followed RREA’s failure to repay the principal on its existing $200 million senior notes at maturity.

    In addition, we withdrew our preliminary ‘B-‘ issue-level rating on RREA’s proposed new $205 million senior notes, as well as our issue-level rating on the existing notes.The rating action stems from RREA’s inability to successfully repay the principal on its senior notes, due on Nov. 1, 2011, which constitutes a default under the terms of the notes’ indenture.

  153. But maybe they will take it back given the recent agreement.

    P.S. Complained to Fidelity people, this is ridiculous what they do, in and out, in and out. How many more?

  154. This is NOT the new 8K, it’s a brief article about Foxwoods.

    A new R-Rock 8K IS out now (the Exchange Offer NOT in it)

  155. New filing just hit the street

  156. Looked at the terms of the exchange offer (see RREA site) and they look good, actually real good to me. Looks like we will made whole. All’s well that ends well. 11/18 don’t forget to vote.

  157. Here’s the jist – Existing senior note holders receive the same par value of new senior notes with 9.00% Coupon to 2018 Maturity plus unpaid 9.75% interest payment accrued from 5/1/11 thru consummation date, which could be to 12/31/11. Solicitation period must commmence by 11/18/11 – even though the 60% who negotiated this exchange offer will have already agreed – for us small retail people and 66 2/3% is required for completion of the exchange. The new 9.00% notes appear to have better securitization/collateral than the 9.75% existing ones plus the applicable portion of new 9.00% notes must be redeemed at 100% every 6 months with River Rock’s excess cash flow if EBITDA for rolling 12 month calendar month period prior to distribution is less than $50 million. In other words, the new 9.00% notes will realistically be redeemed prior to 2018 assuming continued success at the Casino. Overall, could have been a lot worse. Those not agreeing to the exchange offer will probably be offered a deal not quite so great and would be welcome to pursue legal proceedings per the original Indenture. I just don’t see the benefit of doing so …. that’s my 2 cents, which equates to my net worth and overall intelligence ….

  158. For those too lazy to look for it the major points are:

    – Full exchange for new 9% notes due 2018, same seniority/security.

    – The accrued interest will be paid.

    – Amortization on frankly rather draconian terms. 90% sweep!

    – A few technical changes to the indenture.

    P.S. Impressive list of major holders.

  159. FYI Etrade reversed the interest payment as I’m sure you probably surmised would happen

  160. Don’t be deranged; exchange!

  161. Valuehound,

    I want to thank you (and many others) for your insightful contributions to this site. If you are not a professional money manager, you should be. If you are, please post (if the site owner will allow) your professional contact information

  162. >>>Looked at the terms of the exchange offer (see RREA site)
    I can’t find this the River Rock Investor relations site does not have it. Google has no listing. Can you tell me the URL

  163. I own 100 of the bonds and read the filing. I also read this to show that the new bonds will be better secured than the defaulted bonds. I did not read the old bond indenture. Is the waiver of sovernity a new element? If so it would be a major improvement in our security.

  164. The terms of the exchange are in an appendix in the SEC filing at


    The major bond holders are in this document:

  166. The waiver of sovernity is not a new element it is in the old 10k

    Unincorporated instrumentalities of Indian tribes formed pursuant to tribal law, such as the Authority, have sovereign immunity under federal law and may not be sued without their consent. We have granted a limited waiver of sovereign immunity on behalf of the Tribe and expressly consented to legal proceedings by the Trustee to interpret or enforce the terms of the Indenture or the Senior Notes as against any of our assets and revenues and against the revenues of our casino and related amenities. Express waivers of tribal sovereign immunity generally are valid if properly made, and if such waivers of sovereign immunity are held to be ineffective investors may not be able to enforce their rights and remedies under the Senior Notes or exercise any remedy for violations of federal securities laws.

  167. I’ve scanned through the exchange offer docs. The punishment in terms of revision to the existing note indenture is so harsh, you are forced to to opt in. I had hoped they would be able to round up 90%+ of holders and pay out the remaining (likely retail) holders at par. No such luck. If fact, they are unfairly discriminating against small holders of less than $50k (which includes me). We do not get the partial cash paydown of about 3pts). The indenture revisions forced on the hold-outs are quite clearly in breach of the indenture. First, and the company points this out, they are subordinating our liens (for which 100% participation is required). Second, they can not move the maturity date, again, without 100% participation. As a group, we can achieve a better recovery. If any holders would like to join me in forming a committee to push our case, please let me know.

  168. I own a small amount of these bonds. Does anybody know when the exchange offer is supposed to come out? I thought it would be by November 18th but it hans’t happened. Is there a possibility that the exchange doesn’t take place and they let the bonds default?

  169. What will happen if I do not exchange my bond? Do I still get interest and principle back ?.

  170. The lawyers that did the restructuring deal got an award……

  171. […] […]

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