River Rock Entertainment Authority: The final obstacle to refinancing now resolved

May 31, 2011

Those of you who have been following my articles on the River Rock casino bonds will recall that they fall due for refinancing in November of this year, and that this refinancing process has been delayed because the casino is negotiating its agreement with Sonoma County. If you haven’t been following my articles, that should pretty much bring you up to date.

The agreement with Sonoma County required River Rock to build an emergency access road, and also to pay to the county $75 million by 2020 in order to address the increased usage of county resources caused by a planned expansion of the casino. Now that the expansion has been put on indefinite hold, it would seem that the county requiring the full $75 million would place an undue burden on River Rock’s finances and also be unfair.

The River Rock Entertainment Authority has renegotiated the agreement, cutting the required payments from $5 million per year, increasing by four percent annually, to a flat $3.5 million per year. However,  if the expansion does open River Rock will have to make such additional payments as to bring the total payment (including the $10.3 million already paid) to $75 million, and at any rate the full $75 million must be paid by 2020, subject to future negotiation. Furthermore, the Authority also secured an agreement to build the road on an alternate site, which is now in escrow, and which allows for a 20% grade instead of a 10% grade, a change which the casino estimates will save up to $15 million.

So, now that the $75 million obligation has been deferred, which reduces its present value, and the road savings plan is looking more definite, it would appear that River Rock is a more attractive prospect from the perspective of a bond buyer. Based on last year’s free cash flow figures, and treating the $3.5 million annual payment as a fixed charge, the casino has a fixed charge coverage ratio of 2.5x, as compared to 2.3x before the renegotiation, which is a more attractive situation. Also, the River Rock Entertainment Authority has $43 million in cash on its balance sheet, which, if the new road plan goes through, would be more available as a source of liquidity or simply to pay back part of the bonds. As result, it should be easier for River Rock to refinance.

The market seems to greet this renegotiation with approval; prices have improved to around 92 from generally 88 before the announcement (as a reminder, the bonds were at 84 when I recommended them). River Rock now has a clear route to refinancing (and not too soon, I should note, as refinancing bonds seems to be a months-long process). I still find this issue attractive and find it highly unlikely that there should be no refinancing.

110 Responses to “River Rock Entertainment Authority: The final obstacle to refinancing now resolved”

  1. Okay my interest payment previously credited by Option Express has also been reversed now.

  2. There was a press release of third quarter earnings on 11/14. You can read it at this web site:


    Interesting that the tribe continued to be paid their cash while the bondholders are left waiting. Essentially, nothing mentioned about the debt default other than the third quarter conference would not be held in view of the debt refinancing underway. Talk about trying to sweep that under the rug! No more Indian bonds for me. I hold bonds from one other tribal casino. When they mature, and hopefully get paid in full, I am out of Indian bonds, not because they are casino bonds, just that the Indian tribes seem to live by their own set of rules.

  3. Is anyone here taking River Rock up on their tender offer? I have spoken to Fidelity Investments as well as with the King Company (Phone: 212-269-5550) that is handling this for River Rock. It seems that if one accepts the tender off, a bunch of rights in the defaulted bond get waived. If 66 2/3% agree, then it takes effect. My interpretation is that if those protective covenants get waived, the remaining bondholders who have not accepted the tender offer have little leverage. If someone else here feels otherwise, please post.

    At this time Fidelity is telling me if I accept the tender offer by this Friday 12/1, as an incentive, I will receive the unpaid interest that was due on 11/1. Acceptance after that date would cause the loss of that interest. It seems like the small bond holders are getting the shaft here.

  4. Where is this information coming from that if the tender is accepted by 12-1 the interest will be paid? What is Fidelity basing it on in writing?

  5. I took River Rock up on their tender offer and consents on Friday 12/02. Thank you Ken for the alert.

    Here is a portion of the letter I received from Fidelity today:

    Tender/Consent Cutoff Date 12/04/11 Tender only Cutoff Date 12/16/11

    The CONSENT PAYMENT shall be, for each consent validly delivered on or prior to the expiration date, a cash amount equal to the accrued and unpaid interest on the principal amount of existing notes in respect of which such consent has been validly delivered up to, but not including, November 1, 2011.

    The CONSENT PREMIUM shall be, for each consent validly delivered on or prior to the consent date, a cash amount equal to the interest on the principal amount of existing notes computed at the rate of 9 3/4% per annum from, and including November 1, 2011 to, but not including the acceptance date. You must tender your notes by the consent date to be eligible to receive the consent premium.

    I think this legal crap means to receive the Consent Premium the cutoff is 12/04 and to receive the Consent Payment the cutoff is 12/16. That means you could still get the unpaid interest up to November 1 if you tender by 12/16.

    Hope this helps Jeffery and others.

  6. What a bunch of bull. On 12-2-11, Option Express had a proxy vote (for or against) posted in shareholder services online but no way to elect which new bond to exchange for. They were confused. I got this big packet of material from DF King the transfer agent, but that was not applicable because my bonds are held in the brokers name.

    I was told the deadline was extended to midnight December 7th however. Option Express finally figured out what to do and was given verbal instructions by me to exchange for the tax-free bonds on 12-6-11. So I should get the premium and payment or whatever.

    I think if your broker screws up and does not take your verbal instructions in time, and you forfeit an interest payment, you would have a good small claims case against the broker for the lost interest.

  7. Something is up, my broker Option Express is showing a different cusip but not the one for either old River Rock or either of the two new River Rock bonds.

    This new mysterious CUSIP is 76899AHE4 with a value of zero for now.

  8. River Rock issued the following press release today;

    December 21, 2011
    River Rock Entertainment Authority Announces Final Terms and Closing of its Exchange Offer and Consent Solicitation
    Relating to its 9¾% Senior Notes Due 2011. The offer to exchange its 9¾% Senior Notes due 2011 (the “Existing Notes”) expired at 12:00 Midnight (New York City time) on December 19, 2011 (the “Expiration Date”). As of the Expiration Date, the Authority had received
    tenders of an aggregate principal amount of Existing Notes of $196,393,000, which represents 98.20% of the
    total principal amount of outstanding Existing Notes.
    In settlement of the offer and consent solicitation, the Authority issued today (the “Exchange Date”)
    $189,924,000 in aggregate principal amount of New Notes (as defined below) and made cash payments totaling
    $18,626,625.07 to tendering holders. Of the aggregate principal amount of New Notes issued, the Authority
    issued $96,622,000 of new 9% Series A Senior Notes due 2018 (the “Series A Notes”) and $93,302,000 of new
    8% tax-exempt Series B Senior Notes due 2018 (the “Series B Notes,” and together with the Series A Notes, the
    “New Notes”). The Authority paid $6,342,374.93 as principal pay down and $126,625.07 in lieu of odd lots
    (New Notes in denominations of less than $1,000) to holders who tendered $50,000 or more principal amount
    of Existing Notes. In addition, the Authority paid a total of $12,157,625.07 to holders who delivered a consent
    to the proposed amendments to the indenture, dated as of November 7, 2003, governing the Existing Notes and
    related waiver. In connection with the closing of the offer and consent solicitation, the Authority also sold to
    Merrill, Lynch, Pierce, Fenner & Smith, Incorporated (“Merrill Lynch”) $27,600,000 in aggregate principal
    amount of 6.5% Senior Subordinated Notes due 2019 (the “Subordinated Notes”), the proceeds of which were
    applied to repay an equal amount of notes of the Tribe that were held by Merrill.
    Holders who tendered $50,000 or more of Existing Notes accepted for exchange received, for each $1,000 of Existing Notes tendered and accepted for exchange, $962.00 in principal amount of New Notes,$38.00 in cash principal payment and $62.29 in cash consent consideration (reduced to $48.75 for holders who tendered after December 7, 2011). Holders with odd lots received an additional cash payment in lieu thereof.

    Holders who tendered less than $50,000 of Existing Notes accepted for exchange received, for each $1,000 of
    Existing Notes tendered and accepted for exchange, $1,000 in principal amount of New Notes and $62.29 in
    cash consent consideration (reduced to $48.75 for holders who tendered after December 7, 2011).

    After the closing of the offer and consent solicitation, $3,607,000 in principal amount of Existing Notes which
    were not tendered remain outstanding. Such Existing Notes are subject to the First Supplemental Indenture (and related amended collateral documents) and the rights of the holders of New Notes and of Subordinated Notes.
    The Authority’s offer and consent solicitation was made under Section 3(a)(9) of the Securities Act of
    1933, as amended, pursuant to an offering circular and consent solicitation statement and a related letter of
    transmittal and consent (collectively and, together with any amendment thereto, the “Offer Documents”), which
    were furnished to the holders of the Existing Notes. The Offer Documents set forth the complete terms of the
    offer and consent solicitation.

    Don Duffy
    ICR, LLC

  9. Just out of curiosity, does any know what will happen to the 1.8% of the outstanding bonds that were not tendered?

  10. Does anyone know the percent of outstanding shares they plan to buy back in this lottery?


    CUSIP: 768369AF7

    Re: Partial call lottery

    Please be advised,

    The bond position you are currently holding is subject to an upcoming partial call lottery. If your position is sold before the lottery is completed,
    The account holder will be responsible for any losses due to this corporate action event. Typically, the lottery will be completed within two business days.
    Called bonds will be segregated from your original position.

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