MotorCity Debt = 100 percent of Casino's profits for next eight years

Is it any wonder that Moody's and S&P have posted concerns about MotorCity Casino's (CCM Merger Inc.) corporate credit rating and the risks tied to more than $300 million in junk bonds issued as part of Marian Ilitch's overall borrowing picture?

Jason T. Hanselman an attorney at the Dykema Gossett Law Firm practices in the following areas of law: Government; Regulatory Law; Gaming Law; Gaming Licensing; Education Law; Charter School Law; Public School Law; Election, Campaign and Political Law; Election and Campaign Finance.

Hanselman notes in his published public biography that he:

"Represents casino licensees, casino supplier licensees and vendors before the Michigan Gaming Control Board; and

"Helped facilitate the acquisition of Detroit's MotorCity Casino, including negotiating $1.1 billon in acquisition financing and obtaining regulatory approval for the acquisition from the Michigan Gaming Control Board, 2005."

The Detroit Free Press published:

"The price of a Detroit casino could be as high as $1 billion, said people familiar with the sale and purchase of casinos." 06.15.04

"The total estimated value of the MotorCity Casino property is close to $1 billion. Last year, the casino generated $436 million in revenue." 04.25.05

Crain's Detroit Business published:

"Marian Ilitch's $525 million offer to buy Mandalay Resort Group Inc.'s share of MotorCity Casino L.L.C. sets a value of nearly $1 billion on that property and highlights how some of the early local investors have become millionaires." 02.21.05

Forbes published in a feature story "Mike Ilitch has backed losing sports teams and pizza before it was dinner fare--and mostly won big. But casinos in Detroit?" that was part of the 2006 "Richest Americans" issue:

"Marian has poured more than $1 billion into buying (last year) and improving MotorCity Casino, one of Detroit's three gambling ventures." 10.09.06

MotorCity Debt =100% of Anticipated Casino Profits for the first 8 years.

Numerous sources estimated MotorCity Casino was valued at $1 billion when Ilitch acquired the 100% ownership. Ilitch has borrowed $1.1 billion and possibly even more using the Casino as collateral in order to fund the $525 million acquisition (53.5%) and subsequent development of a permanent casino and hotel required in the original agreement with the City of Detroit. At last review S&P and Moody's estimated that MotorCity Casino was leveraged at 8x; that's higher than originally anticipate and one of the reasons S&P and Moody's have raised red flags.

Simply stated, at best case it would take the owners 8 years, using 100% of profits each year, to pay off the large debt before they could realize any profit in their own pockets. Or, if Ilitch were forced to sell the casino today, it's likely that she would face a significant financial loss and certainly so would those who financed her acquisition and expansion. Moody's estimates they would lose at least 88% of their investments.

Ilitch Holdings has a history of extreme leverage with its various subsidiaries. Take the Detroit Tigers baseball team for instance, there are only two other teams out of 30 in baseball that have higher debt to value ratios. If the baseball team were sold today, approximately 80% of the sale would be used to pay off debts.