To win investors' support for looser leverage covenants, Ilitch forced to sweeten the deal

1.31.09

Motor City Sweetens Terms

Motor City and lead Deutsche Bank have sweetened the terms on an amendment to loosen leverage covenants after investors balked. The spread was increased, and sponsor CCM Merger offered an equity injection into the company.

Investors were upset with the initial terms of the amendment, which was launched Jan. 13, because there was no equity input from CCM, which is owned by investor Marian Ilitch.

DB came back to the lenders with a $20 million paydown last Monday.

"The linchpin is just the equity injection," said one portfolio manager. "Some lenders are looking for higher pricing than that, and we're happy to ride the coattails."

The new terms also increase the price bump to 300 basis points, which would bring the total spread to LIBOR plus 5 1/2%. The LIBOR floor was also increased to 3% from 2 3/4%.

Calls to a company spokeswoman and Scott Fischer, CFO of Ilitch Holdings, the parent company of CCM, were not returned.

NOTE: investors rejected this $20 million cash injection proposal and ultimately demand a $45 million equity injection from Motor City Casino owner Marian Ilitch.

Moody's downgraded Credit Rating of MotorCity Casino's parent three times in ten months

Moody's Investor Service

Issuer: CCM Merger, Inc.
Long Term Corporate Family Credit Ratings History








Moody's has been forced to downgrade the Corporate Credit Ratings of CCM Merger, Inc., parent company of MotorCity Casino, three times in the last ten months. The ratings have slid from B1 t0 B2 to B3 to Caa1 all in less than a year.

Utsick Receiver recommends initial payouts to creditors

1.08.09

Goldberg Recommends Creditor Payouts In WWE Case

MIAMI (CelebrityAccess MediaWire) -- Creditors waiting for money from the resolution of Jack Utsick's Worldwide Entertainment may be starting to see a glimmer of light at the end of the tunnel after court appointed receiver Michael Goldberg's December 10th court filing.

The filing constituted a request for the court to authorize an initial disbursement to creditors with claims that have been reconciled as undisputed. This category covers 2727 of the 2,924 claims, leaving just 197 claims as disputed. All told, the claims total up to approximately $300 million.

The legal imbroglio surrounding Jack Utsick's Worldwide Entertainment began in 2006 when the Securities and Exchange Commission alleged that Utisck had been improperly traded in unregistered securities, and was in essence, operating a "ponzi" scheme along with several other violations.

At that time, the court appointed Michael Goldberg to act as a receiver as Worldwide Entertainment was unwound and the claims of creditors were evaluated. This latest filing signals that the court proceedings in the matter may be nearing completion, although Utsick and his legal team still dispute several of the allegations leveled by the SEC. - CelebrityAccess Staff Writers

Reporter suggests politico was architect of tribal chairman's illegal campaign contribution scheme

A Cape Cod Times story by reporter George Brennan indicates court documents released in December 2008 as part of a fraud case brought by the U.S. Department of Justice against former Mashpee Wampanoag tribal chairman Glenn Marshall, indicate that political consultant Stephen J. Graham, so-called "Political Consultant A," is the person who orchestrated $60,000 in illegal federal campaign contributions that are the center of the federal case against Marshall.

Marshall, who has plead guilty to all charges, funneled $4 million he got from his development partner Herb Strather into the Mashpee Fisherman's Association Inc. which Marshall used as a slush fund to hire Jack Abramoff, make the illegal campaign contributions and pay some of his own personal expenses.

Initially, Marshall attempted to use tribal council money to fund the political contributions suggested by Graham, but Marshall was told that was illegal. When Marshall told Graham he didn't know anyone with the kind of money needed to make political donations, Graham allegedly told him how to make them using so-called straw contributors — making donations in their names and then paying those individuals back. Donations were made to Members of Congress and others in the name of Marshall, his family members, and other tribal council officers.

Marshall's attorney Larry Craven has said he thinks even the government doesn't believe the campaign contribution scheme was Marshall's idea. Craven says Marshall's not the architect of the scheme but rather was instructed by reference.

Graham has not been charged in the matter and is still being paid by the Mashpee Wampanoag tribe as a consultant. In 2008, he earned $182,000, according to tribe records.

The federal case against Marshall is one of the several branches of a far-reaching Washington D.C. scandal centered around disgraced former lobbyist Jack Abramoff.

Document: Charges against Glenn Marshall
Document: Glenn Marshall's plea agreement

After failing to appear in Miami despite multiple court orders, Utsick on verge of Contempt

Jack Utsick, the defendant in a $300 million ponzi scheme case brought by the Securities and Exchange Commission (SEC), has failed on multiple occassions to appear in Miami Federal District Court as ordered by U.S. District Judge Paul C. Huck. In failing this week to appear once again for a court ordered deposition in Miami, the SEC submitted a Motion for Contempt Proceedings and Other Sanctions Against Utsick.

In response to the SEC's motion, Judge Huck issued an Order to Show Cause which states as follows:

ORDERED AND ADJUDGED that Defendant John P. Utsick is ordered to appear before the Honorable Paul C. Huck, United States District Judge, 400 N. Miami Avenue, 13th Floor, Courtroom 13-2, Miami, Florida on Friday, February 6, 2009 at 10:00 a.m. to show cause as to why he should not be held in contempt of court for failing to appear for deposition in Miami as ordered by the Court at the hearing held on January 13, 2009 and in writing in its January 20, 2009 order.

Failure to appear at the above scheduled hearing will result in the Court finding the Defendant John P. Utsick in contempt of court and entering immediate sanctions against the Defendant, which may include entry of a final judgment and an award of attorney’s fees for the Plaintiff.

Utsick appears to have taken asylum in Brazil. When Utsick claimed that travel to the U.S. would be a financial hardship, Judge Huck ordered the SEC to pay for any reasonable travel expenses Utsick would incur. Nevertheless, Utsick still failed to appear.

One must wonder if Utsick, who had an earlier career as a pilot with TWA, couldn't have flown to the U.S. using some benefit accrued to him as a former TWA pilot.

SEC Litigation Release: SEC v. John P. Utsick et al., Civil Action No. 06-20975-CIV-UNGARO-BENAGES (S.D. Fla.)

Joe Louis Arena by any other name is still Joe Louis Arena

1.25.09

Slow economy stalls naming deal for new Metro terminal

By Bill Shea

...The Detroit Red Wings and Detroit Pistons, don't have corporate names on their venues.

The Ilitch Holdings Inc.-owned Red Wings play at city-owned Joe Louis Arena and have the right to sell the venue name but won't, said Karen Cullen, Ilitch's vice president of corporate communications.

That's because the team's lease predates the trend of naming-rights deals, which began in earnest in the 1990s, and the realization fans are very unlikely to call the facility anything but the Joe Louis Arena, making a name deal unattractive to companies.

The Ilitches continue to consider renovating Joe Louis or building a new stadium, and any new venue would likely include a name deal — just as with the Ilitch-owned Detroit Tigers and Comerica Park. The company must tell the city by June 30 if it plans to renew the Joe Louis lease, but may be seeking an extension... (Complete Story)

Casino Syndicator and Senator failed to make timely, accurate campaign disclosures; investigation ongoing

It took Detroit casino syndicator Michael Malik, Sr., more than 26 months to report he made a $1,000 contribution to California State Senator Roy Ashburn, in the Fall of 2006. And even then, that disclosure doesn’t sync with reports filed by Ashburn’s committee.

Malik reports in amended disclosures filed 12.23.08 that he lives in Detroit, MI 48201; his employer/occupation is MJM Manistee Inc./Developer; and that he contributed $1,000 to “Ashburn for Senate 2006” (ID: 1252371) on 10.18.06.

In a campaign report filed on 1.31.07 for the period from 10.22.06 through 12.31.06, the “Roy Ashburn Senate Committee” reported it received a $1,000 contribution from Michael Malik of Sacramento, CA 95814 on 10.24.06. Ashburn’s report indicates Malik’s employer/occupation is Governmental Advocates, Inc./Owner.

Malik isn't based in Sacramento. He lives and has his businesses in the Detroit area. And he wants to develop casinos in Barstow, CA, among other places.

Governmental Advocates Inc. is a lobbying firm that Malik had hired and was paying under the table to represent two Indian tribes (Big Lagoon Rancheria and Los Coyotes Band of Cahuilla and Cupeno Indians) that were partners with Malik’s affiliate BarWest LLC.

It does not appear that Ashburn disclosed the last minute campaign contribution from Malik as required under California political finance rules in any of the Late Contribution Reports (F497) filed by Ashburn’s Committee during October 2006. And Malik didn’t report making any such contribution until December 2008.

During 2006 & 2007 Ashburn championed failed legislation in Sacramento that would have paved the way for Malik and his partner Marian Ilitch to build two casino resorts in Barstow, CA.

Malik originally failed to report more than $26,000 in contributions to California political committees when he filed a report in 2007 for the period 7.01.06 through 12.01.06. Rather he reported under penalty of perjury that he made $0.00 contributions during that period.

For nearly two years, California’s Fair Political Practices Commission (FPPC) has been investigating Malik’s blatant failure to report these contributions and also irregularities in lobbying payments and practices. The amended 2006 disclosure filed by Malik on 12.23.08 was likely prompted by the ongoing investigation.

Malik failed to report a $26,600 contribution made by BarWest LLC in 2004 and was fined on two counts in 2006.

Utsick fails to appear in Miami as ordered by Federal Judge; SEC Motions for Contempt and Final Judgement

One-time entertainment mogul Jack Utsick (John P. Utsick) has apparently failed to appear in Miami as ordered by Federa District Court Judge Paul C. Huck. That has prompted counsel for the Securities & Exchange Commission (SEC) to file Motion for Contempt and Final Judgement against Utisck.

Utsick who's been charged by the SEC with running a $300 million ponzi scheme used to finance Broadway productions, concerts and various other events and festivals, had been ordered to cooperate in Discovery and appear in Miami Federal Court to be deposed by the SEC sometime prior to 1.28.09.

Utsick claims to be residing in Brazil and unwilling and unable to travel to the U.S. although Judge Huck had ordered the SEC to cover reasonable travel expenses to bring Utsick back to Miami. Utsick has, in effect, taken asylum in Brazil.

The SEC originally brought charges against Utsick, Robert Yeager, Donna Yeager, Worldwide Entertainment, Inc., The Entertainment Group Fund, Inc., American Enterprises, Inc., and Entertainment Funds, Inc., in April 2006.

Michael I. Goldberg, the Court Appointed Receiver in the matter has filed action against scores of entities and individuals seeking to recover so-called "profit payments" and other debts owed to the Utsick, Worldwide Entertainment, etc. Among those from whom Receiver Goldberg has sought recovery: Paris Hilton, Australian Concert promoters Michael Chugg and Kevin Jacobsen, and Detroit casino syndicator Michael J. Malik, Sr.

Chair of Middleboro Selectmen & leading advocate for Mashpee Wampanoag casino plan resigns

Adam Bond, Chairman of the Middleboro Board of Selectmen resigned this week. He cited the influence of tribal interests on the rest of the Board as a primary reason.

Click the arrow to watch Bond's resignation speech

Bond was tied to plans advanced by the Mashpee Wampanoag Tribe and its developers Herb Strather, Sol Kerzner and Len Wolman to develop a large casino resort in Middleboro. Bond was out front as an advocate of the plan and brought in attorney Dennis Whittlesey to help him negotiate a contract between Middleboro and the Tribe and its developers.

The mega-casino project has not been without controversy. At times opponents of the gambling proposal accused Bond of being in the pocket of the tribe and its developers.

Then in December, a former chairman of the Mashpee Wampanoag tribe, Glenn Marshall, was charged by the U.S. Justice Department with various counts of fraud and illegal campaign finance activity. Marshall has indicated he will plead guilty on all charges and will assist the Justice Department in its ongoing investigations. The case is one of the branches of the Jack Abramoff lobbying scandal that has unfolded in Washington D.C. in recent years.

According to the Cape Cod Times:

Since mid-December, when former Mashpee Wampanoag Chairman Glenn Marshall admitted to federal corruption and fraud charges, Bond has been pushing fellow board members to seize the opportunity to sweeten the casino deal. Bond has repeatedly said Marshall’s crimes could constitute a breach of contract with the town because Marshall was the person making promises to the town on the tribe’s behalf.

His fellow board members resisted, calling only for a meeting with the tribe’s new leaders who will be elected Feb. 8.

Last Wednesday, Bond lashed out at the board on his blog, specifically citing Selectman Mimi Duphily for contacting the tribe’s political consultant, Stephen Graham, and other tribe members.“I am concerned that the town’s interests and/or strategies are being overlooked (and leaked) for some esoteric and emotional reason relating to how certain individuals feel about the tribal members on a personal level,” Bond wrote.

Ilitch offers another $20M influx for MotorCity if investors will loosen up lending convenants

1.26.09

Red Wings’ Ilitch Offers More Cash to Appease MotorCity Lenders

By Pierre Paulden and Michael J. Moore

Jan. 26 (Bloomberg) -- Marian Ilitch, the owner of the National Hockey League’s Detroit Red Wings, offered to pump $20 million into her MotorCity Casino to obtain a loan amendment as gambling revenue falls.

Ilitch made the proposal after Credit Suisse AG’s asset management arm, Highland Capital Management LP and other investors asked her to invest more funds in the property because it’s at risk of violating terms of a $606 million loan, according to investors with knowledge of the situation. Lenders had threatened to raise the interest on the loan to 18 percent a year if she didn’t, said the investors, who declined to be identified because the talks are private.

MotorCity, owned by Ilitch’s closely held CCM Merger Inc., is a victim of the slump in Detroit, home to General Motors Corp. and Ford Motor Co., and the nationwide decline in gambling profits. Gaming revenue at the 400-room hotel and casino tumbled 7.1 percent in November and 11 percent in December from a year earlier, according to Moody’s Investors Service.

“If they don’t get the amendment, they could be in default,” said Keith Foley, a Moody’s analyst in New York. “The amendment is something that they need.”

CCM also offered to increase the interest rate on the loan to either 8.5 percent or 5.5 percentage points more than the London interbank offered rate, whichever is higher, according to the investors. In return, the company is seeking relaxed loan terms through the second quarter of 2011, after previously asking for covenant relief until the loan matures in July 2012. Standard & Poor’s LCD reported the offer earlier today.

Should CCM fail to reach an agreement, it may lose access to a $100 million credit line that it needs to pay a $50 million Economic Development Corp. bond in May, according to Foley. CCM already invested $25 million of equity in September, he said.

Falling Prices

The casino’s term loan due in 2012 was quoted at 42 cents on the dollar, according to a Jan. 20 report from Frankfurt- based Deutsche Bank AG. Its $300 million of 8 percent bonds due in 2013 trade at 55.6 cents on the dollar to yield 25 percent, according to prices compiled by Bloomberg.

“MotorCity Casino’s parent company is in the process of negotiating changes to its credit agreement to bring the financial covenants that were set in 2005 to levels consistent with those already in place for other gaming operators across the United States,” Jacci Woods, a MotorCity spokeswoman, said last week.

Woods declined to comment on details of the talks. Karen Cullen, a spokeswoman for Ilitch Holdings, didn’t return a call seeking comment today.

Declining Markets

Creditors are requiring increased rates from borrowers deemed high-yield, high-risk, and in jeopardy of breaking debt agreements after the so-called leveraged loan market lost 29 percent last year. Companies rated below Baa3 by Moody’s and BBB-by S&P are considered high-yield, or junk.

Borrowers paid an average 1.64 percentage points more in interest last year to amend borrowing agreements needed to avoid default, according to S&P’s LCD data as of September.

Ilitch, who was born in 1933 to Macedonian immigrant parents, is the wife of Michael Ilitch, the 79-year-old owner of Major League Baseball’s Detroit Tigers. The two co-founded closely held pizza chain Little Caesar Enterprises Inc.

CCM used the bonds and loans to buy the 75 percent stake in MotorCity in April 2005 that Ilitch didn’t already own from Las Vegas-based Mandalay Resort Group and other investors. MotorCity opened the hotel in November 2007, adding to the 75,000-square- foot casino.

Debt Burden

Debt rose to about 7 times earnings before interest, taxes, depreciation and amortization from 6.1 times in December as gambling revenue fell amid the economic slowdown, according to a Jan. 16 report by Foley. Terms of the loan require the ratio not exceed 6.1, and the limit will tighten to 5.9 times this quarter, he wrote in a December report.

Casinos across the U.S. are suffering as consumers cut spending in the recession. Revenue on the Las Vegas Strip, the biggest U.S. gambling center, slid 9.3 percent in the first 11 months of 2008 and was poised for its biggest annual drop since data started being compiled in the mid-1980s, the Nevada Gaming Control Board said. Casino revenue in Atlantic City, New Jersey, tumbled a record 19 percent in December, the New Jersey Casino Control Commission said.

Trump Entertainment Resorts Inc., founded by developer Donald Trump, is negotiating a debt restructuring after the Atlantic City, New Jersey-based casino owner skipped a $53 million interest payment that was due Dec. 1.

Detroit’s Declines

Detroit is facing more job losses than the rest of the country after U.S. auto sales tumbled 18 percent last year. Unemployment for the metropolitan area was 9.5 percent in November, up from 7.6 percent a year earlier, data compiled by the Bureau of Labor Statistics show. The national average was 6.7 percent that month.

U.S. automakers are also suffering as the car industry in Europe declines. New car registrations in the European Union fell 18.2 percent in December, according to a Jan. 15 report from the European Automobile Manufacturers Association in Brussels.

“Historically, even with the high unemployment rate, Detroit had done okay on a relative sense,” Foley said. “But November and December numbers, there was a sharp drop-off.”

Deutsche Bank, which arranged the MotorCity loan in 2005, proposed Jan. 13 that CCM increase interest payments to a minimum of 7.75 percent or 5 percentage points more than Libor when Libor exceeds 2.75 percent. CCM currently pays 2 percentage points more than Libor, which ended last week at 1.17 percent.

Increasing Ratios

CCM offered to pay a fee of 50 basis points to lenders if they agreed to the change, according to S&P’s LCD, which reported the proposal earlier this month. A basis point is 0.01 percentage point. In exchange, the debt-to-earnings ratio would be increased to 8 times, S&P’s LCD said, without saying where it got the information.

A majority of the investors rejected the offer and asked Ilitch to inject additional cash into the casino, said the investors, who declined to be identified.

Dallas-based Highland, Credit Suisse of Zurich and other lenders said that without more equity, Ilitch must pay annual interest of 18 percent or 15 percentage points more than Libor, whichever is higher, according to the investors. The interest would be split between cash and payment-in-kind, they said.

Credit Suisse spokeswoman Suzanne Fleming, Highland partner Jack Yang and Deutsche Bank spokesman Scott Helfman declined to comment.

To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net ; Michael J. Moore in New York at mmoore55@bloomberg.net.

Documents imply Ilitch may have gotten special treatment in Domestic Assault case

Following an 8.02.04 Domestic Violence call, Troy Police Department records indicate Harold Fried, an attorney for Ronald Ilitch, cut a deal with officers who allowed him to produce his client the following morning at the Police Department rather than endure questioning -- and a possible arrest -- at the crime scene.

The afternoon following the call to Police, a local NBC affiliate was reporting:

"The son of Detroit business icon Mike Ilitch is wanted by Troy police for questioning, according to Local 4 reports.

"Police said they want to speak with Ron Ilitch about a fight he apparently had with his girlfriend.

"Authorities reportedly have been unable to locate Ilitch."

Lisa Wood, Ron Ilitch's girlfriend, had been living with him at the time. According to various news accounts, on several occassions during the Summer of 2004, Ilitch beat Wood such that she had to seek medical attention. Following the last beating the incident apparently spilled out onto the driveway of the Ilitch home, and on 8.02.04 Troy police were called to the scene.

When police arrived, they were told Ron Ilitch was nowhere to be found. However, a subsequent Troy PD Report documents that Captain Dane Slater had agreed to allow Ilitch attorney Harold Fried to bring his client to PD offices for questioning the next day rather than face any possibly embarassing circumstances at the crime scene. Police never entered the Ilitch home, where the beating had taken place, to look for Ilitch.

So Fried it appears, as promised, produced Ilitch at 10:00 a.m. the next morning. But when Fried and Ilitch arrived at the Police Department, Fried sought a private audience with three of the officers. He explained that Ilitch was "not in any physical condition that would allow him to relay facts of the incident accurately." Instead, Fried informed the officers he would produce a written statement from Ilitch by 11:00 a.m. the next day.

Ilitch would eventually be arraigned on 8.11.04 and then later plea "No Contest" to two counts of Assault related Domestic Violence. (Troy Police Dept. Press Release: Ilitch Warrants Issued)

An 8.04.04 Oakland Press story on the incident also noted:

"Ronald Ilitch has a checkered criminal history that includes drunken driving and drug charges. He was arrested in Wyandotte in 2002 after a fight, and his
1992 Cadillac was impounded as a drug forfeiture. Police at the time said Ilitch had three drunken driving convictions and two bouts with a suspended license on his record."

And Detroit's NBC affiliate reported at the time:

"Local 4 learned that a domestic violence claim was filed against Ilitch last month in Aurora, Colo., where he apparently owns property."

In December 2008, Lisa Wood filed a contracts related lawsuit in Wayne County Court (MI), involving allegations of Conspiracy subsequent to the August 2004 beating and visit by police to the Ilitch home.

Wood says executed contract agreements between herself and Ilitch affiliates were among her personal belongings in the Ilitch home. Wood's complaint alleges that Ilitch and/or Ilitch agents refused to allow authorities to enter the home during the three days following the beating during which time they worked to destroy crime scene evidence and destroy any evidence, to the point of deniability, that her executed contract agreements ever existed. (Lisa Wood v. Little Caesar, Ilitch et al).

In an amended version of the complaint, Wood alleges that Jimmy Shemami, son of confessed Iraqi spy Najib Shemami, was part of the Ilitch family's personal security detail at the time and alleges that Shemami may have been involved in the conspiracy to cover up the crime scene and dispose of Wood's personal papers.

Did Ron Ilitch receive special treatment in this matter? Were Ilitch and/or Ilitch agents allowed to clean up the crime scene and destroy evidence? What role did Shemami's son play?

Why did officers leave the Ilitch home without questioning or locating Ilitch -- especially given his track record?

Why did officers agree to let Fried bring Iitch into the Police Deparment the following day rather than interview and examine Ilitch when they were called to his home?

Was Ilitch sober/clean when he arrived at the Police Department the following day?

When the local NBC affiliate reported domestic violence charges had also been filed against Ilitch the previous month in Colorado, why didn't Police and Prosecutors take appropriate action?

Do you think Harold Fried got special treatment for Ron Ilitch?

Ilitch spin doctor doing damage control in Barstow

1.26.09

Los Coyotes still hoping for Barstow casino

By ABBY SEWELL, staff writer

BARSTOW • At least one Indian tribe is still actively pursuing a casino in Barstow, but they may have a long road ahead of them.

The Los Coyotes Band of Cahuilla and Cupeno tribe is still hopeful that the U.S. Department of the Interior will agree to put land in Barstow into federal trust to be used for a casino, said project spokesman Tom Shields, who works for developer BarWest, LLC. Placing the land in trust is a necessary step before the tribe, whose reservation is in San Diego County, can go forward with an off-reservation casino in Barstow.

The tribe submitted a revised application to put about 23 acres of land in Barstow into federal trust in May 2008, after being turned down in January 2008 due to new federal rules that state an off-reservation casino should be within commuting distance of the reservation. The next step in the process would be for the BIA to come out with a draft environmental impact statement, Shields said.

The interior department’s Bureau of Indian Affairs is currently reviewing the revised application, said spokeswoman Nedra Darling, but she could not give a timeline on when the review might be completed.

Shields said that because the Los Coyotes reservation is so remote and austere, and only about 40 out of the more than 300 tribe members live on-reservation, the commutability standard should not apply. The lack of electricity and roads in most of the reservation and the mountainous terrain make it unsuitable for development, he said.

“In (the BIA’s) minds, tribal members would have to live close enough to the casino for them to commute on a daily basis,” he said. “... We basically pointed out that there’s very few members of the tribe that live on the reservation. Probably more of them live closer to Barstow.”

BarWest currently owns the land on Lenwood Road east of Interstate 15 where the proposed casino would be built, but if the government approves the Los Coyotes’ application, the acreage would be handed to the federal government to be held in trust for the tribe for use as a gaming site.

The Los Coyotes were previously working in partnership with the Big Lagoon Rancheria tribe from Humboldt County, but decided to go it alone after last January’s rejection, while the Big Lagoon tribe elected to pursue a casino closer to home.

Shields said the Los Coyotes tribe remains “100 percent committed” to opening a casino in Barstow.

The Chemehuevi tribe, whose reservation is in Havasu Lake, had submitted an application for a separate casino project in Barstow, which was also rejected in January. The Chemehuevi have not resubmitted their application, and tribal Chairman Charles Wood said Friday that the tribe is waiting to see whether the commutability rules will change under the Obama administration before going forward with the project.

The city also remains hopeful that one of the casino projects will come through, but it is in the hands of the tribes to obtain state and federal approval, city spokesman John Rader said, although he noted that former Mayor Lawrence Dale sent a number of letters to the Department of the Interior in support of the Los Coyotes project in 2008.

Rader said the city sees a casino resort project as a means of jumpstarting the local economy, estimating that the development could create 3,700 jobs, revitalize the outlet malls and other local businesses, and bring about $6.5 million to the city in the first year through a revenue-sharing agreement. The city still has agreements with both the Los Coyotes and the Chemehuevi, both of which would allot 4.3 percent of the casinos’ electronic gaming revenues to the city.

On the state level, Indian casinos have not proved to be as lucrative as some had hoped. Tribal revenue-sharing payments to the state will total $362 million this year, but that is $123 million less than the Governor’s Office had forecasted, according to a recent report in the Sacramento Bee.

Contact the writer:
(760) 256-4123 or asewell@desertdispatch.com

MotorCity Lenders Call on Red Wings’ owner Ilitch for Cash

1.26.09

By Pierre Paulden and Michael J. Moore

Jan. 26 (Bloomberg) -- Marian Ilitch, the owner of the National Hockey League’s Detroit Red Wings, is facing calls from lenders to pump more money into her MotorCity Casino or pay an almost sixfold increase in interest as gambling revenue falls.

Credit Suisse AG’s asset management arm, Highland Capital Management LP and other investors told Ilitch to boost capital in the property because it’s at risk of violating terms of a $606 million loan, according to investors with knowledge of the situation. If she doesn’t, lenders may raise the interest on the loan to 18 percent a year, said the investors, who declined to be identified because the talks are private.

MotorCity, owned by Ilitch’s closely held CCM Merger Inc., is a victim of the slump in Detroit, home to General Motors Corp. and Ford Motor Co., and the nationwide decline in gambling profits. Gaming revenue at the 400-room hotel and casino tumbled 7.1 percent in November and 11 percent in December from a year earlier, according to Moody’s Investors Service.

“If they don’t get the amendment, they could be in default,” said Keith Foley, a Moody’s analyst in New York. “The amendment is something that they need.”

Should CCM fail to reach an agreement, it may lose access to a $100 million credit line that it needs to pay a $50 million Economic Development Corp. bond in May, according to Foley. CCM already invested $25 million of equity in September, he said.

Falling Prices

The casino’s term loan due in 2012 was quoted at 42 cents on the dollar, according to a Jan. 20 report from Frankfurt-based Deutsche Bank AG. Its $300 million of 8 percent bonds due in 2013 trade at 55.6 cents on the dollar to yield 25 percent, according to prices compiled by Bloomberg.

“MotorCity Casino’s parent company is in the process of negotiating changes to its credit agreement to bring the financial covenants that were set in 2005 to levels consistent with those already in place for other gaming operators across the United States,” said Jacci Woods, a MotorCity spokeswoman.

Woods declined to comment on details of the talks. Karen Cullen, a spokeswoman for Ilitch Holdings, referred questions to MotorCity.

Creditors are requiring increased rates from borrowers deemed high-yield, high-risk, and in jeopardy of breaking debt agreements after the so-called leveraged loan market lost 29 percent last year. Companies rated below Baa3 by Moody’s and BBB- by Standard & Poor’s are considered high-yield, or junk.

Borrowers paid an average 1.64 percentage points more in interest last year to amend borrowing agreements needed to avoid default, according to Standard & Poor’s LCD data as of September.

Tigers, Little Caesar

Ilitch, who was born in 1933 to Macedonian immigrant parents, is the wife of Michael Ilitch, the 79-year-old owner of Major League Baseball’s Detroit Tigers. The two co-founded closely held pizza chain Little Caesar Enterprises Inc.

CCM used the bonds and loans to buy the 75 percent stake in MotorCity in April 2005 that Ilitch didn’t already own from Las Vegas-based Mandalay Resort Group and other investors. MotorCity opened the hotel in November 2007, adding to the 75,000-square- foot casino.

Debt rose to about 7 times earnings before interest, taxes, depreciation and amortization from 6.1 times in December as gambling revenue fell amid the economic slowdown, according to a Jan. 16 report by Foley. Terms of the loan require the ratio not exceed 6.1, and the limit will tighten to 5.9 times this quarter, he wrote in a December report.

Casino Revenue

Casinos across the U.S. are suffering as consumers cut spending in the recession. Revenue on the Las Vegas Strip, the biggest U.S. gambling center, slid 9.3 percent in the first 11 months of 2008 and was poised for its biggest annual drop since data started being compiled in the mid-1980s, the Nevada Gaming Control Board said. Casino revenue in Atlantic City, New Jersey, tumbled a record 19 percent in December, the New Jersey Casino Control Commission said.

Trump Entertainment Resorts Inc., founded by developer Donald Trump, is negotiating a debt restructuring after the Atlantic City, New Jersey-based casino owner skipped a $53 million interest payment that was due Dec. 1.

Detroit is facing more job losses than the rest of the country after U.S. auto sales tumbled 18 percent last year. Unemployment for the metropolitan area was 9.5 percent in November, up from 7.6 percent a year earlier, data compiled by the Bureau of Labor Statistics show. The national average was 6.7 percent that month.

U.S. automakers are also suffering as the car industry in Europe declines. New car registrations in the European Union fell 18.2 percent in December, according to a Jan. 15 report from the European Automobile Manufacturers Association in Brussels.

Detroit’s Deterioration

“Historically, even with the high unemployment rate, Detroit had done okay on a relative sense,” Foley said. “But November and December numbers, there was a sharp drop-off.”

Deutsche Bank, which arranged the MotorCity loan in 2005, proposed Jan. 13 that CCM increase interest payments to a minimum of 7.75 percent or 5 percentage points more the London interbank offered rate when Libor exceeds 2.75 percent. CCM currently pays 2 percentage points more than Libor, which ended last week at 1.17 percent.

CCM offered to pay a fee of 50 basis points to lenders if they agreed to the change, according to S&P’s LCD, which reported the proposal earlier this month. A basis point is 0.01 percentage point. In exchange, the debt-to-earnings ratio would be increased to 8 times, S&P’s LCD said, without saying where it got the information.

A majority of the investors rejected the offer and asked Ilitch to inject additional cash into the casino, said the investors, who declined to be identified.

Dallas-based Highland, Credit Suisse of Zurich and other lenders said that without more equity, Ilitch must pay annual interest of 18 percent or 15 percentage points more than Libor, whichever is higher, according to the investors. The interest would be split between cash and payment-in-kind, they said.

Credit Suisse spokeswoman Suzanne Fleming, Highland partner Jack Yang and Deutsche Bank spokesman Scott Helfman declined to comment.

To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.

Last Updated: January 26, 2009 05:42 EST

MotorCity Casino and Greektown saddled with debt, falling revenues; investors making demands

1.25.09

MotorCity, Greektown deal with bad hands of debt

By Chad Halcom and Nancy Kaffer

Two Detroit casinos are rolling snake eyes in the debt market.

A top ratings service downgraded its outlook for MotorCity Casino's parent company, citing a host of financial concerns. Greektown Holdings L.L.C. has until the end of this week to submit a reorganization plan that can resolve its swelling debts without need for a sale.

An agreement entered in U.S. Bankruptcy Court last month between the troubled Greektown Casino owners and its creditors gives the parties until Feb. 1 to submit a “co-exclusive” plan to restructure and settle its debts.

In other words, if the casino company doesn't submit a plan — with the consent of as many bondholders and other litigants as possible — by the deadline, creditors can submit restructuring plans of their own.

The Detroit City Council expects to meet today in a closed session with its Law Department and Chicago-based law firm Shefsky & Froelich Ltd. to review confidential new documents in the ongoing bankruptcy case, in which Detroit is a party.

A deputy press secretary for Detroit Mayor Ken Cockrel Jr. said he believes Greektown will submit a plan by week's end, but an attorney for the casino's creditors said there it might be “difficult” to craft a complete plan with all parties' consent by the deadline.

As late as last week, involved parties were discussing the shape of a reorganization plan, said Robert Gordon of Detroit-based Clark Hill P.L.C. and attorney for Greektown's unsecured creditors' committee.

Greektown, majority-owned by the Sault Ste. Marie Tribe of Chippewa Indians, and the creditors have also had to discuss a few preliminary offers to buy the casino and its assets, which came in earlier this month as part of the proceedings, Gordon said.

“There still has to be some digestion of the proposals that have come in,” he said. “That's why I think there's going to be some possible difficulty or delay in crafting a full plan before the deadline.”

Marian Ilitch-owned MotorCity's fiscal woes were enumerated in a statement posted on Moody's Investors Services' Web site, announcing the downgrade of parent company CCM Merger Inc.'s outlook to negative.

Last fall, CCM owners contributed $25 million in cash equity to enable the business to meet its September debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio. Moody's analysts warn that another equity infusion might be required for CCM to meet its year-end debt-to-EBITDA ratio.

CCM's debt limit is currently seven times EBITDA, according to Moody's, but that ratio could increase in 2009 because of a drop in gaming revenue — down 11 percent in December — that could offset earnings from the casino's expansion and lead to negative cash flow.

CCM's owners would have to ask to amend its lending covenants to increase its debt-to-EBITDA ratio or risk becoming noncompliant, according to Moody's.

Greektown may have its work cut out in proving it can resolve debts as it faces falling revenue and lost market share. A 2008 revenue and tax collection report prepared by the Michigan Gaming Control Board shows that revenue fell for all three casinos in December, with Greektown's dropping 12 percent.

MotorCity ended 2008 with $464 million in revenue, compared with $480 million in 2007. Greektown finished with $316 million compared with $341 million last year.

“Nothing before us suggests the industry isn't still solvent. The casinos as a whole showed 1.8 percent revenue growth over the previous year,” said Rick Kalm, the Gaming Control Board's executive director.

Edward Gudeman, president and managing partner of bankruptcy law firm Weik & Associates P.C. in Royal Oak, said Greektown's ability to control its own future likely comes down to showing an ability to make a profit on operations — exclusive of debt.

“If they can't show that in the plan, or the plan fails to execute, the case could be converted to Chapter 7 and be forced to sell,” he said.

Greektown sought bankruptcy protection in May, citing at least $243 million in unsecured debt to 40 unsecured creditors, and has since gained regulatory approval from the Gaming Board to borrow another $100 million more.

A new hotel is expected to open in a newly built tower along Monroe Street next month.

Chad Halcom: (313) 446-6796, chalcom@crain.com
Nancy Kaffer: (313) 446-0412, nkaffer@crain.com

Candidate with ties to Aronoff considering campaign for Governor of Michigan

1.08.09

Patterson says, 'I know I can do better' as governor, plans on testing waters

BY TAMMY STABLES BATTAGLIA
FREE PRESS STAFF WRITER

Oakland County executive L. Brooks Patterson said he’ll formally announce Saturday he’s “testing the waters” on a run for Michigan governor in 2010.

“I know I can do better,” he said this morning. “I think I’ve proven that, if you look at how well Oakland County‘s managed and the things we’re doing here. I think we take the programs that are successful here and replicate that at the state level.”

Patterson said whether his bid becomes official depends on the response after his annual birthday bash Saturday night. At this point, he doesn’t have a war chest to finance a run, but he’s already had verbal pledges of support from around the state, he said.

"I don’t even have an exploratory committee,” he said today. “I’m going to send up a trial balloon. Right now, I’m just putting my name in the rumor mill.”

The Free Press reported Wednesday that supporters recently launched a Facebook group called “Draft Brooks Patterson for Michigan Governor.”

NOTE: A slush fund for Patterson's benefit was set up by lobbyists at Dykema Gossett and filled with money from affiliates of Daniel Aronoff (Landon Companies, Action Strategies, Inc.) and Harold Fried (Fried Saperstein Abbatt PC). Patterson used the fund to foot his travel bills and commission an artist's portrait of himself.

Amended complaint links Detroit's Ilitch family to that of confessed Iraqi spy Najib Shemami

An amended court complaint filed in Wayne County 3rd Judicial Circuit Court by Lisa Wood, a former girlfriend of Ron Ilitch, now names Jimmy Shemami as a defendant along with Michael Ilitch, Little Caesar Enterprises, Inc., Ilitch Holdings, Inc., and Richard Fenton, vice president of security for Ilitch.

Among the five counts outlined in Wood's amended complaint are charges the Defendants were involved in breach of contract, negiligence and conspiracy.

Jimmy Shemami is the son of confessed Iraqi spy Najib Shemami. Wood has alleged that Jimmy Shemami was part of the team that provided personal security services to members of the Ilitch family -- namely Ronald Ilitch, the oldest son of Mike & Marian Ilitch -- at the time she was the victim of an attack by Ron Ilitch in August 2004.

Following the August 2004 assault by Ron Ilitch, Troy Police were called to the Ilitch home where Wood had been living as Ilitch's girlfriend. Once police arrived, Wood was taken by ambulance to a local hosptial for medical care and subsequently refused re-entry to the Ilitch home. When officers arrived on the scene they were told Ilitch was not home but never entered the residence.

Ron Ilitch plead "no contest" to two counts of Domestic Violence related Assault & Battery but Wood alleges in this newly amended lawsuit that the Defendants and/or those working at their direction cleaned up crime scene evidence and went through her personal effects at the Ilitch home, secreting and destroying executed contracts and supporting documents that were her personal property.

Jimmy Shemami was reportedly present following the August 2004 assault by Ron Ilitch and in subsquent court proceedings on that matter, the court singled out Shemami and ordered him to avoid having any future contact or communication with Wood.

Najib Shemami was among several Detroit-area men arrested in April 2007 and indicted on charges that he was a spy for the former government of Iraqi dictator Saddam Hussein. He's been in custody since and on January 16th, U.S. Attorney Stephen J. Murphy announced Shemami had admitted to spying for Saddam Hussein's government. According to the Detroit News, the elder Shemami is expected to be sentenced in U.S. District Court in Detroit on May 11th.

A search of various FaceBook.com profiles suggests that Shemami and Ilitch family members are further acquainted. It has been reported to TVT that from time-to-time Shemami family members have been hosted as guests in the owner's suites at Comerica Park and Joe Louis Arena which reportedly makes Mrs. Marian Ilitch very uneasy.

Attorneys Irwin Alterman (Kemp Klein Law Firm) and Harold Fried (Fried Saperstein Abbatt PC) are representing the Defendants in this matter. Fried also represented Ron Ilitch in the 2004 Assault & Battery incident.

Indianz.com: Little River Band hopeful for off-reservation casino

As posted on 1.23.09 at indianz.com:

Little River Band hopeful for off-reservation casino

The leader of the Little River Band of Ottawa Indians of Michigan is hopeful for approval of its off-reservation casino.

Ogema Larry Romanelli said the rejection of a land-into-trust case by the U.S. Supreme Court, is good news. The case, if accepted, could have affected tribes nationwide.

The Little River Band is seeking a casino in Muskegon, about 80 miles from the reservation. The tribe has purchased 223 acres for the project.

Get the Story:Leader eyeing Muskegon casino applauds ruling (The Muskegon Chronicle 1/23)

Desperate to attract guests; MotorCity Casino throwing in Red Wings tickets, transportation

According to the Website gadling.com, MotorCity Casino is giving away Detroit Red Wings tickets in travel packages designed to entice guests to stay at the one-year-old 400-room MotorCity Casino Hotel:

Detroit's Greektown and MotorCity Casino are not doing as well as last year. Either are Indiana's. This is the time to look to these places for vacation deals. At MotorCity Casino there are overnight packages that include a variety of perks like food credit and Red Wing hockey game tickets.

And an article published on 1.25.09 in the Columbus Dispatch confirms the Red Wings ticket give-away too:

You know the economy is in bad shape when Americans stop gambling.

Like just about every other industry, casinos have taken a big hit recently...

Detroit's Greektown Casino filed for bankruptcy protection in the spring. Revenue was down more than 7 percent at the casino last year. Revenue was also down at Detroit's MotorCity Casino by more than 3 percent in 2008...

MotorCity Casino in Detroit is offering several overnight room packages for $149 with a $50 food credit, $159 with two $30 gaming vouchers or $179 with two tickets to a Red Wings hockey game, including a shuttle to Joe Louis Arena...

Michael Ilitch and his wife Marian are owners of the Stanley Cup winning Detroit Red Wings NHL franchise and their company Olympia Entertainment retains the management contract for Joe Louis Arena. Marian Ilitch is the owner of Detroit's struggling MotorCity Casino. Ilitch Holdings, Inc. is the umbrella company for all Ilitch owned enterprises. Among other companies in the Ilitch Holdings family are also the Detroit Tigers and Little Casesar Enterprises, Inc.

During a recent six-week period, Moody's twice downgraded the credit ratings for Ilitch-owned CCM Merger, Inc., a parent of MotorCity Casino. In 2005, Ilitch financed the acquisition as well as renovation/expansion of MotorCity Casino through borrowing/offerings totalling at least $1 billion. The new credit rating, "Caa," implies investments in the casino parent are now "judged to be of poor standing and are subject to very high default risk."

In September 2008, Ilitch injected $25 million in cash into the casino venture to escape a violation of lending covenants (debt-to-EBTIDA ratios). But at the end of 2008, when 4th quarter disclosures were made, it was revealed CCM Merger had violated those loan covenants. As a remedy, Ilitch is seeking to amend those lending covenants, loosening the debt-to-EBTIDA ratios -- apparently higher now than it was during the $300 million construction project. However, investors are demanding Ilitch inject further cash into the casino company and oppose amending the loan covenants.

Revenues reported by MotorCity Casino in 2008 were the lowest reported since 2005 -- before the gambling hall was expanded and a 400-room hotel addition was complete. And in December 2008 alone, MotorCity Casino's revenues fell 11.5%.

MotorCity Casino Hotel: Detroit Red Wings Package