Bank of America issues a Commitment Letter of Financing for the Watonga Lucky Star Casino Hotel/Conference Center Expansion
(CONCHO, OK) The Cheyenne and Arapaho Tribes receive an official commitment letter from Bank of America to finance the renovation and expansion of the Watonga Lucky Star Casino.
After several months of working with a nationally known finance consulting firm, Sovereign Finance, the Tribes received proposals from different banks to finance the renovation.
“The proposal from Bank of America was very strong and embodied everything from a nationally recognized bank that the Tribes was looking for,” Cheyenne and Arapaho Tribes Gov. Reggie Wassana said.
Prior to successfully obtaining a commitment letter from Bank of America, the Tribes executed all the proper and necessary steps for the Watonga project which included conducting a Feasibility Study.
Klas Robinson Hospitality Consulting QED (KRHC) prepared the study to address the feasibility of and ability to finance an expansion and renovation of the Lucky Star Casino in Watonga, Oklahoma.
KRHC was commissioned to complete a feasibility study in February 2019 and delivered the study to the Lucky Star Casino management on April 24, 2019. The casino delivered copies of the study to Gov. Wassana, Lt. Gov. Gib Miles, and to the Office of Tribal Attorney. The Tribes Feasibility Study on the Watonga Lucky Star Casino is available for viewing in the Office of Records Management.
The Tribes retention of a nationally recognized casino feasibility expert was a high priority due to the size of the expansion and renovation. Klas Robinson was selected, with consent of Governor Wassana and based on the Casino Procurement Policy. The Tribes also utilized the services of Sovereign Finance, a well-known Native American Owned consulting business, which has a strong track record of assisting tribes to secure financing for business projects.
The Study was one of many documents provided to Bank of America so that the bank could conduct its due diligence in determining whether or not to provide the Tribes with a loan for the renovation and expansion of the Watonga casino. Other documents provided to the bank included:
- Casino Financial Statements
- Tribal Government Financial Statements
- Casino Audits
- Tribal Government Audits
- Casino/Hotel Schematic Design and Design Development
- GRAP
- Tribal Leadership Bios
- Casino Management Bios
- Watonga Casino Balance Sheets and Income Statements
“We have been working very diligently and closely with Sovereign Finance and Bank of America to get the Tribes to this point,” Wassana said.
Wassana stated Bank of America has run its own analysis to ensure that the Watonga Casino will produce the amount of revenue projected in the study. As the Study shows, the viability of financing a renovation of this magnitude in Watonga will not only be successful, it will flourish and solidify the Tribes as a prominent gaming presence in the Northwest corridor of the state.”
“One of the Tribes biggest strengths in attracting Bank of America to submit a proposal for a bank loan is due to the Tribes low debt and high cash flow,” Wassana said. “The Tribes are in the best financial position that it has ever been in. As a result of our positive financial position, Bank of America was able to submit a loan proposal with an interest rate below 3 percent on a 5-year term, 10-year amortization period. Some of the other terms include:
- Lender – Bank of America, N.A.
- Loan Amount – An aggregate principal amount of up to $15,000,000 will be available through the facilities described collectively as the “Senior Credit Facilities”.
- Delay Draw Term Loan: A $10,000,000 delay draw term loan.
- Revolving Credit Facility: A $5,000,000 revolving credit facility.
- Interest Rate – The interest will be right at around 3 percent
- Closing Date – The execution of definitive loan documentation, to occur on or before Jan. 15, 2020 (the “Closing Date”).
- Increase Option – The amount of the Senior Credit Facilities may be increased by an aggregate amount not to exceed $30 million under terms and conditions to be agreed between the Lender and the Borrower, subject to the Lender’s complete discretion.
- Amortization – Delay Draw Term Loan: The Borrower shall make quarterly principal payments on the Delay Draw Term Loan starting on the first full fiscal quarter after the Expiration Date in amounts to fully amortize the credit facility over a 10-year amortization. All accrued but unpaid interest, outstanding principal and all other amounts due and payable with respect to the Delay Draw Term Loan shall be paid by the Borrower on the Maturity Date (subject to the proviso in such definition). Revolving Credit Facility: Before the Maturity Date, the Revolving Credit Facility will require the payment of interest only on a monthly basis. The Revolving Credit Facility will terminate on the Maturity Date and all accrued but unpaid interest and other amounts outstanding or due and payable thereunder shall be paid by the Borrower on the Maturity Date.
- Security – The Borrower shall grant the Lender valid and perfected first priority (subject to certain exceptions to be set forth in the Loan Documents) lien and security interest in all Gaming Assets.
- “Gaming Assets” excludes (a) funds or other assets actually distributed to the Borrower from the Gaming Enterprise in compliance with the Loan Documents and (b) any real property held in trust or restricted status or improvements thereto and certain other “Excluded Assets” to be determined, and only to the extent permitted under federal law.
- Reporting Requirements – The Borrower will agree to provide the following financial reporting:
- Annual audited consolidated and consolidating financial statements of the Gaming Operation (including any independent management letters or assessments) due within 120 days following its fiscal year end.
- Unaudited quarterly consolidated and consolidating statements of the Gaming Operation due within 45 days of each quarter end (including the fourth fiscal quarter).
- Compliance certificate due within 45 days of each fiscal quarter (including the final quarter in each fiscal year) signed by an authorized financial officer of the Borrower.
- No later than 60 days prior to the end of each fiscal year, the annual operating budget and capital expenditures budget for the Gaming Operation on a consolidated and consolidating basis.
- Annual audited financial statements of the Borrower (including any independent management letters or assessments) due within 270 days following its fiscal year end.
For the Watonga community, this casino and hotel expansion will provide additional employment opportunities for tribal citizens and provide economic life to a rural town in the Tribes’ service area where many of our tribal citizens live.
“I’d like to thank all of the Legislators who have supported this project over the past year and to all of our tribal members who attended and participated in all of the public hearings where the contract and financing resolutions for this project was presented and passed by our Legislators. Some special thanks go to our casino management and to all of the casino workers who make positive things happen for the Tribes every day due to their hard work,” Wassana said.