Genting Malaysia on Hook for $274 Million Tribal Casino Loss

Sun, May 28, 2017

The $274 million investment Genting Malaysia made in the First Light Resort & Casino (l.) in Taunton, Massachusetts could be a total loss. The Mashpee Wampanoag is still waiting for word whether it can start building again after an adverse court decision shut it down for a year. It’s possible it may never get that word.

Genting Malaysia, the largest casino developer in the world, may be forced to swallow a loss even it would find indigestible if it is forced to write off its investment of 4 million in the Mashpee Wampanoag tribe’s proposed First Light Resort & Casino in Taunton, Massachusetts. Casino construction has stopped while the tribe waits for a ruling from the Department of the Interior after a federal court last year ruled it erred in the methodology it used to put land into trust for the tribe in early 2016.

The judgements by federal judge William G. Young said the department incorrectly used Section 1 of Indian Reorganization Act of 1934 but that it might be able to use Section 2. The court gave it that option as a possible out. The department is due to issue its decision on that in June.

Judge Young ruled in the case of a federal court challenge by residents of East Taunton who oppose the casino, and who challenged the methodology by which the land was placed into trust.

Genting is the tribe’s backer in this venture, and has a seven-year management agreement, and a promise by the tribe to pay back the money it borrowed as interest bearing promissory notes. However, if the casino is not allowed to go forward, the tribe won’t be able to pay the money back, and being a sovereign nation, won’t even be liable to be sued.

Last week Maybank investment analyst Yin Shao Yang wrote: “If the new record-of-decisions (ROD) is unfavorable, we gather that GenM may write off the investment and forego net interest income of RM105mil. If the new ROD is favorable, we estimate that GenM will also earn management fees of some RM60mil per annum for seven years from 2019 and lift our target price by 14 sen a share.”

Of course, there is still a chance that the tribe may ultimately succeed. And it is also possible that Interior will use a different section of the Indian Reorganization Act of 1934 to put the land into trust.

Mashpee Chairman Cedric Cromwell remains optimistic that the Interior Secretary Ryan Zinke will return with a positive ruling for the tribe.