Council votes to purchase Indiana casino operation
Friday 18th December 2020
In a narrow vote Dec. 17, Tribal Council elected to pursue a $280 million deal to purchase the gaming operation at Caesars Southern Indiana Casino. During the same meeting, Council voted to set up a new LLC to oversee the venture.
Principal Chief Richard Sneed said during a Dec. 15 meeting on the subject that a purchasing agreement will be signed later this month with closing expected toward the end of June. As stated in the resolution, the LLC board is to have its first meeting in January.
The Dec. 17 vote came following a session lasting from approximately 10 a.m. to 3 p.m. during which Council members asked questions about the project supplied to them by their constituents. The session was open only to tribal members, who had to request a link to the Microsoft Teams event from their Council representative or the chief's office. The vote took place in a special session called afterwards, but that session was not broadcast on the livestream as is typical for Tribal Council meetings. The Smoky Mountain News did not have access to either meeting.
According to Painttown Representative Dike Sneed, both measures passed narrowly, with a final weighted vote of 44-49.
Voting in favor of both measures were Chairman Adam Wachacha, Snowbird Representative Bucky Brown, Birdtown Representative Boyd Owle, Big Cove Representative Perry Shell, Painttown Representative Tommye Saunooke and Wolfetown Representative Chelsea Saunooke, Sneed said. Opposed were Wolfetown Representative Bo Crowe, Birdtown Representative Albert Rose, Big Cove Representative Richard French, Yellowhill Representative Tom Wahnetah and Sneed. Vice Chairman David Wolfe was absent due to quarantine restrictions. Other sources recalled the vote similarly, and The Smoky Mountain News has requested voting record sheets to verify the vote as soon as possible.
The resolutions require Chief Sneed's signature to become effective, but that will not likely be a hurdle as Sneed has been a vocal proponent of the move.
According to reporting by The Cherokee One Feather posted on Facebook, the resolution states that the tribe will contribute an amount toward the purchase not to exceed $120 million. However, the resolution does not specify the source of the funding, stating that "the tribe will identify the most advantageous funding mechanism to make the equity contribution." To complete the purchase, the tribe will obtain financing for the project not to exceed $160 million, the newspaper reported.
The debt will be assumed by an independent LLC whose creation Tribal Council also approved yesterday, with a plan to pay it back in five years at 5 percent interest. According to the resolution, EBCI Holdings LLC, will be formed in Delaware and be governed by a five-member board of managers. The company will operate independently of the tribe to manage its commercial gaming operation.
Of the five members, two must be enrolled members of the EBCI, and while the tribe made the initial appointments, the resolution does not state how future appointments will be made.
The casino investment is expected to yield a return of 19 to 23 percent. However, that would not all come back to the tribe directly. State laws in Indiana mean that the LLC can remit only 25 percent of the profits directly back to the tribe each year. However, the tribe owns 100 percent of the LLC's assets, so should it choose to dissolve that company at any point, it would have access to the full profits.
The 25 percent rule is an Indiana law and not universal. The entity could use the remaining funds to invest in similar commercial gaming opportunities in other states, thereby preventing the need to pour more tribal funds into future casino purchases.
The venture is expected to bring in $40 million annually in earnings before interest, taxes, depreciation and amortization. Casino taxes in Indiana are hefty -- according to the Casino Association of Indiana, casinos with between $150 and $600 million in gross revenue must pay 35 percent in taxes. The tribe's 25 percent annual share of cash flowing back to the LLC is expected to fall between $3 and $5 million and would be used to fund tribal programs threatened by looming threats to Cherokee's current monopoly on the local casino market.
The operation is up for sale as the result of a July merger between Eldorado Resorts and Caesars Entertainment -- the same company that owns Harrah's, the tribe's casino management company. The merger created the nation's largest casino and entertainment company, and in some states the union put them afoul of antitrust laws, meaning that the company had to sell off some of its operations in those jurisdictions. The casino in Elizabeth, Indiana, is one of those properties.