Detroit's Greektown Casino Faces Forced Sale

The Board is apparently convinced that the Sault Tribe and the state would be best served by new ownership.

Detroit's Greektown Casino has run into major financial problems due to the debt incurred by ongoing expansion. The problem has grown severe enough that the Michigan Gaming Control Board has set a deadline of June 10th for the casino's operators to explain why a forced sale should not occur.

A deal had recently been struck with Entertainment Interests Group to alleviate Greektown's cash shortage. EIG would receive 40% ownership, in return for an investment of $100 million. The Chippewa Sault Tribe would retain the remaining 60% of casino ownership.

However, Gaming Board officials denied a requested waiver of debt-to-earnings requirements that have put the casino in jeopardy, and suggested that the potential sale would only meet those requirements for a few months before Greektown fell again into violation.

When Greektown received Board approval to take on $500 million in debt in order to build a new permanent hotel and casino on its location, the Board stipulated that the casino maintain a 6.25 to 1 ratio of debt to earnings. The casino has not met that requirement since the end of last year.

While the influx of cash from EIG would temporarily raise the ratio to acceptable levels, accountants hired by the Board say that shortfalls would occur again before the year is out, and continue through 2009 and 2010.

Meanwhile, an attorney for EIG has suggested the company is having second thoughts about investing in Greektown, partially due to the Board's stance. Richard Zussman said, ""We are hesitant to continue spending time and money to close this deal. We'd have to think seriously about moving forward." 

The Board is apparently convinced that the Sault Tribe and the state would be best served by new ownership. A sale would probably get a much higher price than that proposed by EIG, and free the tribe from casino obligations which financially hurt the delivery of services to reservations. Greektown has been a troubled project, and perhaps fresh ownership is its only way to move forward.