The Mashantucket Western Pequot Tribal Nation, the Indian tribe that owns the Foxwoods Resort Casino, is trying to restructure over $1.45 billion in debt as revenues have slowed in the ongoing economic downturn in the US. They have submitted a plan to creditors with a New York investment bank, Miller Buckfire & Co. to advise them.

The casino has been losing business hand over fist in the past couple of years due in part to the recession and in part due to the increased competition on the East Coast from new casinos and racinos in neighboring states. In July, slots revenue (always the main profit sector for a casino) dropped 13%.

According to analysts, the tribe can’t access some things that other companies in this situation would be able to. Tribal casinos are unable to do a debt-for-equity trade and they can’t sell assets that exist on tribal land. At the same time, this tends to work for the tribe in some ways because creditors are unlikely to be able to take over any assets or casino operations due to the sovereign nation status of tribal lands.

It’s actually a situation that others in the industry will be paying close attention to as the chairman of the tribal council, Michael Thomas, has said that the tribal government would be paid first before bondholders or bankers. With limitations on what a creditor can do in dealing with sovereign Indian tribes, this has others questioning what would happen. Would other tribes follow suit should Foxwoods brush off their legal debt obligations? What could be done about it?

Not only are there many questions raised by this unprecedented situation, the financial problems could impact the state budget, as well. As Governor M. Jodi Rell said in a statement, it is a concern for the state as a whole because of the revenue that the state government would lose.