|By Rene Romo, Albuquerque Journal,
N.M.McClatchy-Tribune Regional News
July 6, 2008 - LAS CRUCES -- More than three years after the Mescalero Apaches opened their new Inn of the Mountain Gods Resort and Casino near Ruidoso, the resort has struggled with financial losses and the tribe faces a mountain of debt.
But tribal officials are optimistic despite the losses, management shake-ups and a $200 million debt that comes due in 2010.
The tribe's 273-room luxury resort below snow-capped Sierra Blanca, along with a casino sparkling with nearly 1,000 slot machines, is the centerpiece of tribal economic development.
The resort and casino operation has sustained net losses of $28.4 million from May 2005 to the end of January, according to financial statements filed with the Securities and Exchange Commission. The resort will issue its year-end report on July 25.
Its last report, covering the fiscal year's third quarter ending Jan. 31, showed the 4,000-member tribe's inn, gaming operations and recreational programs sustained a net loss of $4.3 million on $28.9 million in revenue.
Some of the third-quarter losses were due to a winter short on snowfall, which hurt the tribe's skiing operations and reduced hotel occupancy. The meager snowfall led the resort's management to pull the plug on a charter flight service that, starting last September, carried high-rollers from Houston to Alamogordo.
The Inn's occupancy rate averaged 76 percent for the nine months that ended Jan. 31, but fell to 61 percent in the third quarter. Net gaming revenue amounted to $16.8 million in the third quarter, a 5-percent increase over the corresponding period in the previous year.
But resort management said the operation was hampered by increased costs of goods and services and the increased cost of having to meet SEC record-keeping requirements, along with the light snowfall.
The Inn of the Mountain Gods Resort and Casino, or IMG, has generated net profits in only three of the 11 quarters since the rebuilt resort and casino opened in 2005.
Pamela Gallegos, interim chief financial officer for IMG, said tribal officials are wrestling with debt, interest payments and the need to continue investing to maintain the resort's high-end status.
"Certainly, I can tell you, from a multitude of conversations with (tribal) council members, they are concerned, and they do want to pay down that principal, they don't want the tribe highly leveraged," Gallegos said. "But you've got to spend money to make money, and there is a balance between the two."
Gallegos said that, despite the slumping economy and high gas prices, "business has not slowed down."
Tribal President Carleton Naiche-Palmer said the future is looking brighter for the resort.
"Even though we might have experienced some deficit, I think we're moving toward a better future right now,'' said Naiche-Palmer, who was elected president last November and serves as chief executive officer of resort operations.
Tribal leadership is looking to refinance $200 million in debt shouldered in 2003 when the resort issued notes, at 12 percent interest, to complete construction of the expanded Inn of the Mountain Gods and other projects. The $200 million in bonds mature Nov. 15, 2010, when the debt must be paid off.
In May 2007, the tribe's company announced that it had hired an investment banking firm to evaluate its capital structure and arrange potential refinancing, according to an SEC report.
The tribe has not been able to pay down any of the principal on its $200 million bond issue, Gallegos said. Interest expense for the quarter that ended Jan. 31 was $6.6 million, and as of that date accrued interest payable on the notes was $24.6 million, according to the tribe's last SEC report.
'Eating us up alive'
Glenda Brusuelas was a skeptical tribal council member in 2003 when the board, pushed by then-president Sara Misquez, approved the $200 million bond issue, the largest in the tribe's history.
Brusuelas said she had doubts about the financing plan, which arose nine months after the old Inn of the Mountain Gods had been demolished, in large part because council members had only days to review and digest it.
Now, Brusuelas says, the debt and interest are "just eating us up alive.''
"I said, 'My great-grandchildren aren't going to be able to pay that off,''' Brusuelas said. "I don't want to leave my greatgrandchildren with that kind of debt."
IMG chief operating officer Douglas Lentz could not be reached for comment.
Gallegos said she is aware of some Mescalero Apaches' concerns about the debt. "Just tightening your belt and whittling down the principal is not enough,'' Gallegos said. "In this industry, you keep growing or you die."
When IMG's year-end report is issued July 25, it will include "forward-looking statements'' disclosing management's plans and outlook, Gallegos said.
The Inn of the Mountain Gods Resort and Casino includes the luxury hotel and Casino Apache, the Casino Apache Travel Center, Ski Apache and other non-gaming operations, such as big-game hunting, golf and horseback riding. Between Casino Apache and the Travel Center, the tribe operates 55,000 square feet of gaming with 1,475 slot machines and 42 table games.
The new, larger and more lavish resort and casino replaced the original Inn of the Mountain Gods, which the tribe opened in the 1970s.
IMG has experienced a management shake-up over the last year.
On June 2 , resort management hired Lentz, formerly chief executive officer and general manager of the Santa Ysabel Resort and Casino in California, as chief operating officer.
Lentz, whose annual salary is $275,000, replaced former CEO Brian Parrish, whose resignation was announced in early April. The resort's SEC report said Parrish's resignation was "a result of philosophical differences with respect to the current and future operations of the company."
On Jan. 28, the resort and casino's temporary treasurer resigned less than two months after she was appointed to the position. The Tribal Council decided to fire the resort's chief financial officer last August, four weeks after she began her job.
Gallegos painted a positive picture despite the management turnover.
"Inn of the Mountain Gods is moving forward," Gallegos said. "We are continuing to do well, and with a change of leadership, I think we are going to do just fine."
Mescalero is unusual among Indian casino operations in that it reports these financial details publicly. Because the $200 million in notes were offered for public sale, the tribe must file reports with the Securities and Exchange Commission.
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