|By Christina Hoag, The Miami Herald
Knight Ridder/Tribune Business News
Oct. 14, 2005 The Seminole Tribe will pay $560 million to redeem the tax-exempt municipal bonds the IRS says may have improperly financed the tribe's Hard Rock gambling resorts.
The tribe said Thursday it plans to use most of the proceeds of a $730 million bond sale it concluded on Thursday to buy back the municipal bonds. The rest will be used to refinance debt and pay for a $30 million parking garage currently under construction at the Hollywood complex.
The Internal Revenue Service ordered the tribe to repurchase the 2002 bonds by Dec. 2 in a preliminary ruling issued last December.
The agency is investigating the use of the tax-exempt bonds to finance the $450 million Seminole Hard Rock Hotels & Casinos near Hollywood and Tampa, saying such bonds are meant to be used for infrastructure projects, such as roads and schools, not commercial casinos.
The tribe has argued the bond proceeds were used for other parts of the resorts, such as the hotels, which are tantamount to any economic revitalization project in a tourism-dependent state.
The tribe will maintain that stance in fighting the IRS, said Seminole Hard Rock Hotel & Casinos Chief Executive James F. Allen.
"We will continue to 100 percent defend the tribe's tax-exempt status on those bonds," he said. "It was a legal deal, it was the right deal."
The tax-exempt bonds were sold through The Capital Trust Agency, an entity created by the two tiny Florida Panhandle cities of Gulf Breeze and Century to sell bonds largely for public works projects. The towns earn money through bond fees.
By repurchasing the bonds, the tribe also avoids any future lawsuit by bondholders, who may be liable to pay taxes on the interest earned if the IRS rules the bonds taxable.
The new taxable bonds, which received an A- rating from Fitch Ratings and BBB- from Standard & Poor's, were sold in two lots: $450 million worth which will mature in 2013 and $280 million to mature in 2020. They will pay about 6 percent interest, Allen said.
Allen said the Seminole Tribe is only the third gaming company to have received an investment-grade rating on its bonds and the transaction is one of the largest in the gaming industry.
"It shows that investors see the stability and future of the business."
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