MTGA and Downs Racing, L.P. Announce Developments at Mohegan Sun at Pocono Downs
The Mohegan Tribal Gaming Authority, or the Authority, the operator of a gaming and entertainment complex located near Uncasville, Connecticut, known as Mohegan Sun, and its subsidiary Downs Racing, L.P., or Downs Racing, the operator of a harness racetrack located in Plains Township, Pennsylvania, known as Mohegan Sun at Pocono Downs, announced today several developments relating to Mohegan Sun at Pocono Downs.
As previously announced, the Authority and Downs Racing have been pursuing aggressively various options to address the adverse economic impact on their development plans created by the Pennsylvania Department of Revenue’s unfavorable regulatory interpretation of the local share tax assessment on slot revenues and the numerous delays that have occurred in the process for issuing gaming licenses in Pennsylvania.
On August 7, 2006, the Authority and PNGI Pocono, Inc., a subsidiary of Penn National Gaming, Inc., or Penn National, entered into an amendment of the original purchase agreement with subsidiaries of Penn National, pursuant to which the Authority acquired the Pocono Downs entities. Pursuant to the amendment, the Authority will receive an aggregate refund of $30.0 million of the original purchase price for the Pocono Downs entities, payable in five installments of $7.0 million, $7.0 million, $6.5 million, $6.0 million and $3.5 million. The installments are payable upon each of the first five anniversaries of the opening date of slot machine operations at Mohegan Sun at Pocono Downs. Also, pursuant to the amendment, the seller and the Authority agreed to modify certain provisions of the original purchase agreement, including the elimination of the Authority’s post-closing termination rights with respect to the transaction and the elimination of the seller’s indemnification obligations relating to environmental issues and certain other post-closing claims. Penn National continues to guaranty the performance of its subsidiaries under the purchase agreement, as amended.
In addition, while no official action has been taken yet, based upon discussions between our counsel and counsel for various local officials, individual conversations which we have had with Luzerne County Commissioners Greg Skrepenak and Todd Vonderheid and public officials of Plains Township and the City of Wilkes-Barre, the Authority and Downs Racing also believe that Downs Racing will obtain, from available grant monies, some additional relief through the reimbursement and/or payment of infrastructure costs associated with Mohegan Sun at Pocono Downs. Within the next week, Downs Racing plans to submit to various governmental entities, for formal consideration, an intergovernmental agreement that would provide for participating municipalities to prioritize the use of various state funds of approximately $15,000,000 earmarked for economic development in Luzerne County for the development of Mohegan Sun at Pocono Downs. Downs Racing anticipates that various public meetings will be scheduled shortly by necessary government bodies to commence the legal process for implementing such an agreement.
Robert Soper, the Chief Executive Officer of Downs Racing, said, “The local support we’ve been developing for local infrastructure grants, in conjunction with the Authority’s agreement with Penn National, has enabled us to believe that the Authority can receive an adequate return on its investment in Pennsylvania. The community and its elected leaders have indicated that they strongly support our project and they understand the economic benefit which is expected to be generated from our total investment of up to $200,000,000, including the creation of 800 to 1000 new jobs.” Soper continued, “In particular, Commissioners Skrepenak and Vonderheid have demonstrated exemplary leadership and vision and have continued to encourage our investment in Luzerne County. We also are grateful for the support and encouragement of leaders from Plains Township and the City of Wilkes-Barre and look forward to continuing with our efforts to develop a first-class facility at Mohegan Sun at Pocono Downs.”
As a result of these developments, Downs Racing is pleased to announce that it has re-scheduled a two-day career fair to take place on September 12th and 13th. The career fair will occur at the Wachovia Arena and specific details about the event will be announced soon. Downs Racing anticipates hiring approximately 400 new positions in connection with the planned opening of a temporary slot machine facility at Mohegan Sun at Pocono Downs, and the career fair will serve as an opportunity to inform the community of the types of positions available and provide potential applicants an opportunity to show interest in joining the organization.
About the Authority
The Authority is an instrumentality of the Mohegan Tribe of Indians of Connecticut, a federally recognized Indian tribe with an approximately 507-acre reservation situated in southeastern Connecticut, adjacent to Uncasville, Connecticut. The Authority has been granted the exclusive power to conduct and regulate gaming activities on the existing reservation of the Tribe, including the operation of Mohegan Sun, a gaming and entertainment complex that is situated on a 240-acre site on the Tribe’s reservation and, through its subsidiary, Downs Racing, owns and operates Mohegan Sun at Pocono Downs, a harness racetrack located in Plains Township, Pennsylvania and five OTW facilities located elsewhere in Pennsylvania. The Tribe’s gaming operation at Mohegan Sun is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Mohegan Sun currently operates in an approximately 3.0 million square foot facility, which includes the Casino of the Earth, Casino of the Sky, the Shops at Mohegan Sun, a 10,000-seat Arena, a 350-seat Cabaret, meeting and convention space and an approximately 1,200-room luxury hotel. More information about the Authority and its properties can be obtained by visiting http://www.mtga.com.
Special Note Regarding Forward-Looking Statements
Some information included in this press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include information relating to business development activities, as well as capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and increased competition. These statements can sometimes be identified by the use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “believe” or “intend” and similar expressions. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of the Authority. These risks and uncertainties include, but are not limited to, those relating to increased competition (including the legalization or expansion of gaming in New England, New York, New Jersey and Pennsylvania), the financial performance of Mohegan Sun, Pocono Downs and the OTW facilities, dependence on existing management, potential adverse changes in local, regional, national or global economic climates, the Authority’s leverage and ability to meet its debt service obligations, changes in federal or state tax laws or the administration of such laws, changes in gaming laws or regulations (including the limitation, denial or suspension of licenses required under gaming laws and regulations), and the continued availability of financing. Additional information concerning potential factors that could affect the Authority’s financial results is included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2005, as well as its other reports and filings with the SEC. The forward-looking statements included in this press release are made only as of the date of this release. The Authority does not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances. The Authority cannot assure you that projected results or events will be achieved or will occur.
Press Release Mohegan Tribal Gaming Authority Uncasville, Connecticut August 9, 2006
Mitchell Grossinger Etess
Chief Executive Officer
Mohegan Tribal Gaming Authority
Robert J. Soper
President and Chief Executive Officer
Mohegan Sun at Pocono Downs