Tribes stand to accumulate about $400m in new and refinanced debt in 25 contracts reviewed this year by the National Indian Gaming Commission, according to NIGC associate general counsel Michael Gross.

Speaking Wednesday to the Native American Finance Officers Association in Jersey City, N.J., Gross said he told Secretary of the Interior Ken Salazar last week that the most difficult issue confronting the NIGC general counsel’s office is “this question of management in restructuring debt.”

The Indian Gaming Regulatory Act of 1988 (IGRA) requires tribes, not their creditors, to run Indian casinos.

But the lingering impact of the Great Recession is forcing more gambling tribes to restructure contracts, and it’s becoming harder to tell if tribes are retaining management authority, Gross said.

“If I lend you money, that sure doesn’t look like a management contract. But if you default and I put my managers in, it starts to look an awful lot like a management contract,” Gross said.

Gross urged tribal officials to check with the NIGC before agreeing to restructure debt in contracts adding that IGRA also may prohibit a gaming tribe from filing for bankruptcy.

“If you file bankruptcy, your property becomes the estate of the bankruptcy court; you’re no longer the owner. That would seem to me to directly conflict with the Indian Gaming Regulatory Act,” Gross said.

Gross said he hopes the bankruptcy question never has to be answered, but his comments echoed a growing concern about the sputtering economy among many gaming officials this week at the 28th annual NAFOA conference.

Brad Peterson, executive vice president of the gaming division of Wells Fargo in Las Vegas, said the industry is finally realizing that an economic recovery is going to take longer than expected.

“I think there is a general view that, as the economy recovers and as the consumer starts to spend with more comfort and more confidence, the first dollar they pull out of their pocket might not be a gaming dollar. They might need new tires,” Peterson said.

But the worst of the Great Recession appears to be over and even though banks have tightened guidelines for Indian gaming projects, there is still enough money available to fund about 95 percent of tribal requests, Peterson said.

Peterson also said he’s not sure if banks will ever be as willing to finance Indian casinos as they were before the Great Recession.

“We were creeping toward the irrational with some of the deals being made in 2005 and 2006,” Peterson said. “Now, I think we are working toward a rational equilibrium.”

After a 10-year effort, the Gun Lake Tribal Gaming Authority plans to open a casino near Grand Rapids, Mich. in February.

John Shagonaby, the authority’s chief executive officer, said the effort made him feel like “a captain in a battle.”

To obtain financing, Shagonaby's tribe had to scale down the casino from a $350m facility with 2,500 slot machines to a $165m facility with 1,400 slot machines.

Derrick Watchman, chief financial officer of the Navajo tribe, said the tribe’s $50m casino with about 750 slot machines in Gallup, N.M. is about half the size it was originally intended to be.

The tribe decided to finance the project through its own institutions after mainstream banks refused to issue a loan without conditions that infringed on Navajo sovereignty, Watchman said.

Reza Akhavi, a director at Deutsche Bank Securities Inc. in New York City, said the recession has made banks more demanding in reviewing loan applications for casino projects.

“A bit more scrutiny and a lot more work has to be done,” Akhavi said.