No. of Recommendations: 2
If you have not seen it yet, RR issued a press release today regarding their exchange offer.

I called the number to get the actual exchange offer document and have extracted the following from it:

- If tendering under $50K face, you will get new notes with the same face value paying 9% with a Nov 1,2018 maturity. You also get caught up on unpaid interest up to Nov 1, 2011. New notes accrue starting Nov 1, 2011. These notes are senior to any other current or future debts.
- If tendering $50K or greater, you can elect to have a mix of 9% taxable or 7.5% federal tax free (muni)with the same 2018 maturity. The face amount is reduced by $18.5M Principal Payment that will be spread across these notes. The Principal Payment does not apply if you tender less that $50K.
- Notes can be repurchased starting in 2015 at a premium to face (fat chance!)
- Interest is paid May 1 and Nov 1 (as before).
- At each intest payout RR is required to repurchase bonds at par using their "Excess Cash Flow" which I was unable to completely sort out. But, I believe it is on the order of $20M/yr (from 2010 filing). These repurchases are prorated across the taxable and non-tax issues and are done at par but it is unclear how this will occur across the entire population of notes. I suspect we will all have some repurchased at each interest payout date.
- Virtually all of the covenants in the current issue are eliminated.
- They believe the exchange will not be a taxable event. But, we need to be aware that the bi-annual repurchase of notes are likely to be.
- They are also issuing $27.6M of subordinate 6.5% 2019 notes in a private placement to Merrill to retire a bank loan the tribe has.

While not idea, I think there are some positives here.
- If the $200M current notes end up being $100M at 9% and $81.5M at 7.5% the annual interest paid in the first year declines by over $4M which will should show up in Excess Cash Flow and more repurchase of notes.
- As more shares are repurchased each period, the Excess Cash should continue to increase such that the notes will be totally retired prior to maturity.

So, I am encouraged that we will ultimately be made whole on this and be paid 9% on the declining balance in the interim.

Please correct any of the above if you find an error in my research.

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