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Native American Gaming Bonds

Native American tribes have been one of the most widely underserved communities in the capital markets. Historically, the barriers that affect a tribe’s ability to enter this market include IRS regulations, inability of credit markets to grasp and value the risks associated with sovereign immunity, and the lack of consistent revenue-generating enterprises that are required to support a financing transaction. However, recent growth in tribal enterprise developments; a need for access to longer-term, attractively priced debt; and an increased demand from institutional buyers has helped to overcome these barriers and has spurred the growth of tribal bond issues in the capital markets. Currently, tribal lending represents a multibillion-dollar industry that includes nearly all of the major money-center banks, as well as many of the largest regional banks. From a capital market’s perspective, investment in tribal bond issues also represents a multibillion-dollar industry and spans the investor spectrum from high yield mutual funds to insurance companies and hedge funds to municipal money managers.

The growth in lending and investing to tribal entities has closely followed the growth in tribal gaming, which began to flourish after passage of the Indian Gaming Regulatory Act of 1988 (IGRA). IGRA set out the federal guidelines by which federally recognized Indian tribes could develop commercial gaming enterprises on tribal trust lands. IGRA required states ...