Seneca Gaming Corp. said Monday that it is setting up a restricted internal reserve account with money to start repaying some of the casino operator’s more-costly bond debt.

The Niagara Falls-based casino operating subsidiary of the Seneca Nation of Indians said the move is part of its efforts to “strategically position itself to meet the economic and competitive challenges currently facing the gaming industry.”

Seneca Gaming does not plan to repay any of the bonds early, but will use the funds in the reserve account to reduce its overall debt when it refinances the bonds, a spokesman said.

Repaying some of the debt at that time would reduce the company’s debt load and pare its interest expenses.

“The economic lessons of the past couple years for [Seneca Gaming] and the rest of the gaming industry are clear,” said Richard K. Nephew, Seneca Gaming board treasurer. “The company’s future success depends upon prudent use of leverage, maintaining a strong balance sheet and targeted reinvestment in our business.”

The fund will be used to “retire” some of the 7.25 percent senior notes that Seneca Gaming sold in 2004 and 2005, when it raised $500 million. The company will use earnings and free cash flow to fund the repayment.

“Establishing this fund is an extension of our focus on practical management and responsible operations,” said Cathy Walker, chief operating officer.

The money raised from the original bond sale helped finance the company’s expansion, enabling it to complete the 26-story hotel tower at Seneca Niagara Casino & Hotel in Niagara Falls, the permanent Seneca Allegany Casino & Hotel operation in Salamanca and the temporary Seneca Buffalo Creek Casino. That money has all been spent.

Construction of the permanent Buffalo facility, as well as expansion projects in Niagara Falls and Salamanca, has been suspended because of the economic decline. But the Senecas still are spending $9 million to expand Buffalo Creek, adding 5,300 square feet of gambling space and bringing the total number of slot machines to 445.

In December, the Senecas had extended their $50 million senior secured revolving line of credit with KeyBank at the London Inter-bank Offered Rate plus 1.25 percentage points.

That rate, originally negotiated in June 2008, currently equals about 1.5 percent, about a fifth of the interest rate on the bond debt.

The maturity date of the credit line also was extended through the end of next year.

The credit line provides emergency liquidity, but officials previously said they don’t expect to use it.