|9 Months Ended|
Sep. 30, 2019
|Debt Disclosure [Abstract]|
5. LONG-TERM DEBT
Long-term debt, related discounts and issuance costs consist of the following:
Senior Secured Notes. On May 10, 2019, the Company entered into a Notes Purchase Agreement under which it agreed to sell an additional $10 million in aggregate principal amount of its senior secured notes due 2024 (the “Incremental Notes”) to qualified institutional buyers. The Company has used or expects to use the proceeds from the Incremental Notes to (i) provide additional liquidity for the construction of the Phase One parking garage at Bronco Billy’s Casino and Hotel and other capital expenditures; (ii) pay fees and expenses incurred in connection with the Incremental Notes offering; and (iii) provide funds for general corporate purposes. The Incremental Notes were issued on the same day at a price of 99.01% of their face value (a 0.99% original issue discount) pursuant to the indenture (as amended and supplemented, the “Indenture”), dated as of February 2, 2018. The Indenture governs the $100 million of senior secured notes due 2024 (the “Original Notes”) previously issued by the Company on February 2, 2018. The Incremental Notes have the same maturity date and interest rate as the Original Notes, are part of the same series as the Original Notes, and are treated as a single class together with the Original Notes (collectively, the “Notes”) for all purposes under the Indenture.
Also, on May 10, 2019, the Company executed the Second Amendment to the Indenture dated as of May 10, 2019, which (i) increased the principal amount required to be redeemed each quarter from $250,000 to $275,000 in total aggregate of the Notes, beginning June 30, 2019; (ii) permitted liens incurred in connection with the Cripple Creek Expansion Project; and (iii) changed the total leverage ratio as described in the Indenture and below under “Covenants.”
The Notes bear interest at the greater of the three-month London Interbank Offered Rate (“LIBOR”) or 1.0%, plus a margin rate of 7.0%. Interest on the Notes is payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year until the Notes mature on February 2, 2024. On each interest payment date, the Company is required to make principal payments of $275,000 with a balloon payment for the remaining $103.5 million due upon maturity.
The Company may redeem all or a part of the Notes plus the premium as set forth below, plus accrued and applicable unpaid interest:
The Notes are collateralized by substantially all of the Company’s assets and are guaranteed by all of its material subsidiaries.
Interest Rate Cap Agreement. The Company maintains an Interest Rate Cap from Capital One, N.A. (“Capital One”) in order to manage expected interest rate increases on the Notes. The agreement is for a notional amount of $50 million and expires on March 31, 2021. The Interest Rate Cap has a strike rate of 3.00% and resets every three months at the end of March, June, September, and December. If the three-month LIBOR exceeds the strike rate at the end of any covered period, the Company will receive cash payments from Capital One. For details regarding fair value measurements, see Note 2.
Covenants. The Indenture governing the Notes contains customary representations and warranties, events of default, and positive and negative covenants, including financial covenants. The Company is required to maintain a total leverage ratio, which measures Consolidated EBITDA (as defined in the Indenture) against outstanding debt. The Company is allowed to deduct up to $15 million of its cash and equivalents (beyond estimated cash utilized in daily operations) in calculating the numerator of such ratio. For the remainder of this year, the total leverage ratio maximum was adjusted to 6.00x as a result of the issuance of the Incremental Notes.
The Company was in compliance with its covenants as of September 30, 2019. However, there can be no assurances that the Company will remain in compliance with all covenants in the future and/or that it would be successful in obtaining waivers or modifications in the event of noncompliance.
The entire disclosure for long-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef