| LONG-TERM DEBT |
7. LONG-TERM DEBT
At December 31, 2014 and 2013, long-term debt consists of the following (in thousands):
| |
|
2014
|
|
|
2013
|
|
|
Long-term debt, net of current portion:
|
|
|
|
|
|
|
|
First Term Loan, maturing June 29, 2016, variable interest rate which averaged 4.75% and 5.4% during 2014 and 2013
|
|
$ |
38,631 |
|
|
$ |
37,500 |
|
| |
|
|
|
|
|
|
|
|
|
Second Term Loan, maturing April 1, 2017, interest rate is fixed at 14.25% per annum
|
|
|
20,000 |
|
|
|
20,000 |
|
| |
|
|
|
|
|
|
|
|
|
Revolving Loan, maturing June 29, 2016, variable interest rate which averaged 4.75% in 2014
|
|
|
2,000 |
|
|
|
-- |
|
| |
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
(1,337 |
) |
|
|
-- |
|
| |
|
$ |
59,294 |
|
|
$ |
57,500 |
|
First and Second Lien Credit Facilities. On October 1, 2012, we acquired all of the equity membership interests in Silver Slipper Casino Venture LLC dba Silver Slipper Casino located in Bay St. Louis, Mississippi. The purchase price of approximately $69.3 million, exclusive of cash and working capital in the amounts of $6.4 million and $2.9 million, respectively, was funded by our First Lien Credit Facility and our Second Lien Credit Facility. The First Lien Credit Facility and Second Lien Credit Facility are secured by substantially all of our assets, and our wholly-owned subsidiaries guarantee our obligation under the agreements. The Second Lien Credit Facility is subordinate to the lien of the First Lien Credit Facility.
On June 29, 2012, we entered into the First Lien Credit Facility which, including the amendments described below, provided for a term loan in an amount up to $50.0 million and a revolving loan (“Revolving Loan”) in an amount up to $5.0 million. The First Lien Credit Facility has been amended as follows:
|
|
·
|
On August 26, 2013, we entered into the First Lien Amendment to:
|
|
|
¡
|
Increase the term loan portion by $10.0 million to $56.3 million;
|
|
|
|
Reduce the interest rate by one percent;
|
|
|
|
Extend the maturity date to June 29, 2016; and
|
|
|
|
Amend certain financial covenants.
|
|
|
·
|
On July 18, 2014, we entered into the First Lien 2nd Amendment effective as of June 30, 2014 to:
|
|
|
|
Revise certain financial ratio covenants as of June 30, 2014, and going forward through the term of the loan;
|
|
|
|
Extend the time period to March 31, 2015 for draws against the $10.0 million term loan associated with the hotel at the Silver Slipper Casino; and
|
|
|
|
Extend the payment terms to begin on April 1, 2015.
|
|
|
·
|
On January 9, 2015 we entered into the First Lien 3rd Amendment effective as of December 31, 2014 to:
|
|
|
|
Revise certain financial ratio covenants as of December 31, 2014, and going forward through the term of the loan;
|
|
|
|
Extend the time period to May 31, 2015 for draws against the $10.0 million term loan associated with the hotel at the Silver Slipper Casino; and
|
|
|
|
Extend the payment terms to begin on June 1, 2015.
|
On October 1, 2012, we entered into the Second Lien Credit Facility (including the amendments described below) with ABC Funding, LLC as administrative agent for a term loan in an amount up to $20.0 million.
On October 1, 2012, we closed on the acquisition of all of the equity membership interests in Silver Slipper Casino Venture LLC dba Silver Slipper Casino located in Bay St. Louis, Mississippi. The Second Lien Credit Facility has been amended as follows:
|
|
·
|
On August 26, 2013, we entered into the Second Lien Amendment to:
|
|
|
|
Revise certain financial ratio covenants.
|
|
|
·
|
On July 18, 2014, we entered into the Second Lien 2nd Amendment, to:
|
|
|
|
Revise certain financial ratio covenants as of June 30, 2014, and going forward through the term of the loan; and
|
|
|
|
Increase the interest rate by one percentage point to 14.25% for the remainder of the term of the loan.
|
|
|
·
|
On January 9, 2015, we entered into the Second Lien 3rd Amendment, which became effective December 31, 2014, to:
|
|
|
|
Revise certain financial ratio covenants as of December 31, 2014, and going forward through the term of the loan; and
|
|
|
|
Extend the maturity date to April 1, 2017.
|
As of December 31, 2014, we had drawn $1.1 million of the $10.0 million term loan under the First Lien Credit Facility. The remaining $8.9 million of funding availability under the term loan will be used for a portion of the construction costs of the 129-room hotel addition to the Silver Slipper Casino. The remaining construction costs will be funded from available cash and cash flow from operations. As of December 31, 2014, we had funded cash of $8.2 million of the estimated total project costs of $20 million (including capitalized interest) and we anticipate funding an additional $1.5 million in cash in 2015. Construction of the hotel is expected to be completed in two phases, with the 120 standard rooms opening in the second quarter of 2015, followed shortly thereafter by the remaining nine suites.
On March 24, 2014 we made a $2.0 million draw on our $5.0 million revolving loan under the First Lien Credit Facility. We currently have $3.0 million undrawn on the revolving loan.
We have elected to pay interest on the First Lien Credit Facility based on the greater of the elected London Interbank Offered Rate (“LIBOR”) rate or 1.0%, plus a margin rate. LIBOR rate elections can be made based on a 30-day, 60-day, 90-day or 180-day LIBOR, and margins are adjusted quarterly. As of December 31, 2014, the interest rate was 4.75% on the balance outstanding on the First Lien Credit Facility, based on the 1.0% minimum, plus a 3.75% margin. We pay interest on the Second Lien Credit Facility at the fixed rate of 14.25% per annum effective July 18, 2014. During 2013, we paid interest at a fixed rate of 13.25% per annum.
The First Lien Credit Facility and Second Lien Credit Facility contain customary negative covenants, including, but not limited to, restrictions on our and our subsidiaries’ ability to: incur indebtedness; grant liens; pay dividends and make other restricted payments; make investments; make fundamental changes; dispose of assets; and change the nature of our business. The First Lien Credit Facility and Second Lien Credit Facility require that we maintain specified financial covenants, including a total leverage ratio, a first lien leverage ratio, and a fixed charge coverage ratio, all of which measure Adjusted EBITDA (as defined in the agreements) against outstanding debt and fixed charges (as defined in the agreements). A capital expenditure ratio must also be maintained. The First Lien Credit Facility and Second Lien Credit Facility currently defines Adjusted EBITDA as net income (loss) plus (a) interest expense, (b) provisions for income taxes, and (c) depreciation and amortization, and further adjusted to eliminate the impact of certain items that are either non-cash items or are not indicative of ongoing operating performance such as (d) extraordinary gains and losses (including non-cash impairment charges), (e) non-cash stock compensation expense, (f) certain acquisition costs, (g) costs related to the Company’s S-1 registration statement in 2014, (h) board and management transition expenses, (i) joint venture net income, unless such net income has actually been received by the Company in the form of cash dividends or distributions. For purposes of our covenants, we also received pro forma credit for gaming tax reductions in Indiana in 2014 and ending with the first quarter of 2015.
The First Lien Credit Facility and the Second Lien Credit Facility maximum total leverage ratio and maximum first lien leverage ratio vary according to the applicable time period and the fixed charge coverage ratio remains constant, as indicated in the tables below:
|
First Lien Credit Facility
|
|
|
Applicable Period
|
|
Maximum
Total Leverage
Ratio
|
|
|
Maximum
First Lien Leverage
Ratio
|
|
|
Minimum
Fixed Charge
Coverage Ratio
|
|
|
June 30, 2014 through and including September 29, 2014
|
|
|
4.75 |
x |
|
|
3.50 |
x |
|
|
1.10 |
x |
|
September 30, 2014 through and including December 30, 2014
|
|
|
5.50 |
x |
|
|
3.50 |
x |
|
|
1.10 |
x |
|
December 31, 2014 through and including June 29, 2015
|
|
|
5.50 |
x |
|
|
4.00 |
x |
|
|
1.10 |
x |
|
June 30, 2015 through and including September 29, 2015
|
|
|
4.75 |
x |
|
|
3.50 |
x |
|
|
1.10 |
x |
|
September 30, 2015 through and including December 30, 2015
|
|
|
4.50 |
x |
|
|
3.25 |
x |
|
|
1.10 |
x |
|
December 31, 2015 through and including March 30, 2016
|
|
|
4.25 |
x |
|
|
3.00 |
x |
|
|
1.10 |
x |
|
March 31, 2016 and thereafter
|
|
|
4.25 |
x |
|
|
3.00 |
x |
|
|
1.10 |
x |
| |
|
|
|
|
|
|
|
|
|
|
Second Lien Credit Facility
|
|
|
Applicable Period
|
|
Maximum
Total Leverage
Ratio
|
|
|
Maximum
First Lien Leverage
Ratio
|
|
|
Minimum
Fixed Charge
Coverage Ratio
|
|
|
June 30, 2014 through and including September 29, 2014
|
|
|
5.00 |
x |
|
|
3.75 |
x |
|
|
1.00 |
x |
|
September 30, 2014 through and including December 30, 2014
|
|
|
5.75 |
x |
|
|
3.75 |
x |
|
|
1.00 |
x |
|
December 31, 2014 through and including March 30, 2015
|
|
|
5.75 |
x |
|
|
4.25 |
x |
|
|
1.00 |
x |
|
March 31, 2015 through and including June 29, 2015
|
|
|
5.75 |
x |
|
|
4.25 |
x |
|
|
1.00 |
x |
|
June 30, 2015 through and including September 29, 2015
|
|
|
5.00 |
x |
|
|
3.75 |
x |
|
|
1.00 |
x |
|
September 30, 2015 through and including December 30, 2015
|
|
|
4.75 |
x |
|
|
3.50 |
x |
|
|
1.00 |
x |
|
December 31, 2015 through and including March 30, 2016
|
|
|
4.50 |
x |
|
|
3.25 |
x |
|
|
1.00 |
x |
|
March 31, 2016 and thereafter
|
|
|
4.50 |
x |
|
|
3.25 |
x |
|
|
1.00 |
x |
We were in compliance with our covenants as of December 31, 2014, however, there can be no assurances that we will remain in compliance with all covenants in the future. The First Lien Credit Facility and Second Lien Credit Facility also include customary events of default, including, among other things: non-payment; breach of covenant; breach of representation or warranty; cross-default under certain other indebtedness or guarantees; commencement of insolvency proceedings; inability to pay debts; entry of certain material judgments against us or our subsidiaries; occurrence of certain ERISA events; re-purchase of our own stock and certain changes of control. A breach of a covenant or other events of default could cause the loans to be immediately due and payable, terminate commitments for additional loan funds, or the lenders could exercise any other remedy available under the First Lien Credit Facility or Second Lien Credit Facility or by law. If a breach of covenants or other event of default were to occur, we would seek modifications to covenants or a temporary waiver or waivers from the First Lien Credit Facility and Second Lien Credit Facility lenders. No assurance can be given that we would be successful in obtaining such modifications.
Our next scheduled principal payment is due October 1, 2015. Additionally, quarterly payments of $0.25 million are scheduled to begin June 1, 2015 on the construction portion of the term loan.
We are required to make prepayments under the First Lien Credit Facility, under certain conditions defined in the agreement, in addition to the scheduled principal installments for any fiscal year ending December 31, 2012 or thereafter. Prepayment penalties will be assessed in the event that prepayments are made on the Second Lien Credit Facility prior to the discharge of the First Lien Credit Facility.
Scheduled maturities of long-term debt as of the most recent balance sheet presented are as follows, for the annual periods ended December 31 (in thousands):
| |
|
|
|
|
2015
|
|
$ |
1,337 |
|
|
2016
|
|
|
39,294 |
|
|
2017
|
|
|
20,000 |
|
| |
|
$ |
60,631 |
|
|