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COMMITMENTS AND CONTINGENCIES
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3 Months Ended |
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Mar. 31, 2014
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| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES |
8. COMMITMENTS AND CONTINGENCIES
Fitz Tunica Casino & Hotel
On March 21, 2014, we entered into a definitive agreement with The Majestic Star Casino LLC ("Majestic Star") to acquire all of the outstanding membership interests of the entity operating Fitz Tunica Casino & Hotel ("Majestic Mississippi, LLC"), located in Tunica, Mississippi, for a purchase price of $62.0 million. The closing of the agreement is subject to the completion of financing, licensing, and other customary conditions. On May 7, 2014 we informed Majestic Star of our financing efforts and our belief that we will not likely be successful in obtaining financing for the purchase of Majestic Mississippi, LLC. As a result, we have requested Majestic Star to consider termination of the agreement.
Silver Slipper Casino Hotel construction
On August 26, 2013, the Silver Slipper Casino entered into an agreement with WHD Silver Slipper, LLC related to construction of the six-story, 142-room Silver Slipper Casino Hotel (the “Construction Agreement”) being built between the south side of the casino and the waterfront, with rooms featuring views of the bay. We have commenced construction of the Silver Slipper Casino Hotel, which is scheduled for completion in late 2014 or early 2015 and is budgeted to cost approximately $17.7 million. The progress on the Silver Slipper Casino Hotel has been slower than expected as we encountered adverse soil conditions and adverse weather which may extend the opening of the hotel to early 2015. In connection with the financing of the Silver Slipper Casino Hotel, on August 26, 2013, we entered into the First Lien Amendment and the Second Lien Amendment which amended certain provisions of these agreements. The First Lien Amendment modifications included a $10.0 million increase to the term loan portion of the First Lien Credit Agreement to $56.3 million, a 1% lower interest rate and an extended maturity date to June 29, 2016. The $10.0 million term loan under the First Lien Credit Agreement remains undrawn, but subject to covenants and other terms of the First Lien Credit Agreement. At March 31, 2014 we exceeded the allowable total leverage ratio and the first lien leverage ratios for both of our credit agreements. We received waivers for compliance with these ratios at March 31, 2014 from our Creditors. If we are not in compliance with our covenants at June 30, 2014, and we are not able to renegotiate the terms of our First Lien and Second Lien Credit Agreements, we may be prevented from drawing against the $10.0 million term loan. There can be no assurances that we will be in compliance with our covenants at June 30, 2014 or periods subsequent. The term loan is needed to complete construction of the Silver Slipper Casino Hotel. As of March 31, 2014, we funded $3.6 million in construction and financing costs for the Silver Slipper Casino Hotel and we anticipate funding an additional $4.1 million in cash before the end of 2014. In 2014, we capitalized $0.08 million in interest related to the construction of the Silver Slipper Casino Hotel.
Keeneland Association, Inc.
We, together with Keeneland Association, Inc., are currently pursuing potential gaming opportunities in Kentucky, including the installation of instant racing machines at racetrack properties. The installation of instant racing machines at racetrack properties in Kentucky has been challenged by opponents of the instant racing machines who filed an action alleging that the machines are unlawful gambling. The Kentucky Court of Appeals had vacated the lower court’s decision that had upheld regulations adopted by the Kentucky Horse Racing Commission authorizing the use of instant racing machines by race tracks in Kentucky, and the Kentucky Horse Racing Commission and others, including Keeneland Association, Inc., appealed the vacation of the lower court’s decision to the Kentucky Supreme Court. On February 20, 2014, the Kentucky Supreme Court held, among other matters, that the Kentucky Horse Racing Commission acted in its regulatory authority when it licensed the operation of pari-mutuel wagering on instant racing, also known as historical horse racing, but remanded the matter to the Circuit Court to determine if instant racing constitutes a pari-mutuel form of wagering authorized by Kentucky law.
On February 26, 2014, we entered into an exclusivity agreement with Keeneland Association, Inc. to own, manage, and operate instant racing and, if authorized, traditional casino gaming at race tracks in Kentucky, subject to completion of definitive documents for each opportunity. In addition, we and Keeneland Association, Inc. have a letter of intent that provides for an exclusive option to purchase the Thunder Ridge Raceway in Prestonsburg, Kentucky. The purchase will be subject to the completion of definitive documentation and to the approval of the Kentucky Horse Racing Commission, including the approval to transfer the racing license to a to-be-constructed quarter horse racetrack near Corbin, Kentucky to be owned 75% by us and 25% by Keeneland Association, Inc.
Other items
We are party to a number of pending legal proceedings which occurred in the normal course of business. Management does not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material effect on our financial position, cash flows or results of operations.
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