GAMING AMENDMENTS

As a follow-up to our posts on gaming debt restructurings and defaults, we are providing a list of recent credit facility amendments in the sector below. With the exception of MGM’s 2nd amendment, the cost of obtaining these amendments appears reasonably low. In other words, banks seem willing to be flexible. MGM’s 2nd amendment only bought the company 2 months yet cost them 100 bps and was pretty restrictive.

On the other hand, ASCA’s amendment was particularly attractive for the company. This is probably the best comp when considering PNK in its eventual negotiations for a higher leverage ratio in its covenant. While PNK doesn’t appear to have an issue currently, the company may brush up against its maximum ratio in 2010.


Summary of recent gaming credit facility amendments:
  • MGM MIRAGE, Amendment 1

    • On September 30, 2008, MGM entered into an amendment to its Credit Agreement.

    • Amendment increased the maximum total leverage ratio to 7.5x beginning in 4Q08 which will remain in effect through 4Q09, with step-downs thereafter.

    • The amendment also revised limitations on secured indebtedness

    • Drawn pricing on leverage above 5.0x was increased moderately
  • MGM MIRAGE, Amendment 2

    • On March 16, 2009, MGM entered into a second amendment to its Credit Agreement.

    • Amendment provided a waiver of non-compliance with the total leverage ratio covenant or interest charge coverage ratio covenant for quarter ended March 31, 2009 quarter waived through May 15, 2009.

    • 300MM repayment of R/C funded balance, which may not be re-drawn

    • 100 bps increase in drawn pricing and establishes a base rate floor of 4.0% and a LIBOR floor of 2.0%

    • Additionally the Amendment restricts MGM and its subsidiaries from:
    - Paying dividends or distributions on, or repurchase equity,
    - prepay outstanding indebtedness
    - make certain investments, including investments in CityCenter above the stated thresholds or if Infinity World Development Corp. fails to make its corresponding investments, or if any obligations under CityCenter’s senior credit facility have been accelerated
    - incur additional debt,
    - incur liens on assets,
    - merge or consolidate with another company, dissolve or liquidate
    - dispose of material assets,
    - create unrestricted subsidiaries and
    - prepay trade payables.
  • WYNN RESORTS

    • On November 13, 2008, Wynn Resorts entered into an amendment to its Credit Agreement.

    • Amendment allows Wynn to make a debt buyback of up to $650 million of loans outstanding.

    • Amendment contained the following relevant provisions:
    – Loans acquired under debt buyback are cancelled and retired immediately upon closing;
    – Loans cancelled and retired are no longer deemed outstanding under Credit Agreement;
    – Wynn has the option to conduct Dutch Auction for loans outstanding.

    • Wynn successfully purchased $625 million of loans at a discounted price of 93.375%, resulting in retirement of $625 million of principal for payment of $596 million on November 26, 2008.
  • AMERISTAR CASINOS

    • On March 13, 2009, Ameristar entered into a third amendment to its Credit Agreement.

    • Amendment increased the maximum permitted leverage ratio and senior leverage ratio beginning the quarter ended September 30, 2008 by 25 to 50bps through maturity

    • Increased the applicable margin by 1.25%

    • Added a new covenant where TTM EBITDA needed to exceed $275MM

    • Existing $500MM subordinated debt limitation was eliminated

    • Amount of Cumulative Capital Expenditures permitted increased to $1.1BN from $1.0BN

    • Permitted Annual Dividends payments decreased from $40MM to $30MM

    • Cumulative amount of stock repurchases permitted decreased from $125MM to $50MM (plus any amount available under the dividend basket)

    • Reclassified the maturing R/C due Nov 2010 as non-extending loan commitments and permitted to request in the future to convert their Non-Extending Revolving loan Commitment to a new Tranche of Extending Revolving Loan Commitments that mature on August 10, 2012 (subject to quarterly $12MM of principal amortization commencing on Dec 2010)
    – pricing would be negotiated at the time of the extension request, but amount is non-negotiable

    • The existing Incremental Commitment Facility was expanded to permit ASCA in the future to obtain Incremental Term Loans that mature on or after 11/10/2012 in order to reduce the Non-Extending Revolving Loan Commitments (Terming out debt permission)

    • $9MM on-time fee paid to lenders