Introductory Note
As previously disclosed, in September 2018, MGE Niagara Entertainment Inc. (“MGE Niagara”), an indirect wholly-owned subsidiary of the Mohegan Tribal Gaming Authority d/b/a Mohegan Gaming & Entertainment (“MGE”), was selected by the Ontario Lottery and Gaming Corporation (the “OLG”) to be the service provider for Fallsview Casino Resort, Casino Niagara and the future5,000-seat Niagara Falls Entertainment Centre, all in Niagara Falls, Canada (the “Niagara Gaming Bundle”). In connection therewith, MGE Niagara entered into a Transition and Asset Purchase Agreement (the “TAPA”) with the OLG and the Ontario Gaming Assets Corporation (the “OGAC”). Pursuant to the terms and subject to the conditions of the TAPA, MGE Niagara agreed to acquire certain assets associated with the Niagara Gaming Bundle and to perform certain transition activities prior to the closing of such acquisition in order to facilitate a transition of the operational responsibilities from the current operator to MGE Niagara.
| Item 1.01 | Entry into Definitive Material Agreement. |
On June 10, 2019, MGE Niagara entered into a Credit Agreement with, among others, Bank of Montreal, as administrative agent, and the lenders party thereto (the “Credit Agreement”), providing for senior secured credit facilities in the aggregate principal amount of 290,000,000 Canadian dollars (the “Credit Facilities”), comprised of a revolving credit facility in the amount of 190,000,000 Canadian dollars (the “Revolving Facility”) and a term loan facility in the amount of 100,000,000 Canadian dollars (the “Term Facility”). MGE Niagara is an “unrestricted subsidiary” under MGE’s existing credit facilities and indenture and the Credit Facilities are non-recourse to MGE and its “restricted subsidiaries” thereunder.
The Revolving Facility provides for (i) borrowings and bankers’ acceptances denominated in Canadian dollars or U.S. dollars and up to 20 million Canadian-dollar equivalent of borrowings in the form of swingline loans and (ii) the issuance of up to 100 million Canadian dollars of letters of credit. Borrowings under the Term Facility are denominated in Canadian dollars. On June 11, 2019 (the “Closing Date”), MGE Niagara borrowed all 100 million aggregate principal amount of Canadian dollar term loans under the Term Facility and caused a Canadian dollar letter of credit to be issued to the OLG under the Revolving Facility, in each case for the purposes of funding the Acquisition (as defined below) and the transactions relating thereto.
The Credit Facilities mature on June 10, 2024. The Term Facility will amortize in equal quarterly installments in an aggregate quarterly amount equal to 1.25% of the initial principal amount of the Term Facility beginning on September 30, 2019.
The Credit Agreement contains customary covenants applicable to MGE Niagara, including covenants governing: incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, asset sales, acquisitions and investments, affiliate transactions and fundamental changes. Additionally, the Credit Agreement includes financial maintenance covenants pertaining to total leverage and fixed charge coverage. The Credit Agreement also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations.
Borrowings under the Credit Facilities will bear interest as follows: (i) for Prime Rate Loans (as defined in the Credit Agreement) denominated in Canadian dollars, the applicable prime rate (subject to a 0.00% floor) plus a total leverage-based margin of 100 to 200 basis points, (ii) for USBR Loans (as defined in the Credit Agreement) denominated in U.S. dollars, the applicable base rate plus a total leverage-based margin of 100 to 200 basis points, (iii) for LIBOR Loans (as defined in the Credit Agreement) denominated in U.S. dollars, the applicable LIBOR rate (subject to a 0.00% floor) plus a total leverage-based margin of 250 to 350 basis points and (iv) for Bankers’ Acceptances (as defined in the Credit Agreement) denominated in Canadian dollars, based on a Discount Rate (as defined in the Credit Agreement) (subject to a 0.00% floor) and a total leverage-based margin of 250 to 350 basis points. MGE Niagara is also required to pay a total leverage-based undrawn commitment fee on the Revolving Facility of between 50 and 70 basis points.
The Credit Facilities are secured by, among other things, substantially all of the properties and assets of MGE Niagara, subject to certain customary exceptions, as well as by a pledge of (i) all of the issued and outstanding shares of MGE Niagara held by its direct parent and (ii) the convertible debenture held by the Convertible Debenture Holder (as defined below).
Proceeds from borrowings under the Revolving Facility may be used by MGE Niagara for general corporate purposes, including working capital, capital expenditures and the issuance of letters of credit.
The foregoing summary of the Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Credit Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
