| Loans and Notes Payable | 7. Loans and Notes Payable
Loans and notes payable consist of the following:
June 30, 2015 December 31, 2014
Senior Construction Facility $
— $ 150,000,000
Mesa Credit Facility (net of unamortized discount of
$4,026,465) 158,473,535
—
Junior Construction Facility 400,000,000 398,000,000
Revolving Credit Facility
— 4,000,000
Mesa Revolving Credit Facility 22,500,000
—
Total loans payable 580,973,535 552,000,000
Notes payable 8,173,952 10,463,604
Total loans and notes payable 589,147,487 562,463,604
Less: current portion (4,086,976 ) (4,330,355 )
Total long term loans and notes payable $ 585,060,511 $ 558,133,249
Senior Construction Facility
On May 2, 2012, the Company secured the Senior Construction
Facility and entered into an escrow and security agreement (the
“Escrow Agreement”) with KeyCorp. The Company paid a
closing fee equal to 5.00% of the stated principal amount of the
Senior Construction Facility totaling $15,000,000, which has been
capitalized as deferred financing costs in the accompanying
condensed consolidated balance sheets. The net proceeds of the
Senior Construction Facility of $285,000,000 were deposited into an
escrow account (the “Escrow Account”) administered by
KeyCorp to be released upon the Company meeting certain conditions,
including securing a minimum of $115,000,000 through the Junior
Construction Facility by November 2, 2012, with an option to
extend this date for an additional period of three months. On
November 1, 2012, the Company exercised its extension option
and deposited $9,966,667 into the Escrow Account representing
interest due on the Senior Construction Facility through
February 3, 2013.
On January 31, 2013, the Company entered into an amendment to
the Senior Construction Facility which provided, among other
things, that (i) the Senior Construction Facility could be
reduced by up to $150,000,000; (ii) the Company could continue
to raise the Junior Construction Facility up to maximum amount of
$300,000,000 until February 2014, subject to a $150,000,000
reduction of the Senior Construction Facility; (iii) the
renovation of the Property could commence in advance of the release
of the Senior Construction Facility proceeds from the Escrow
Account; and (iv) the Company could extend the date by which
it is required to meet the conditions to release the Senior
Construction Facility proceeds from escrow for two additional
periods of three months each. On February 4, 2013, the Company
exercised its first extension option under the amended facility and
deposited $9,750,000 into the Escrow Account representing interest
due on the Senior Construction Facility through May 2, 2013.
On May 1, 2013, the Company exercised its second extension
option under the amended facility and deposited $9,858,333 into the
Escrow Account representing interest due on the Senior Construction
Facility through August 1, 2013.
On February 14, 2013, Stockbridge and SBE made capital
contributions to the Company totaling $24,361,631, which were
deposited into an escrow account administered by KeyCorp. These
funds are Qualified Additional Financing (as defined in the Senior
Construction Facility loan documents) and were used to finance
construction of the Renovation Project for the first six months of
construction, while the Junior Construction Facility fundraising
continued. On the same date, the Company commenced construction of
the Renovation Project.
On July 25, 2013, the Company entered into a second amendment
to the Senior Construction Facility, which raised the maximum
amount of the Junior Construction Facility from $300,000,000 to
$400,000,000, provided that, no later than February 2, 2014,
the principal amount of the Senior Construction Facility was
reduced to $150,000,000, subject to the following conditions:
(i) to the extent that the aggregate amount of the Junior
Credit Facility does not exceed $125,000,000, no reduction of the
Senior Construction Facility is required; (ii) to the extent
that the aggregate amount of the Junior Construction Facility
exceeds $125,000,000 but does not exceed $175,000,000, the Senior
Construction Facility will be reduced by $50,000,000; (iii) to
the extent that the aggregate amount of the Junior Construction
Facility exceeds $175,000,000 but does not exceed $200,000,000, no
reduction of the Senior Construction Facility is required;
(iv) to the extent that the aggregate amount of the Junior
Construction Facility exceeds $200,000,000 but does not exceed
$300,000,000, the Senior Construction Facility will be reduced on a
dollar-for-dollar basis; and (v) to the extent that the
aggregate amount of the Junior Construction Facility exceeds
$300,000,000 but does not exceed $400,000,000, no reduction of the
Senior Construction Facility is required.
The second amendment to the Senior Construction Facility also
provided, among other things, that (i) interest payments are
to be made monthly in advance after August 2, 2013 up to and
including the date of First Disbursement (as defined in the Senior
Construction Facility loan documents); (ii) certain conditions
required to be met to release the Escrow Account were revised;
(iii) certain conditions required to be met in order for the
Company to draw down on the Senior Construction Facility were
implemented; and (iv) the Company could utilize deposits made
to the Escrow Account or proceeds from the Junior Construction
Facility to prepay the Senior Construction Facility, pursuant to
the prepayment conditions described in the preceding paragraph.
On August 2, 2013, the conditions required to release the
Escrow Account were met, and the proceeds were released. Of the
proceeds from the Escrow Account, $50,000,000 was utilized to pay
down the Senior Construction Facility and $1,500,000 was utilized
to pay a prepayment premium equal to 3.00% of the principal
repayment of the Senior Construction Facility. Prepaid interest
totaling $1,847,685 was transferred to an interest reserve account
and the balance of the Escrow Account was reserved to fund a
portion of project costs.
On January 30, 2014, the Company, using restricted cash,
prepaid an additional $100,000,000 of the Senior Construction
Facility, reducing the balance to $150,000,000 and paid a
prepayment premium equal to 15.00% of the principal repaid,
totaling $15,000,000, which is included in loss on early retirement
of debt in the condensed consolidated statements of operations.
On September 16, 2014, the Company entered into a third
amendment to the Senior Construction Facility, which provided for,
among other things, the consent to secure the Revolving Credit
Facility.
The use of proceeds to make repayments or pay prepayment premiums
do not qualify as disbursements under the Senior Construction
Facility. The First Disbursement (as defined in the Senior
Construction Facility loan documents) under the Senior Construction
Facility occurred on July 29, 2014.
The Senior Construction Facility bore interest at London Interbank
Offered Rate (“LIBOR”) plus 11.00%, with a minimum
interest rate of 13.00% and would have matured on the earlier of
(i) May 2, 2017 or (ii) six months prior to the
maturity date of the Junior Construction Facility. Additionally,
the Company was subject to certain covenants pursuant to the Senior
Construction Facility, including certain financial covenants with
an initial measurement date of September 30, 2015.
On May 1, 2015, Holdings entered into an agreement with Mesa
to refinance the Senior Credit Facility and the Revolving Credit
Facility (the “Refinancing”). Subsequent to the
Refinancing, the Senior Construction Facility and the Revolving
Credit Facility were paid in full and the related restrictive
financial covenants were eliminated. The Refinancing resulted in a
loss on early retirement of debt totaling $8,653,978, which was
included in the accompanying condensed consolidated statements of
operations. This loss consisted of unamortized deferred finance
costs and fees paid directly to or on behalf of the lenders of the
Senior Construction Facility and the Revolving Credit Facility
related to the Refinancing.
Junior Construction Facility
The Junior Construction Facility lenders have raised the Junior
Construction Facility through the EB-5 Program, which allows
foreign citizens to obtain green cards and permanent residence
status upon the satisfaction of certain requirements stemming from
investments which create jobs for U.S. citizens and legal
residents. Such investments may be made in a lender that provides
debt financing for a project that creates jobs, which is the model
used for the Renovation Project. The Property is located in a
targeted employment area, as defined by the USCIS. Accordingly,
each investor is required to make an investment of at least
$500,000 in the lender that provides debt financing to the
Renovation Project. Pursuant to the EB-5 Program, investors are
required to file a petition for a temporary green card
(“I-526 Petition”) with the USCIS and invest in a new
commercial enterprise. Pursuant to the terms of the EB-5 offerings,
the funds associated with investors that have filed I-526 Petitions
become available to the Company upon the approval of at least 23
I-526 Petitions by the USCIS.
The Company worked with American Dream Fund, LLC (including its
affiliates, “ADF”) and Pan-America Business Consulting
Limited (including its affiliates, “PABC”, and
collectively with ADF, the “EB-5 Agents”) to raise two
tranches of EB-5 capital up to a maximum of $200,000,000 each
(respectively, “EB-5 Tranche 2 Facility” for ADF and
“EB-5 Tranche 1 Facility” for PABC).
During the year ended December 31, 2013, the EB-5 Tranche 2
Facility lender, via a special purpose entity, completed the EB-5
Tranche 2 Facility fundraising equal to $200,000,000 of
capital. As of December 31, 2014, the Company had drawn
the entire $200,000,000 from the EB-5 Tranche 2 Facility
(“EB-5 Tranche 2 Loan”). The EB-5 Tranche 2 Loan bears
interest at 0.50% and matures on August 1, 2018, subject to
two one-year extension options.
As of June 30, 2015, the EB-5 Tranche 1 Facility lender, via a
special purpose entity, had raised $200,000,000 for the EB-5
Tranche 1 Facility. As of June 30, 2015, the Company has drawn
$199,000,000 from the EB-5 Tranche 1 Facility (“EB-5 Tranche
1 Loan”, and collectively with the EB-5 Tranche 2 Loan, the
“EB-5 Loans”). The undrawn portion is held in
lender and lender related accounts and reflected as restricted cash
and loans payable in the accompanying condensed consolidated
balance sheets because the Company is the primary obligor. The EB-5
Tranche 1 Loan bears interest at 0.50% and matures on
January 30, 2019, subject to a one-year extension option.
On September 16, 2014, the Company entered into amendments of
the Junior Construction Facility, which provided for, among other
things, the consent to secure the Revolving Credit Facility.
For the three months ended June 30, 2015 and 2014, the Company
incurred interest relating to the EB-5 Loans totaling $496,655 and
$349,245, respectively, and, $986,794 and $561,621, respectively,
during the six months ended June 30, 2015 and 2014, which has
been included in interest expense in the accompanying condensed
consolidated statements of operations. As of June 30, 2015,
interest payable in respect of the EB-5 Loans totaling $1,771,741
and $761,542 has been included in accounts payable and accrued
expenses and other long-term liabilities, respectively, in the
accompanying condensed consolidated balance sheets. As of
December 31, 2014, interest payable in respect of the EB-5
Loans totaling $1,283,767 and $362,722 has been included in
accounts payable and accrued expenses and other long-term
liabilities, respectively, in the accompanying condensed
consolidated balance sheets. The EB-5 Loans are collateralized by a
subordinated mortgage interest in the Renovation Project.
Commencing in 2013, the Company incurred certain percentage fees on
a per annum basis based upon the balances outstanding on the EB-5
Loans as well as a result of the EB-5 Agents achieving certain
fundraising goals that are payable directly or indirectly by the
Company. The fees include the following:
(i) The Company incurred certain percentage fees based upon the
balance outstanding of the EB-5 Loans for the EB-5 Agents’
administration of the EB-5 Loans totaling $1,760,722 and $994,479
for the three months ended June 30, 2015 and 2014,
respectively, and, $3,505,444 and $1,653,687, respectively, during
the six months ended June 30, 2015 and 2014, which have been
included in general and administrative expenses in the accompanying
condensed consolidated statements of operations. As of
June 30, 2015, fees payable to the EB-5 Agents totaling
$248,431 and $2,387,958 have been included in accounts payable and
accrued expenses and other long-term liabilities, respectively, in
the accompanying condensed consolidated balance sheets. As of
December 31, 2014, fees payable to the EB-5 Agents totaling
$441,315 and $891,500 have been included in accounts payable and
accrued expenses and other long-term liabilities, respectively, in
the accompanying condensed consolidated balance sheets.
(ii) The Company incurred certain percentage fees based upon the
balance outstanding under the EB-5 Loans for migration agent
services totaling $134,750 and $18,432,111 for the three months
ended June 30, 2015 and 2014, respectively, and $134,750 and
$29,853,168, respectively, for the six months ended June 30,
2015 and 2014, which have been capitalized as deferred financing
costs in the accompanying condensed consolidated balance sheets. As
of June 30, 2015, fees payable totaled $11,072,680 and
$28,574,897 and have been included in accounts payable and accrued
expenses and other long-term liabilities, respectively, in the
accompanying condensed consolidated balance sheets. As of
December 31, 2014, fees payable totaled $11,343,424 and
$33,982,688 and have been included in accounts payable and accrued
expenses and other long-term liabilities, respectively, in the
accompanying condensed consolidated balance sheets.
(iii) The EB-5 Agents earn one-time fees based on the aggregate
amount of EB-5 Loans raised (“Success Fees”). Success
Fees totaling $0 and $520,000 for the three months ended
June 30, 2015 and 2014, respectively, and $40,000 and
$4,065,000, respectively, for the six months ended June 30,
2015 and 2014, were earned by the EB-5 Agents and have been
capitalized as deferred financing costs in the accompanying
condensed consolidated balance sheets. As of June 30, 2015 and
December 31, 2014, $20,000 and $0, respectively, were payable
to the EB-5 Agents and have been included in accounts payable and
accrued expenses in the accompanying condensed consolidated balance
sheets.
Additionally, the Company incurs fees for advisory services for the
EB-5 Loans. For the six months ended June 30, 2015 and the
year ended December 31, 2014, fees totaling $0 and $300,000,
respectively, were paid and have been capitalized as deferred
financing costs in the accompanying condensed consolidated balance
sheets. Henceforth, the Company will incur fees for additional
advisory services to manage the Junior Construction Facility, which
will be expensed as incurred.
Revolving Credit Facility
On September 16, 2014, Holdings entered into the Revolving
Credit Agreement arranged by J.P. Morgan and administered by JPM
Chase Bank, which provides for a $65,000,000 senior secured
Revolving Credit Facility. The Revolving Credit Facility was
scheduled to mature on September 30, 2018 or, if the Senior
Construction Facility had not been refinanced in full prior to
November 2, 2016 with indebtedness maturing later than
December 31, 2018, on November 2, 2016. Additionally, the
Company was subject to certain covenants pursuant to the Revolving
Credit Facility, including certain financial covenants with an
initial measurement date of September 30, 2015.
Proceeds from the Revolving Credit Facility were used by Holdings
to finance ongoing working capital and general corporate needs. All
amounts owing under the Revolving Credit Facility were
collateralized by a first priority security interest in all assets
of Holdings, the Company and SB Gaming under a security agreement,
dated as of September 16, 2014, among Holdings, the Company,
SB Gaming and JPM Chase Bank. All obligations under the Revolving
Credit Agreement were also guaranteed by the Company and SB
Gaming.
Advances under the Revolving Credit Facility bore interest
generally, at an annual rate of either (i) the JPM Chase Bank
prime rate plus an applicable margin; or (ii) the applicable
LIBOR plus an applicable margin. Additionally, the unutilized
portion was subject to a 1.00% commitment fee.
The Revolving Credit Facility was senior to the Senior Construction
Facility and Junior Construction Facility. Any borrowings under the
Revolving Credit Facility in excess of $22,500,000 would have
required the consent of the lenders of the Senior Construction
Facility and Junior Construction Facility.
On May 1, 2015, the Holdings entered into an agreement with
Mesa to refinance the Senior Credit Facility and the Revolving
Credit Facility (the “Refinancing”). Subsequent to the
Refinancing, the Senior Construction Facility and the Revolving
Credit Facility were paid in full and the related restrictive
financial covenants were eliminated. The Refinancing resulted in a
loss on early retirement of debt totaling $8,653,978, which was
included in the accompanying condensed consolidated statements of
operations. This loss consisted of unamortized deferred finance
costs and fees paid directly to or on behalf of the lenders of the
Senior Construction Facility and the Revolving Credit Facility
related to the Refinancing.
Mesa Credit Facility and Mesa Revolving Credit
Facility
On May 1, 2015, Holdings, entered into a credit agreement with
Mesa, for a total amount of $185,000,000. This amount is comprised
of an initial funding amount of $162,500,000, the Mesa Credit
Facility, and a future advance revolving amount of $22,500,000, the
Mesa Revolving Credit Facility, all of which has been fully funded
as of May 1, 2015. The proceeds from the Mesa Facilities were
used to repay the principal amount outstanding under the Senior
Construction Facility of $150,000,000, the balance due on the
Revolving Credit Facility of $22,500,000, and partially to fund the
escrow accounts required under the Mesa Facilities. The Mesa
Facilities will mature on May 1, 2019, subject to a one-year
extension option, and bear an interest rate of LIBOR plus 8.00%,
with a minimum LIBOR of 0.50%. The Mesa Facilities are secured by a
first priority lien on all the assets of Holdings and the Company
and are senior to the Junior Construction Facility.
At any given time, the unutilized portion of the Mesa Revolving
Credit Facility is subject to a 0.50% revolving commitment fee. As
of June 30, 2015, $162,500,000 and $22,500,000 of the Mesa
Credit Facility and the Mesa Revolving Credit Facility,
respectively, were outstanding.
Notes Payable
In October 2013, the Company entered into a provider contract and
equipment payment and security agreement with KT Corporation for
the construction of various interactive media displays throughout
the Property. The agreement was subsequently amended in July 2014.
The total amended contract price was $13,597,699, of which
$1,336,770 was paid on November 27, 2013, and the remainder is
to be paid in 12 equal quarterly installments commencing on
September 30, 2014. The outstanding principal balance of the
contract price bears interest at a fixed rate equal to
9.50% per annum. As of June 30, 2015 and
December 31, 2014, $8,173,952 and $10,217,441, respectively,
of the note payable was outstanding, of which $4,086,976, has been
included in current notes payable and $4,086,976 and $6,130,465,
respectively, have been included in long-term notes payable in the
accompanying condensed consolidated balance sheets. |
