PROSPECTUS SUPPLEMENT
(To prospectus dated February 8, 1999)
$400,000,000
[LOGO]
8 1/2% SENIOR NOTES DUE 2006
----------------
The notes will bear interest at 8 1/2% per year and will mature on
November 15, 2006. We will pay interest on the notes on May 15 and November 15
of each year, beginning on May 15, 2000.
We may redeem the notes at any time prior to their maturity at the
redemption prices and on the conditions specified in this prospectus supplement
under "Description of Notes--Optional Redemption."
The notes will be unsecured and will rank equally with all of our other
senior unsecured indebtedness.
INVESTING IN THE NOTES INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE S-11 OF THIS PROSPECTUS SUPPLEMENT.
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PER NOTE TOTAL
-------- -----
Price to public(1).......................................... 99.019% $396,076,000
Underwriting discount....................................... .625% $2,500,000
Proceeds to Park Place...................................... 98.394% $393,576,000
(1) Plus accrued interest from November 15, 1999, if settlement occurs
after that date
Neither the Securities and Exchange Commission nor any other federal or
state securities commission or regulatory authority, including any gaming
regulatory authority, has approved or disapproved of these securities or
determined that this prospectus supplement or the accompanying prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about November 15, 1999.
--------------------------
LEAD MANAGER
JOINT BOOK RUNNING MANAGER
MERRILL LYNCH & CO.
CO-LEAD MANAGER
JOINT BOOK RUNNING MANAGER
BANC OF AMERICA SECURITIES LLC
CO-LEAD MANAGER
DEUTSCHE BANC ALEX. BROWN
SG COWEN
------------------
SCOTIA CAPITAL
BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
PNC CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
------------------------
The date of this prospectus supplement is November 9, 1999.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
--------
Market Data................................................. S-3
Summary..................................................... S-4
Risk Factors................................................ S-11
Forward-Looking Statements.................................. S-16
The Acquisition............................................. S-17
Use of Proceeds............................................. S-20
Capitalization.............................................. S-21
Unaudited Pro Forma Condensed Financial Statements.......... S-22
Selected Financial Data..................................... S-29
Properties of Caesars....................................... S-31
Regulation and Licensing.................................... S-34
Description of Other Indebtedness........................... S-42
Description of Notes........................................ S-43
Underwriting................................................ S-51
Legal Matters............................................... S-52
Independent Public Accountants.............................. S-52
Index to Financial Statements............................... F-1
PROSPECTUS
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Incorporation of Certain Documents By Reference............. 1
Disclosure Regarding Forward-Looking Statements............. 2
The Company................................................. 2
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of Debt Securities.............................. 3
Description of Capital Stock................................ 12
Common Stock................................................ 12
Preferred Stock............................................. 13
Description of Depositary Shares............................ 15
Description of Warrants..................................... 18
Plan of Distribution........................................ 20
Legal Matters............................................... 21
Experts..................................................... 21
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any person to provide you with
different information or to make any representation not contained in this
prospectus supplement or the accompanying prospectus. If anyone provides you
with different or inconsistent information, you should not rely on it. You
should not assume the information contained in this prospectus supplement or the
accompanying prospectus and documents incorporated by reference is accurate
after the dates on the front covers of each of the prospectus supplement and the
accompanying prospectus and after the date of filing of the incorporated
documents. Our business, financial condition, results of operations and
prospects may have changed since those dates.
S-2
MARKET DATA
Market data used in this prospectus supplement and the accompanying
prospectus, including information relating to our relative position in the
casino and gaming industry, is based on our good faith estimates, which we based
upon our review of internal surveys, independent industry publications and other
publicly available information. Although we believe these sources are reliable,
we have not independently verified the information and cannot guarantee its
accuracy and completeness.
S-3
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND
MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD
READ THIS ENTIRE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
INCLUDING THE FINANCIAL DATA AND RELATED NOTES AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND IN THE ACCOMPANYING PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION. THE TERMS "PARK PLACE," "WE," "OUR," AND "US," AS USED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS REFER TO PARK PLACE
ENTERTAINMENT CORPORATION AND ITS SUBSIDIARIES AS A COMBINED ENTITY EXCEPT WHERE
IT IS CLEAR THAT THE TERMS MEAN ONLY PARK PLACE ENTERTAINMENT CORPORATION.
PARK PLACE ENTERTAINMENT CORPORATION
We are the largest gaming company in the world, as measured by casino square
footage and revenues. We are currently the only gaming company with a
significant presence in Nevada, New Jersey and Mississippi, the three largest
U.S. gaming markets. We have approximately 1.4 million square feet of gaming
space and approximately 23,000 rooms. We operate our properties as a collection
of premier brand names that includes Bally's, Flamingo, Grand, Hilton and
Conrad. We believe our casino hotels are leading establishments with respect to
location, size, facilities, physical condition, quality and variety of services
offered in the areas in which they are located. We currently own or operate:
- nine U.S. land-based casinos;
- four U.S. dockside casinos;
- one U.S. riverboat casino;
- two land-based casinos in Australia; and
- one land-based casino in Uruguay.
Our properties are listed below.
APPROXIMATE APPROXIMATE
NUMBER OF YEAR CASINO SQUARE
NAME AND LOCATION ROOMS/SUITES ACQUIRED FOOTAGE(1)
- ----------------- ------------ -------- -------------
DOMESTIC CASINOS
NEW JERSEY
Bally's Park Place Casino Resort....................... 1,240 1996 155,000
The Atlantic City Hilton Casino Resort................. 804 1996 60,000
NEVADA
Flamingo Hilton Las Vegas.............................. 3,638 1971 93,000
Las Vegas Hilton....................................... 2,956 1971 100,000
Paris Casino Resort(2)................................. 2,900 1999 85,000
Bally's Las Vegas...................................... 2,814 1996 68,000
Reno Hilton............................................ 2,003 1992 114,000
Flamingo Hilton Laughlin............................... 1,912 1990 58,000
Flamingo Hilton Reno................................... 604 1981 46,000
MISSISSIPPI
Grand Casino Tunica.................................... 1,356 1998 140,000
Grand Casino Biloxi.................................... 985 1998 110,000
Grand Casino Gulfport.................................. 1,007 1998 110,000
Bally's Saloon-Gambling Hall-Hotel..................... 235 1996 40,000
LOUISIANA
Bally's Casino Lakeshore Resort(3)..................... -- 1996 30,000
(FOOTNOTES ON FOLLOWING PAGE)
S-4
APPROXIMATE APPROXIMATE
NUMBER OF YEAR CASINO SQUARE
NAME AND LOCATION ROOMS/SUITES ACQUIRED FOOTAGE(1)
- ----------------- ------------ -------- -------------
INTERNATIONAL CASINOS
AUSTRALIA
Conrad Jupiters, Gold Coast(4)......................... 609 1985 70,000
Conrad International Treasury Casino, Brisbane(4)...... 136 1995 65,000
URUGUAY
Conrad International Punta del Este Resort and
Casino(5)............................................ 302 1997 38,000
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Total.............................................. 23,501 1,382,000
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(1) Includes square footage attributable to our race and sports books.
(2) This property opened on September 1, 1999.
(3) We have a 49.9% ownership interest in this property.
(4) We have a 19.9% ownership interest in this property.
(5) We have a 46.4% ownership interest in this property.
Our principal executive offices are located at 3930 Howard Hughes Parkway,
Las Vegas, Nevada 89109, and our telephone number is (702) 699-5000.
THE ACQUISITION
On April 27, 1999, we entered into a definitive agreement with Starwood
Hotels & Resorts Worldwide, Inc. and several of its subsidiaries to acquire all
of the outstanding stock of Caesars World, Inc., a wholly owned subsidiary of
Starwood, and all of their interests in several other gaming entities for $3.0
billion in cash. We refer in this prospectus supplement to all of the interests
we are acquiring collectively as "Caesars." The closing of the acquisition is
conditioned upon the receipt of regulatory and gaming approvals, as more fully
described in the sections entitled "The Acquisition" and "Regulation and
Licensing."
Caesars owns and/or operates major gaming resorts in Las Vegas, Nevada,
Atlantic City, New Jersey and Harrison County, Indiana, as well as three other
domestic and five international properties. Caesars also owns strategic parcels
of land in Atlantic City and behind Caesars Palace in Las Vegas. We believe the
Caesars brand name is one of the most highly regarded and recognized brand names
in the gaming industry. We believe this acquisition is strategic and provides
built-in opportunities for growth. We also expect the acquisition to be
accretive to earnings and free cash flow in the first full year of operations.
On a pro forma basis following the Caesars acquisition, our combined casino
square footage and number of rooms will be approximately 2 million and 28,000,
respectively.
S-5
The following table sets forth information available to us at October 1999
about the Caesars properties in which we will have interests upon consummation
of the acquisition:
APPROXIMATE APPROXIMATE
NUMBER OF CASINO
NAME LOCATION ROOMS/SUITES SQUARE FOOTAGE
- ------------------------------------ --------------------------------- ------------ --------------
DOMESTIC CASINOS
Caesars Palace Las Vegas, Nevada 2,454 125,000
Caesars Atlantic City Atlantic City, New Jersey 1,149 120,000
Caesars Indiana(1) Harrison County, Indiana --(2) 90,000
Caesars Tahoe(3) Stateline, Nevada 440 40,000
Sheraton Casino & Hotel Robinsonville, Mississippi 134 33,000
Dover Downs(4) Dover, Delaware -- 25,000
INTERNATIONAL CASINOS
Windsor Casino(5) Windsor, Canada 389 100,000
Caesars Gauteng(6) Kempton Park, South Africa -- 65,000
Sheraton Casino Sydney(10) Cape Breton, Nova Scotia, Canada -- 15,000
Sheraton Halifax Hotel & Casino(10) Halifax, Nova Scotia, Canada 350 20,000(7)
Caesars Manila(8) Manila, Philippines -- 4,000
Caesars Palace at Sea S.S. Crystal Harmony -- 3,850(9)
S.S. Crystal Symphony -- 5,000(9)
----- -------
Total 4,916 645,850
===== =======
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(1) Caesars Indiana is managed by Caesars and owned by a joint venture in which
Caesars owns in excess of 90% of the economic interests.
(2) A 500-room hotel tower is currently planned to be under construction in
2000.
(3) Caesars leases the building that houses the hotel and casino and leases the
underlying land under a long-term ground and structure lease.
(4) Caesars provides management services to the casino at the Dover Downs
racetrack in Delaware.
(5) Caesars has a 50% interest in Windsor Casino Limited, which operates this
hotel/casino complex. The Province of Ontario owns the complex.
(6) Caesars has an approximately 25% interest in a joint venture that owns
Caesars Gauteng and has an approximately 50% interest in a joint venture
that manages Caesars Gauteng.
(7) A permanent casino featuring approximately 33,000 square feet is currently
under construction.
(8) Caesars has a 50% interest in a joint venture which owns Caesars Manila and
receives a marketing services fee.
(9) Caesars operates the Caesars Palace at Sea casinos only while the cruise
ships on which they are located are in international waters.
(10) Caesars has a 95% interest in Metropolitan Entertainment Group, which owns
and operates the two Canadian properties.
For a more detailed description of the above properties, see "Properties of
Caesars."
S-6
OTHER RECENT DEVELOPMENTS
HILTON SPINOFF AND GRAND MERGER
We were incorporated in June 1998, and on December 31, 1998, Hilton Hotels
Corporation completed the transfer of the operations, assets and liabilities of
substantially all of its gaming business to us. Hilton distributed our common
stock to Hilton's shareholders tax-free on a one-for-one basis. Also on
December 31, 1998, immediately following our spin-off from Hilton, we acquired,
by means of a merger, the Mississippi gaming business of Grand Casinos, Inc.,
which includes the Grand Casino Biloxi, Grand Casino Gulfport and Grand Casino
Tunica properties, in exchange for the assumption of debt and the issuance of
our common stock to Grand shareholders on a one-for-one basis. Immediately prior
to the Grand merger, Grand completed the transfer of the operations, assets and
liabilities of its non-Mississippi business to Lakes Gaming, Inc. and then
distributed Lakes' common stock to Grand shareholders. The non-Mississippi
business consisted of the management of two Indian-owned casinos and other
assets and liabilities.
NEW CREDIT FACILITIES
In order to finance the Caesars acquisition, we entered into a new
$2.0 billion 364-day revolving credit facility on August 31, 1999. Up to
$650 million of this facility can be drawn before the closing of the
acquisition, at which point the entire $2.0 billion will be available subject to
various closing conditions. In addition to the new $2.0 billion 364-day
facility, we also entered into a $1.0 billion 364-day facility which may only be
used to provide funding for the Caesars acquisition. Availability under the
$1.0 billion facility will be reduced by the proceeds of any public notes we may
issue, including notes in this offering.
PARIS CASINO RESORT
On September 1, 1999 we opened the 2,900 room Paris Casino Resort in Las
Vegas, Nevada. This resort, which is located adjacent to Bally's Las Vegas on
the Las Vegas Strip, features an 85,000 square foot casino, eight restaurants,
130,000 square feet of convention space and a retail shopping complex with a
French influence. In addition to a 50 story replica of the Eiffel Tower, the
resort also features replications of some of Paris' most recognized landmarks,
including the Arc de Triomphe, the Paris Opera House, The Louvre and Rue de la
Paix.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
On October 25, 1999, we announced our results for the third quarter and nine
months ended September 30, 1999. Net income for the three months ended
September 30, 1999 before pre-opening expenses net of taxes, was $58 million or
$0.19 per diluted share compared with net income of $44 million or $0.14 per
diluted share on a pro forma basis including Grand in the prior year. Including
pre-opening expenses net income was $34 million or $0.11 per diluted share for
the three months ended September 30, 1999 compared to net income of $44 million
or $0.14 per diluted share on a pro forma basis including Grand in the prior
year.
For the nine months ended September 30, 1999, net income before pre-opening
expenses net of taxes, was $152 million or $0.49 per diluted share compared to
net income of $133 million or $0.43 per share on a pro forma basis including
Grand. For the nine months ended September 30, 1999, net income including
pre-opening expenses was $119 million or $0.39 per diluted share compared to
$133 million or $0.43 per diluted share on a pro forma basis including Grand in
the prior year.
We also reported that EBITDA (as defined) was $213 million for the three
months ended September 30, 1999 compared to $184 million on a pro forma basis
including Grand in the prior year. For the nine months ended September 30, 1999,
EBITDA was $585 million compared to $544 million in the prior year.
S-7
OVERVIEW OF OUR CORPORATE STRUCTURE FOLLOWING THE ACQUISITION
The following chart shows a simplified version of our corporate structure
immediately following the proposed acquisition:
[LOGO]
S-8
THE OFFERING
Issuer............................................... Park Place Entertainment Corporation.
Total Amount of Notes Offered........................ $400 million in principal amount of 8 1/2%
senior notes due 2006.
Maturity............................................. November 15, 2006.
Interest Payment Dates............................... May 15 and November 15, beginning May 15,
2000. Interest will accrue from the issue date
of the notes.
Optional Redemption.................................. We may redeem the notes at any time at the
redemption prices described in the
"Description of Notes" section under the
heading "Optional Redemption," plus accrued
and unpaid interest to the date of redemption.
Ranking.............................................. The notes are our unsecured obligations. The
notes will rank senior to our subordinated
indebtedness and equally with our other senior
indebtedness. The notes will effectively rank
junior to all liabilities of our subsidiaries.
Certain Covenants.................................... The indenture will, among other things, limit
our and our subsidiaries' ability to:
- enter into sale and lease-back transactions;
- incur liens on our assets to secure debt;
- merge or consolidate with another company;
and
- transfer our assets substantially as an
entirety.
These covenants are subject to a number of
important qualifications and exceptions which
are described in the "Description of Notes"
section under the heading "Additional
Covenants of Park Place" in this prospectus
supplement, and in the "Description of Debt
Securities" section under the heading
"Consolidation, Merger or Sale of Assets" in
the accompanying prospectus.
Use of Proceeds...................................... We estimate that the net proceeds from this
offering will be approximately $393 million.
We will use the net proceeds of the offering
to repay a portion of the outstanding debt
under our five-year revolving credit facility.
For additional details, see "Use of Proceeds."
S-9
RISK FACTORS
See "Risk Factors" for a discussion of the factors you should carefully
consider before deciding to invest in the notes, including factors affecting
forward-looking statements.
S-10
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS AND THE INFORMATION INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING AN INVESTMENT IN THESE
NOTES.
OUR SUBSTANTIAL INDEBTEDNESS FOLLOWING THE ACQUISITION COULD ADVERSELY AFFECT
OUR FINANCIAL RESULTS AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE
NOTES.
Following the acquisition, we will have a significant amount of
indebtedness. At June 30, 1999, pro forma for the acquisition and the incurrence
of indebtedness to fund the purchase price of Caesars, we would have had total
consolidated indebtedness of approximately $5.5 billion and stockholders' equity
of approximately $3.7 billion.
The notes will not restrict our ability to borrow substantial additional
funds in the future nor do they provide holders any protection should we be
involved in a highly leveraged transaction. If we add new indebtedness to our
anticipated debt levels following or prior to the acquisition, it could increase
the related risks that we face.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- limit our ability to satisfy our obligations with respect to the notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate activities;
- limit our flexibility in planning for, or reacting to, changes in our
business and industry;
- place us at a competitive disadvantage compared to other less leveraged
competitors; and
- limit our ability to borrow additional funds.
SERVICING OUR INDEBTEDNESS WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH AND OUR
ABILITY TO GENERATE SUFFICIENT CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness, including
the notes, and to fund planned capital expenditures depends on our ability to
generate cash flow in the future. This, to some extent, is subject to general
economic, financial, competitive, legislative and regulatory factors and other
factors that are beyond our control. In addition, our ability to borrow funds
under our revolving credit facilities in the future will depend on our meeting
the financial covenants in the agreements, including an interest coverage test
and a leverage ratio test. We cannot assure you that our business will generate
cash flow from operations or that future borrowings will be available to us
under our revolving credit facilities in an amount sufficient to enable us to
pay our indebtedness, including the notes, or to fund our other liquidity needs.
As a result, we may need to refinance all or a portion of our indebtedness,
including the notes, on or before maturity. We cannot assure you that we will be
able to refinance any of our indebtedness on commercially reasonable terms or at
all. Our inability to generate sufficient cash flow or refinance our
indebtedness on commercially reasonable terms would have a material adverse
effect on our financial condition, results of operations and ability to satisfy
our obligations under the notes.
OUR ABILITY TO CONSUMMATE THE ACQUISITION DEPENDS ON, AMONG OTHER THINGS,
RECEIPT OF REGULATORY APPROVAL, INCLUDING GAMING APPROVALS IN VARIOUS
JURISDICTIONS.
Consummation of the acquisition is subject to the receipt of regulatory
approval, including gaming approvals in various jurisdictions. If all of the
required regulatory approvals have not been obtained by
S-11
November 1, 1999, then the condition will be deemed satisfied when we have
obtained regulatory approvals from gaming authorities in Nevada, New Jersey,
Indiana and Windsor, Ontario. After these four regulatory approvals are
obtained, we will be obligated to purchase, at the full $3.0 billion purchase
price, those properties for which approvals have been obtained and any other
properties the acquisition of which would not result in a material liability or
impairment of a material contract. As of November 3, 1999, we had received
regulatory approvals in Mississippi, Nevada and New Jersey.
In the event of a closing on less than all of the properties, Starwood would
be required to conduct the retained properties in the ordinary course consistent
with the agreement and for our economic benefit. In addition, Starwood would be
required to use reasonable efforts to help us obtain the necessary consents and
approvals to convey the retained properties, and to convey the retained
properties to us as soon as those consents and approvals are obtained. If the
required consents and approvals are not obtained within six months of the
closing date, Starwood must, at our election, either:
- convey the retained properties to us notwithstanding our inability to
obtain the required consents and approvals; or
- sell the retained properties to a third party or parties and remit the net
proceeds of the sale to us.
If we were to close on less than all of the properties, we would bear the
following risks with respect to the retained properties, including:
- We would be required to pay all taxes, losses and reasonable costs
relating to the retained properties, and to reimburse Starwood for any net
cash shortfalls of the retained properties;
- We may not be able obtain the consents and approvals needed to acquire the
retained properties, and if we are unable to obtain such consents and
approvals and Starwood is required to sell the retained properties on our
behalf, Starwood may not obtain a price which reflects the fair value of
those properties; and
- Starwood may not operate the retained properties in a manner consistent
with the manner in which we would operate those properties, which could
reduce the value of those properties to us or a third party purchaser.
WE ARE A HOLDING COMPANY AND DEPEND ON THE BUSINESS OF OUR SUBSIDIARIES TO
SATISFY OUR OBLIGATIONS UNDER THE NOTES.
We are a holding company. Our subsidiaries conduct substantially all of our
consolidated operations and own substantially all of our consolidated assets.
Consequently, our cash flow and our ability to pay our debts depends upon our
subsidiaries' cash flow and their payment of funds to us. Our subsidiaries are
not obligated to make funds available to us for payment on the notes or
otherwise. In addition, our subsidiaries' ability to make any payments to us
will depend on their earnings, the terms of their indebtedness, business and tax
considerations, legal and regulatory restrictions and economic conditions. These
payments may not be adequate to pay interest and principal on the notes when
due. In addition, their ability to make payments to us depends on applicable law
and debt instruments to which they or we are a party, which may include
requirements to maintain minimum levels of working capital and other assets.
The notes will effectively rank junior to all existing and future
liabilities of our subsidiaries, including trade payables. In the event of a
bankruptcy, liquidation or dissolution of a subsidiary and following payment of
its liabilities, the subsidiary may not have sufficient assets remaining to make
any payments to us so that we can meet our obligations as the holding company,
including our obligations to you under the notes. Assuming completion of this
offering, as of June 30, 1999, our subsidiaries would have had approximately
$16 million of debt. The indenture governing the notes will not limit the
ability of our subsidiaries to incur substantial additional debt.
S-12
WE MAY REQUIRE YOU TO DISPOSE OF YOUR NOTES OR REDEEM YOUR NOTES IF ANY GAMING
AUTHORITY FINDS YOU UNSUITABLE TO HOLD THEM.
We may require you to dispose of your notes or redeem your notes if any
gaming authority finds you unsuitable to hold them or in order to otherwise
comply with gaming laws to which we are subject, as more fully described in the
sections entitled "Regulation and Licensing" and "Description of Debt
Securities--Mandatory Disposition Pursuant to Gaming Laws."
LAKES GAMING, INC. MAY NOT BE ABLE TO SATISFY ITS INDEMNIFICATION OBLIGATIONS TO
GRAND AND THIS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
In connection with Grand's spin-off of Lakes, Lakes and Grand agreed to
indemnify each other for liabilities retained by them. Among other things, Lakes
agreed to indemnify Grand for:
- liabilities related to Stratosphere Corporation, in which Grand formerly
had an ownership interest, including various lawsuits related to the
bankruptcy of Stratosphere Corporation to which Grand and some of its
current and former directors and officers are parties;
- other liabilities relating to the non-Mississippi business of Lakes, such
as tribal loan guarantees and real property lease guarantees; and
- Grand's ongoing indemnification obligations to current and former
directors and officers of Grand with respect to the foregoing.
As security to support Lakes' indemnification obligations to Grand, Lakes
agreed to irrevocably deposit, in trust for the benefit of Grand, as our
wholly-owned subsidiary, an aggregate of $30 million, consisting of four annual
installments of $7.5 million, during the four year period subsequent to
December 31, 1998. The first installment is due on December 31, 1999. Lakes'
ability to satisfy this funding obligation is materially dependent upon:
- the continued success of its operations;
- any National Indian Gaming Commission review of the Lakes' Indian casino
management contracts, including the assignment of these contracts to Lakes
in the spin-off; and
- the general risks inherent in the Lakes business.
If Lakes fails to fund the trust, or otherwise satisfy its indemnification
obligations to Grand, Grand would be required to satisfy any liabilities, which
could, either individually or in the aggregate, have a material adverse effect
on our business and results of operations.
Lakes will bear the cost of defending itself, its current and former
directors and officers, and Grand and its current and former officers and
directors for any settlement of or judgment in the Stratosphere litigation.
Although the Stratosphere lawsuits are in their early stages and Lakes plans to
defend itself vigorously, the costs of defense and any settlement or judgment
may have a material adverse effect on Grand if Lakes is unable to satisfy any of
its obligations to Grand. In the Lakes Form 10-Q for the period ended July 4,
1999, Lakes reported that it had total assets of $173 million (including cash of
$49 million) and total liabilities of $25 million at July 4, 1999.
For additional information concerning legal proceedings related to
Stratosphere, see our Form 10-K for the year ended December 31, 1998, and our
Form 10-Qs for the quarters ended March 31, 1999, and June 30, 1999, all of
which are incorporated by reference in the accompanying prospectus.
THE GAMING INDUSTRY IS HIGHLY COMPETITIVE.
To the extent that casino hotel room capacity is expanded by others in a
city where our casino hotels are located, competition will increase. The
completion of a number of room expansion projects and the opening of new casino
hotels led to a 3.8% increase in hotel capacity in Las Vegas in 1998 compared to
S-13
1997, thereby increasing competition in all segments of the Las Vegas market.
Including our Paris Casino Resort, three new mega-resorts have opened in 1999.
We expect projects completed or under development to increase hotel room
capacity by nearly 10% in 1999 compared to 1998. The business of our Nevada
casino hotels might also be adversely affected if gaming operations of the type
conducted in Nevada were to be permitted under the laws of other states,
particularly California. Similarly, legalization of gaming operations in any
jurisdiction located near Atlantic City, New Jersey, or the establishment of new
large scale gaming operations on nearby Indian tribal lands, could adversely
affect our Atlantic City casino hotels. In addition, the supply in the Gulf
Coast region has recently increased with the opening of a new resort by a
competitor. This increase in supply could have an adverse effect on our Gulf
Coast properties. The expansion in any locale of riverboat gaming or casino
gaming on Indian tribal lands could also impact our gaming operations. Gaming
related referenda have been voted upon or are being proposed in several states
which could materially adversely affect us.
GAMING REFERENDA HAVE BEEN VOTED ON OR ARE BEING PROPOSED IN MISSISSIPPI AND
CALIFORNIA AND ADOPTION OF THESE REFERENDA COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS.
Voters in California approved Proposition Five, which was proposed by
California Indian tribes in the November 3, 1998 election. This referendum
sought to legalize games which several tribes operated in contravention of
California and Federal law, which could lead to the expansion of gaming
operations by California Indian tribes and could have a material adverse effect
on our Nevada operations. A legal action was filed in California State court
challenging the validity of Proposition Five under the California constitution.
On December 2, 1998, the California Supreme Court issued an order staying
implementation of Proposition Five. On August 23, 1999, the California Supreme
Court issued its decision on Proposition Five, concluding that Proposition Five
is invalid because it violates a state constitutional ban on Nevada-style casino
gambling. On September 10, 1999, nearly 60 Indian tribes and California's
Governor signed tribal-state agreements that would legalize casino-style
gambling in California. The agreements are contingent on a constitutional
amendment that would give tribes the right to offer a limited number of slot
machines and the range of house-banked card games. On September 10, 1999
California lawmakers approved the constitutional amendment along with a separate
measure ratifying the tribal-state agreements. California voters still must
approve the constitutional amendment which will appear on the March 2000 ballot.
In Mississippi, in three separate instances, referenda were proposed which,
if approved, would have amended the Mississippi Constitution to ban gaming in
Mississippi and would have required all currently legal gaming entities to cease
operations within two years of the ban. All three of the proposed referenda have
been ruled illegal by Mississippi state trial court judges because, among other
reasons, each of the proposed referenda failed to include required information
regarding the anticipated effect of such a ban on government revenues. The
proponents of the most recent referendum recently filed a notice of appeal of
the trial court ruling with the Mississippi Supreme Court, requesting expedited
action on the matter. Although briefing is underway, the Mississippi Supreme
Court has not scheduled any hearings with respect to the matter. Any such
referendum must be approved by the Mississippi Secretary of State and signatures
of approximately 98,000 registered voters must be gathered and certified in
order for such a proposal to be included on a statewide ballot for consideration
by the voters. The next election for which the proponents could attempt to place
such a proposal on the ballot would be in November 2000. It is likely at some
point that a revised initiative will be filed which will adequately address the
issues regarding the effect on government revenues of a prohibition of gaming in
Mississippi. However, while it is too early in the process for us to make any
predictions with respect to whether such a referendum will appear on a ballot or
the likelihood of such a referendum being approved by the voters, if such a
referendum were passed and gaming were prohibited in Mississippi, it would have
a material adverse effect on us and our Mississippi gaming operations.
S-14
THE GAMING INDUSTRY IS HIGHLY REGULATED AND WE MUST ADHERE TO VARIOUS
REGULATIONS AND MAINTAIN OUR LICENSES TO CONTINUE OUR OPERATIONS.
The ownership, management and operation of gaming facilities are subject to
extensive federal, state, provincial, tribal and/or local laws, regulations, and
ordinances, which are administered by the relevant regulatory agency or agencies
in each jurisdiction. These laws, regulations and ordinances vary from
jurisdiction to jurisdiction, but generally concern the responsibility,
financial stability and character of the owners and managers of gaming
operations as well as persons financially interested or involved in gaming
operations. For a summary of gaming regulations that affect our business, see
"Regulation and Licensing." The regulatory environment in any particular
jurisdiction may change in the future and any such change could have a material
adverse effect on our results of operations.
THE NATIONAL GAMBLING IMPACT STUDY COMMISSION'S RECOMMENDATIONS MAY ADVERSELY
AFFECT THE GAMING INDUSTRY AND OUR OPERATIONS.
A National Gambling Impact Study Commission has been established by the
United States Congress to conduct a comprehensive study of the social and
economic impact of gaming in the United States. On April 28, 1999, the National
Commission voted to recommend that the expansion of gambling be curtailed. In
June 1999, the National Commission issued a final report of its findings and
conclusions, together with recommendations for legislative and administrative
actions. Below are highlights of some of those recommendations:
- Legal gaming should be restricted to those at least 21 years of age;
- Betting on college and amateur sports should be banned;
- The introduction of casino-style gambling at pari-mutuel racing facilities
for the primary purpose of saving the pari-mutuel facility financially
should be prohibited;
- Internet gaming should be banned within the United States;
- The types of gaming activities allowed by Indian tribes within a given
state should not be inconsistent with the gaming activities allowed to
other persons in that state; and
- State, local and tribal governments should recognize that casino gaming
provides economic development, particularly for economically depressed
areas. The National Commission differentiated casino gaming from
stand-alone slot machines (e.g., in convenience stores), Internet gaming
and lotteries which the commission stated do not provide the same economic
development.
Any additional regulation of the gaming industry which may result from the
National Commission's report may have an adverse effect on the gaming industry,
including us.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THESE NOTES.
Prior to this offering, there was no public market for the notes. We have
been informed by the underwriters that they intend to make a market in the notes
after we complete this offering. However, the underwriters may cease their
market-making activity at any time. In addition, the liquidity of the trading
market in these notes, and the market price quoted for these notes, may be
adversely affected by changes in the overall market for these types of
securities and by changes in our financial performance or prospects or in the
prospects for companies in our industry generally. As a result, you cannot be
sure that an active trading market will develop for these notes.
S-15
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus and the documents
incorporated by reference in this prospectus supplement and the accompanying
prospectus include forward-looking statements. We intend for the words
"believes," "anticipates," "expects," "intends," "interested in," "plans,"
"continues," "projects" and similar expressions to identify forward-looking
statements. Forward-looking statements include, among other things, statements
relating to our plans, strategies, properties and adequacy of resources under
the headings "Summary," and "Properties of Caesars," and in our Form 10-K and
Form 10-Qs under the headings "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business and Properties of Park
Place." We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties, and assumptions about us and our
subsidiaries, including, among other things, factors discussed under the heading
"Risk Factors" in this prospectus supplement and in our filings with the
Securities and Exchange Commission and the following:
- the effect of economic, credit and capital market conditions in general
and on gaming companies in particular;
- construction and development issues, including environmental restrictions,
weather, soil conditions, building permits and zoning approvals;
- our ability to consummate the acquisition and successfully integrate
Caesars' operations into ours;
- the impact of competition, particularly from other gaming and hotel/gaming
operations;
- changes in laws or regulations, third party relations and approvals,
decisions of courts, regulators and governmental bodies;
- litigation outcomes and judicial action; and
- changes in customer demand.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus supplement and the accompanying prospectus
and the documents incorporated by reference in this prospectus supplement and
the accompanying prospectus might not occur.
S-16
THE ACQUISITION
GENERAL
On April 27, 1999, we entered into a stock purchase agreement with Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation, and several of its
subsidiaries, which we refer to collectively as "Starwood." Under this agreement
we have agreed to pay $3.0 billion in cash for:
(a) 100% of the stock of Caesars World Inc., a Florida corporation;
(b) 100% of the stock of Sheraton Tunica Corporation, a Delaware
corporation; and
(c) partnership interests, the acquisition of which will result in the
ownership of 95% of the total economic interests in Metropolitan
Entertainment Group, a Canadian partnership.
We refer to the gaming entities in (a), (b) and (c) above collectively in
this prospectus supplement as "Caesars."
The parties have agreed to adjust the purchase price upward (or downward) to
account for preclosing capital expenditures in excess of (or below) $5 million
per month. In addition, the parties have agreed to make similar adjustments for
net working capital in excess of (or below) $25 million as of the closing date.
If any financing obligations, including existing slot machine capital
leases, remain in existence at the closing of the acquisition, then at our sole
and exclusive option:
- the purchase price will be reduced by the amount of the financing
obligations; or
- the financing obligations will be discharged by paying out of the purchase
price the amount required to discharge the obligations.
Starwood has agreed to transfer to third parties, prior to the closing date,
and we will acquire no interest in, the following properties and assets that are
owned by Caesars: Cove Haven, Inc., Pocono Palace, Inc., Paradise Stream, Inc.,
Brookdale Resorts, Inc., Romantic Tours, Inc., Romantic Advertising, Inc., and
the Atlantic City Convention Center-Sheraton Hotel. Starwood will cause its
interest in the Sheraton Halifax Hotel to be transferred to Caesars, and we will
own this interest after the closing date of the acquisition.
COVENANTS
Until the closing of the acquisition, Starwood has agreed, among other
things, to:
- operate Caesars in the ordinary course and consistent with past practices;
- provide us with access to the facilities and employees of Caesars;
- refrain from soliciting other potential purchasers of Caesars;
- eliminate all intercompany indebtedness and other intercompany accounts
between Caesars and Starwood, other than a note for approximately
$23 million relating to a facility associated with Caesars Palace, Las
Vegas, Nevada;
- eliminate any indebtedness to third parties, other than capitalized
leases, which will be our obligation after the transaction's closing;
- terminate all intercompany agreements between Caesars and Starwood other
than certain agreements ancillary to the stock purchase agreement
described in more detail below under "Ancillary Agreements;" and
- cooperate with us in taking actions required to close the acquisition.
S-17
We have agreed, among other things, to:
- cooperate with Starwood in taking actions required to close the
acquisition;
- provide the employees of Caesars with employee welfare and retirement
plans and programs that provide benefits substantially similar to those
provided to our other similarly situated employees, subject to any
contracts or other agreements with labor organizations and applicable law;
and
- pay specified severance, change of control and similar benefits that may
become payable as a result of the acquisition or as the result of the
termination of any employees of Caesars after the closing of the
acquisition, except that we and Starwood will each pay for one-half of all
severance benefits and change of control payments owing to an executive
officer of Caesars World, Inc.
REPRESENTATIONS AND WARRANTIES
Starwood has made representations to us regarding its ability to sell us its
interests in Caesars. We have made representations regarding our ability to
purchase Caesars.
TAX MATTERS
We have agreed with Starwood not to make an election under Section 338 of
the Internal Revenue Code with respect to this transaction except that we have
agreed to join in making a Section 338(h)(10) election with respect to the
acquisition of Sheraton Tunica Corporation and some of its subsidiaries so long
as the election does not require a corresponding election regarding Caesars
World and its subsidiaries.
CONDITIONS
The closing of the transaction is conditioned upon:
- the continued accuracy of the representations and warranties;
- the material performance of covenants;
- the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
- the receipt of other regulatory approvals; and
- the absence of any order, statute, regulation or similar restraint
enjoining or prohibiting the consummation of the transaction or any
material suit or proceeding by a governmental authority restraining the
transaction or rendering the stock purchase agreement ineffective.
On June 16, 1999, we received notification of the early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
If all of the required regulatory approvals have not been obtained by
November 1, 1999, then the condition relating to regulatory approvals in the
acquisition agreement will be deemed satisfied when we have obtained regulatory
approvals from gaming authorities in Nevada, New Jersey, Indiana and Windsor,
Ontario. After these four regulatory approvals are obtained, we will be
obligated to purchase, at the full $3.0 billion purchase price, those properties
for which approvals have been obtained and any other properties that we can
acquire without causing a material liability or impairment of a material
contract. As of November 3, 1999 we had received regulatory approvals from
gaming authorities in Mississippi, Nevada and New Jersey. In the event of a
closing on less than all of the properties, Starwood would be required to
conduct the retained properties in the ordinary course consistent with the
agreement and for our economic benefit. In addition, Starwood would be required
to use reasonable efforts to help us obtain the necessary consents and approvals
to convey the retained properties, and to convey the retained properties to us
as
S-18
soon as those consents and approvals are obtained. If the required consents and
approvals are not obtained within six months of the closing date Starwood must,
at our election, either:
- convey the retained properties to us notwithstanding our inability to
obtain the required consents and approvals; or
- sell the retained properties to a third party or parties and remit the net
proceeds of the sale to us.
During any period in which Starwood continues to hold retained operations
after the closing date, Starwood will be obligated to use its reasonable best
efforts to operate the retained operations in the ordinary course consistent
with the stock purchase agreement and to remit the net profits of the retained
operations to us (or, if it is not permitted by law to remit the net profits to
us, Starwood must set aside the net profits for our benefit pending conveyance
of the retained operations to us). We will be responsible for all costs
(including transfer taxes) incurred by Starwood in connection with any transfers
required to effectuate the foregoing.
TERMINATION
The stock purchase agreement may be terminated:
(1) by mutual consent of the parties; or
(2) by either party if:
(A) the other party materially breaches a representation, warranty or
covenant such that, after giving effect to a 30-day cure period, a
condition to the non-breaching party's obligation to close would not
be satisfied; or
(B) the closing has not occurred by January 31, 2000, other than as a
result of a breach of a representation, warranty or covenant of such
party; or
(C) the transaction has been permanently enjoined.
ANCILLARY AGREEMENTS
We intend to enter into agreements with Starwood, including a license
agreement to allow us to use the "Sheraton" name and related marks and to allow
Starwood to continue to use the "Caesars" name and related marks with respect to
properties that used these names prior to the transaction. In addition, we
intend to enter into an agreement with Starwood under which we will each provide
certain transitional services to each other at our respective costs. This
transitional services agreement's term will be for a period not to exceed one
year.
S-19
USE OF PROCEEDS
We will use the net proceeds of the offering, estimated to be approximately
$393 million, to repay a portion of the outstanding debt under our five-year
revolving credit facility. As of June 30, 1999, we had approximately $1.4
billion outstanding under our five-year revolving credit facility bearing an
average interest rate of 6.26%. We incurred this indebtedness primarily to
consummate our spin-off from Hilton and repurchase the Grand 10 1/8% first
mortgage notes due 2003.
S-20
CAPITALIZATION
The following table sets forth our capitalization at June 30, 1999:
(a) on a historical basis;
(b) as adjusted after giving effect to our August 1999 issuance of
$300 million of senior notes due 2003 and this offering and the
application of the estimated net proceeds of $393 million as described
under "Use of Proceeds;" and
(c) pro forma for the acquisition.
You should read this information together with "The Acquisition," "Use of
Proceeds" and "Unaudited Pro Forma Condensed Financial Statements" and the
audited consolidated financial statements and related notes appearing elsewhere
in this prospectus supplement or incorporated by reference in the accompanying
prospectus.
JUNE 30, 1999
-------------------------------------------------------------------
ACTUAL AS ADJUSTED PRO FORMA
------------------------- ----------- -------------------------
($ IN MILLIONS)
CASH AND EQUIVALENTS AND RESTRICTED CASH.................... $ 158 $ 158 $ 233
========================= ====== =========================
TOTAL CURRENT PORTION OF LONG-TERM DEBT..................... $ 7 $ 7 $ 18
========================= ====== =========================
LONG-TERM DEBT:
Revolving credit facilities(1)............................ $ 1,430 $ 741 $ 2,929
7 3/8% senior notes due 2002(2)........................... 299 299 299
7% senior notes due 2002(2)............................... 324 324 324
7 7/8% senior subordinated notes due 2005................. 400 400 400
7.95% senior notes due 2003............................... -- 298 298
8 1/2% senior notes due 2006.............................. -- 396 396
Commercial paper program.................................. 24 24 24
Other debt to fund acquisition(1)......................... -- -- 800
Other..................................................... 16 16 62
Less current portion of long-term debt.................. (7) (7) (18)
------------------------- ------ -------------------------
Total long-term debt, net of current portion............ $ 2,486 $2,491 $ 5,514
------------------------- ------ -------------------------
TOTAL STOCKHOLDERS' EQUITY.................................. 3,686 3,686 3,686
------------------------- ------ -------------------------
TOTAL CAPITALIZATION........................................ $ 6,179 $6,184 $ 9,218
========================= ====== =========================
- ------------------------
(1) As of November 3, 1999, we had approximately $1.1 billion outstanding under
our five-year revolving credit facility. On August 31, 1999, we entered into
a new $2.0 billion revolving credit facility which replaced our prior
$650 million 364-day revolving credit facility. In addition to the new
$2.0 billion 364-day facility, we entered into a $1.0 billion 364-day
facility which may be used only to provide funding for the Caesars
acquisition. The pro forma figure in the table assumes that we issue
$1.5 billion in notes, inclusive of the $300 million aggregate principal
amount of 7.95% senior notes due 2003 we issued in August 1999 and these
notes, and use the proceeds to repay outstanding debt under our revolving
credit facilities. In order to fund the acquisition, we plan to borrow under
our existing $1.5 billion five-year revolving credit facility and our new
$2.0 billion 364-day revolving credit facility. For additional information,
see "Description of Other Indebtedness."
(2) In connection with our spin-off from Hilton, we assumed the payment
obligations with respect to these outstanding Hilton notes which are net of
unamortized discount.
S-21
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are based
upon our historical consolidated financial statements and those of Grand and
Caesars. You should read this pro forma financial information together with
those historical consolidated financial statements and related notes, which are
included or incorporated by reference into this prospectus supplement or the
accompanying prospectus.
With respect to our merger with Grand and as further described in the
accompanying footnotes, the unaudited pro forma condensed statement of income
for the year ended December 31, 1998, gives effect to:
- our merger with Grand applying the purchase method of accounting; and
- adjustments that are directly attributable to the Grand merger and are
anticipated to have a continuing impact.
The pro forma condensed statement of income reflecting our merger with Grand
assumes the merger was consummated on January 1, 1998.
With respect to the proposed acquisition of Caesars, the unaudited pro forma
condensed statements of income for the six months ended June 30, 1999 and the
year ended December 31, 1998 give effect to:
- our acquisition of Caesars applying the purchase method of accounting; and
- adjustments that are directly attributable to the acquisition and
anticipated to have a continuing impact.
The pro forma condensed statements of income reflecting the acquisition
assume we completed the Caesars' acquisition on January 1, 1998.
The unaudited pro forma condensed balance sheet presents our combined
financial position with Grand and Caesars as of June 30, 1999. The unaudited pro
forma condensed balance sheet reflects the acquisition of Caesars applying the
purchase method of accounting and adjustments that are directly attributable to
the acquisition and anticipated to have a continuing impact. The pro forma
condensed balance sheet assumes we completed the Caesars' acquisition as of
June 30, 1999.
We have prepared the unaudited pro forma condensed financial statements
based upon currently available information and assumptions that we have deemed
appropriate. This pro forma information may not be indicative of what actual
results would have been, nor does the data purport to represent our and Caesars'
combined financial results for future periods.
For the purpose of preparing these pro forma financial statements, we will
undertake a study to establish the fair value of the acquired assets and
liabilities of Caesars. The allocation of the purchase price to the assets and
liabilities acquired reflected in this pro forma financial data is preliminary.
Accordingly, the actual financial position and results of operations may differ
from these pro forma amounts.
The following table sets forth the calculation of the purchase price of
Caesars and the preliminary allocation as of June 30, 1999.
(IN MILLIONS)
-------------
Purchase Price.............................................. $3,000
Other adjustments, net...................................... 9
Transaction costs and expenses.............................. 25
------
$3,034
======
S-22
The preliminary allocation of the pro forma purchase price is as follows:
Property and equipment...................................... $2,500
Goodwill.................................................... 731
Other, net.................................................. (197)
------
$3,034
======
We are currently in the process of allocating the purchase price among the
assets to be acquired and the liabilities assumed. The final purchase price and
its allocation will be based on independent appraisals, discounted cash flows,
quoted market prices and estimates by management and is expected to be completed
within one year following the Caesars acquisition.
S-23
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(IN MILLIONS)
PARK PLACE
HISTORICAL CAESARS PRO FORMA PARK PLACE
(INCLUDING GRAND) HISTORICAL ADJUSTMENTS PRO FORMA
----------------- ---------- ----------- ----------
ASSETS
Cash and cash equivalents................... $ 152 $ 75 $ -- $ 227
Restricted cash............................. 6 -- -- 6
Accounts receivable, net.................... 132 104 -- 236
Other current assets........................ 142 36 -- 178
------ ------ ------- -------
Total current assets...................... 432 215 -- 647
Investments................................. 181 56 -- 237
Property and equipment, net................. 5,250 1,990 510 (a) 7,750
Goodwill.................................... 1,278 -- 731 (b) 2,009
Goodwill--Caesars........................... -- 970 (970)(c) --
Other assets................................ 82 102 30 (d) 214
------ ------ ------- -------
Total assets.................................. $7,223 $3,333 $ 301 $10,857
====== ====== ======= =======
LIABILITIES AND EQUITY
Accounts payable and accrued expenses....... $ 345 $ 195 $ 25 (e) $ 565
Current maturities of long-term debt........ 7 11 -- 18
Income taxes payable........................ 4 32 -- 36
------ ------ ------- -------
Total current liabilities................. 356 238 25 619
Bank financing.............................. 1,430 1,536 (f) 2,929
(37)(g)
Notes and other............................. 1,056 185 1,494 (f)
(150)(h) 2,585
Deferred income taxes, net.................. 644 82 224 (i) 950
Due to parent and affiliates................ -- 1,039 (1,039)(j) --
Other non-current liabilities............... 51 37 -- 88
------ ------ ------- -------
Total liabilities......................... 3,537 1,581 2,053 7,171
------ ------ ------- -------
EQUITY
Common stock, 303 million shares
outstanding............................... 3 -- -- 3
Additional paid-in capital.................. 3,618 -- -- 3,618
Other....................................... (8) -- -- (8)
Retained earnings........................... 85 -- -- 85
Common stock in treasury at cost, 1.7
million shares............................ (12) -- -- (12)
Division equity............................. -- 1,752 (1,752)(k) --
------ ------ ------- -------
Total equity.............................. 3,686 1,752 (1,752) 3,686
------ ------ ------- -------
Total liabilities and equity.................. $7,223 $3,333 $ 301 $10,857
====== ====== ======= =======
(FOOTNOTES ON FOLLOWING PAGE)
S-24
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The following pro forma adjustments have been made to the unaudited pro
forma balance sheet as of June 30, 1999:
(a) Reflects the net increase in the carrying value of Caesars' property and
equipment to adjust those assets to their estimated fair market value.
(b) Reflects as goodwill the excess purchase price over fair value of net
tangible assets acquired and liabilities assumed.
(c) Reflects the elimination of Caesars' historical goodwill.
(d) Reflects deferred financing charges related to the notes and increased bank
facility financings.
(e) Reflects the accrual of direct merger costs related to the acquisition.
(f) Reflects the increase in long-term debt of $1.5 billion to be drawn under
our revolving credit facilities and the issuance of long-term notes in the
aggregate amount of $1.5 billion.
(g) Reflects the adjustment to the purchase price for the net working capital
adjustment, capital expenditure adjustment and the slot machine capital
lease obligations pursuant to the purchase agreement.
(h) Reflects the elimination of Caesars' 8 7/8% senior subordinated notes which
Caesars redeemed in August 1999.
(i) Reflects the deferred tax liability due to the carryover tax basis of the
assets acquired and the fair value of such assets as recorded by Park Place.
(j) Reflects the elimination of Caesars' loans due to parent and affiliates.
(k) Reflects the elimination of Caesars' equity accounts.
S-25
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PARK PLACE
HISTORICAL CAESARS PRO FORMA PARK PLACE
(INCLUDING GRAND) HISTORICAL ADJUSTMENTS PRO FORMA
----------------- ---------- ----------- ----------
Revenues
Casino...................................... $1,070 $522 $ -- $1,592
Rooms....................................... 181 59 -- 240
Food and beverage........................... 132 54 -- 186
Other revenue............................... 104 64 -- 168
------ ---- ----- ------
1,487 699 -- 2,186
------ ---- ----- ------
Expenses
Casino...................................... 558 307 -- 865
Rooms....................................... 65 16 -- 81
Food and beverage........................... 122 47 -- 169
Other expenses.............................. 353 162 -- 515
Depreciation and amortization............... 142 88 22 (c)
(14)(d) 238
Pre-opening expense......................... 10 1 -- 11
Corporate expense........................... 17 -- -- 17
------ ---- ----- ------
1,267 621 8 1,896
------ ---- ----- ------
Operating income.............................. 220 78 (8) 290
Starwood management fee..................... -- (16) 16 (e) --
Interest and dividend income................ 6 -- -- 6
Interest expense and other, net............. (58) (20) (120)(f)
17 (g) (181)
Interest expense, net from unconsolidated
affiliates................................ (6) -- -- (6)
------ ---- ----- ------
Income before income taxes and minority
interest.................................. 162 42 (95) 109
Provision for income taxes.................. 73 21 (30)(h) 64
Minority interest, net...................... 2 (2) -- --
------ ---- ----- ------
Income from continuing operations............. $ 87 $ 23 $ (65) $ 45
====== ==== ===== ======
Basic earnings per share...................... $ 0.29 $ 0.15
====== ======
Diluted earnings per share.................... $ 0.28 $ 0.15
====== ======
Basic weighted average shares outstanding..... 303 303
====== ======
Diluted weighted average shares outstanding... 306 306
====== ======
(FOOTNOTES ON FOLLOWING PAGES)
S-26
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PARK PLACE,
PARK PLACE GRAND AND
PARK PLACE GRAND PRO FORMA AND GRAND CAESARS PRO FORMA CAESARS
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------- ---------- ----------- -----------
Revenues
Casino....................... $1,587 $ 513 $ -- $2,100 $ 937 $ -- $3,037
Rooms........................ 306 34 -- 340 105 -- 445
Food and beverage............ 230 35 -- 265 101 -- 366
Management fee income........ -- 92 (92)(a) -- -- -- --
Other revenue................ 182 13 -- 195 113 -- 308
------ ------ ------- ------ ------ ------- ------
2,305 687 (92) 2,900 1,256 -- 4,156
------ ------ ------- ------ ------ ------- ------
Expenses
Casino....................... 845 169 -- 1,014 558 -- 1,572
Rooms........................ 112 16 -- 128 33 -- 161
Food and beverage............ 230 37 -- 267 88 -- 355
Other expenses............... 555 216 4 (a) 775 257 -- 1,032
Depreciation and
amortization............... 225 59 -- 284 143 44 (c)
(27)(d) 444
Impairment losses and
other...................... 29 -- (13)(b) 16 39 -- 55
Pre-opening expense.......... -- -- -- -- 42 -- 42
Corporate expense............ 7 57 (31)(a) 33 -- -- 33
------ ------ ------- ------ ------ ------- ------
2,003 554 (40) 2,517 1,160 17 3,694
------ ------ ------- ------ ------ ------- ------
Operating income............... 302 133 (52) 383 96 (17) 462
Starwood Management Fee........ -- -- -- -- (33) 33 (e) --
Interest and dividend
income..................... 21 10 (5)(a) 26 -- -- 26
Interest expense and other,
net........................ (87) (45) -- (132) (26) (240)(f)
23(g) (375)
Interest expense, net from
unconsolidated
affiliates................. (13) -- -- (13) -- -- (13)
------ ------ ------- ------ ------ ------- ------
Income before income taxes
and minority interest...... 223 98 (57) 264 37 (201) 100
Provision for income taxes... 111 27 (16)(a) 122 22 (64)(h) 80
Minority interest, net....... 3 -- -- 3 (5) -- (2)
------ ------ ------- ------ ------ ------- ------
Income from continuing
operations................... $ 109 $ 71 $ (41) $ 139 $ 20 $ (137) $ 22
====== ====== ======= ====== ====== ======= ======
Basic earnings per share....... $ 0.42 $ 0.46 $ 0.07
====== ====== ======
Diluted earnings per share..... $ 0.42 $ 0.45 $ 0.07
====== ====== ======
Basic weighted average shares
outstanding.................. 261 303 303
====== ====== ======
Diluted weighted average shares
outstanding.................. 263 306 306
====== ====== ======
(FOOTNOTES ON FOLLOWING PAGE)
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NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
The following pro forma adjustments have been made to the unaudited pro
forma statements of income for the six months ended June 30, 1999 and the year
ended December 31, 1998:
(a) Reflects the elimination of Lakes Gaming, Inc.
(b) Reflects the elimination of the transaction costs associated with our
spin-off from Hilton and our merger with Grand.
(c) Reflects the adjustment to depreciation expense due to the revaluation of
the acquired property and equipment resulting from the allocation of the
purchase price of Caesars. This adjustment also reflects the increase in
expense due to amortization of goodwill arising from our purchase of
Caesars. Goodwill is to be amortized over 40 years.
(d) Reflects the elimination of Caesars' historical goodwill.
(e) Reflects the elimination of the intercompany management fee charged by
Starwood.
(f) Reflects additional interest expense, including amortization of related
deferred finance charges, arising from expected borrowings incurred by us to
fund the purchase of Caesars. We expect to fund the acquisition with
borrowings under our revolving credit facilities. The pro forma effects of
borrowings under the revolving credit facilities, this offering, the August
1999 issuance of $300 million of 7.95% senior notes and the proposed
subsequent note offerings have been computed at a blended interest rate of
7.9%. Each 1/8% change in the rate on the borrowings would result in a
change in interest expense of $4 million for the year.
(g) Reflects the elimination of the interest expense on the Caesars World, Inc.
8 7/8% senior subordinated notes, which Caesars redeemed in August 1999, and
loans due to parent and affiliates.
(h) Reflects the tax effect of the pro forma adjustments using the statutory
rate of 35%, with the exception of the amortization of goodwill, which is
assumed to be non-deductible for tax purposes.
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SELECTED FINANCIAL DATA
In the following tables we are providing certain selected financial
information to aid you in your analysis of our company.
PARK PLACE SELECTED HISTORICAL FINANCIAL INFORMATION
We derived the following historical information from our audited financial
statements for 1995 through 1998 and unaudited financial statements for 1994 and
the six months ended June 30, 1998 and 1999 before giving effect to the
acquisition. The information is only a summary and you should read it together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our historical financial statements and related notes which are
set forth in the reports we have filed with the Commission and that are
incorporated by reference in the accompanying prospectus.
SIX MONTHS ENDED
OR AS OF JUNE 30, FISCAL YEARS ENDED OR AS OF DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
RESULTS OF OPERATIONS:
Total revenue..................... $1,487 $1,149 $2,305 $2,153 $ 970 $ 942 $ 899
Total operating income............ 220 187 302 201 92 165 162
Income from continuing
operations...................... 87 80 109 67(1) 36(2) 85 79
Income from continuing operations
per share--diluted.............. $ .28 $ .30 $ .42 $ .25 $ .18 $ .44 $ .41
OTHER OPERATING DATA:
EBITDA(3)......................... $ 372 $ 299 $ 556 $ 512 $ 216 $ 253 $ 240
Ratio of earnings to fixed
charges(4)...................... 2.6x 3.6x 2.7x 2.4x 2.1x 4.0x 3.8x
BALANCE SHEET(5):
Cash and equivalents, restricted
cash and temporary
investments..................... $ 158 $ 382 $ 234 $ 232 $ 38 $ 26
Total assets...................... 7,223 7,174 5,630 5,364 1,350 1,248
Total debt........................ 2,493 2,472 1,306 1,278 549 549
Total stockholders' equity........ 3,686 3,608 3,381 3,157 592 510
- ------------------------
(1) Includes after-tax non-recurring charges totaling $59 million related to the
recognition of impairment losses related to a riverboat casino and an
impairment loss and other costs associated with the closure of another
riverboat casino.
(2) Includes after-tax non-recurring charges totaling $23 million, primarily
related to the write-off of pre-opening expenses for a riverboat casino and
losses associated with a planned relocation of another riverboat casino.
(3) EBITDA is earnings before interest, taxes, depreciation, amortization,
pre-opening costs, non-cash items and spin-off costs in 1998, which can be
computed by adding depreciation, amortization, pre-opening costs, spin-off
costs and non-cash items to operating income. We have presented EBITDA
supplementally because we believe it provides a more complete analysis of
results of operations. We have excluded non-cash items, such as asset
write-downs and impairment losses and pre-opening costs from EBITDA as these
items do not impact operating results on a recurring basis. Pre-tax non-cash
charges totaled $16 million for the year ended December 31, 1998 and
$96 million for the year ended December 31, 1997 and relate to the
recognition of impairment losses on a riverboat casino and an impairment
loss and other costs associated with the closure of another riverboat
casino. Our pre-tax non-cash charges totaled $1 million for the year ended
December 31, 1996 and relate to the write-down of an asset to estimated fair
market value. You should not consider EBITDA as an alternative to any
measure of performance as promulgated under generally accepted accounting
principles, such as
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operating income or income from continuing operations, nor should you
consider it to be an indicator of our overall financial performance. Our
calculations of EBITDA may be different from the calculations used by other
companies and therefore comparability may be limited. Our historical
depreciation, amortization, pre-opening costs, non-cash items and spin-off
costs for the six months ended June 30, 1999 and 1998 and the years ended
December 31 1998, 1997, 1996, 1995 and 1994 totaled $152 million,
$112 million, $254 million, $311 million, $124 million, $88 million and
$78 million, respectively.
(4) We determined the ratio of earnings to fixed charges by dividing (a)
earnings before income taxes and minority interests plus fixed charges
(excluding capitalized interest) by (b) fixed charges. Fixed charges consist
of interest on indebtedness, including capitalized interest, the portion of
rental expense that is considered to be interest, and amortization of loan
expense related to long-term debt.
(5) Gives effect to the Grand merger as of December 31, 1998 and June 30, 1999.
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PROPERTIES OF CAESARS
The following table sets forth information available to us at October 1999
about the Caesars properties in which we will have interests upon consummation
of the acquisition:
APPROXIMATE APPROXIMATE
NUMBER OF CASINO
NAME LOCATION ROOMS/SUITES SQUARE FOOTAGE
- ------------------------------------ --------------------------------- ------------ --------------
DOMESTIC CASINOS
Caesars Palace Las Vegas, Nevada 2,454 125,000
Caesars Atlantic City Atlantic City, New Jersey 1,149 120,000
Caesars Indiana(1) Harrison County, Indiana --(2) 90,000
Caesars Tahoe(3) Stateline, Nevada 440 40,000
Sheraton Casino & Hotel Robinsonville, Mississippi 134 33,000
Dover Downs(4) Dover, Delaware -- 25,000
INTERNATIONAL CASINOS
Windsor Casino(5) Windsor, Canada 389 100,000
Caesars Gauteng(6) Kempton Park, South Africa -- 65,000
Sheraton Casino Sydney(10) Cape Breton, Nova Scotia, Canada -- 15,000
Sheraton Halifax Hotel & Casino(10) Halifax, Nova Scotia, Canada 350 20,000(7)
Caesars Manila(8) Manila, Philippines -- 4,000
Caesars Palace at Sea S.S. Crystal Harmony -- 3,850(9)
S.S. Crystal Symphony -- 5,000(9)
----- -------
Total 4,916 645,850
===== =======
- ------------------------
(1) Caesars Indiana is managed by Caesars and owned by a joint venture in which
Caesars owns in excess of 90% of the economic interests.
(2) A 500-room hotel tower is currently planned to be under construction in
2000.
(3) Caesars leases the building that houses the hotel and casino and leases the
underlying land under a long-term ground and structure lease.
(4) Caesars provides management services to the casino at the Dover Downs
racetrack in Delaware.
(5) Caesars has a 50% interest in Windsor Casino Limited, which operates this
hotel/casino complex. The Province of Ontario owns the complex.
(6) Caesars has an approximately 25% interest in a joint venture that owns
Caesars Gauteng and has an approximately 50% interest in a joint venture
that manages Caesars Gauteng.
(7) A permanent casino featuring approximately 33,000 square feet is currently
under construction.
(8) Caesars has a 50% interest in a joint venture which owns Caesars Manila and
receives a marketing services fee.
(9) Caesars operates the Caesars Palace at Sea casinos only while the cruise
ships on which they are located are in international waters.
(10) Caesars has a 95% interest in Metropolitan Entertainment Group, which owns
and operates the two Canadian properties.
CAESARS PALACE
Caesars Palace, which opened in 1966, is one of the premier gaming
properties in the world, attracting patrons from all over the world to its
luxurious guest rooms and 125,000 square foot casino. Caesars Palace
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is located on the corner of Las Vegas Boulevard and Flamingo Road, the "4
Corners," in the heart of the Las Vegas Strip. Caesars Palace has approximately
2,454 rooms in service, a 125,000 square foot casino including 99 table games
and 1,919 slot machines. It also has 14 restaurants and bars, 171,000 square
feet of meeting and banquet space, a 1,100-seat showroom, a 23,000 square foot
health spa, an "Omnimax" theater and the "Caesars Magical Empire," which
combines a dining experience with a unique entertainment program and theme. The
Caesars Palace property stands on approximately 80 acres, including 4.3 acres of
undeveloped land behind Caesars Palace which could be used for a number of
purposes including the expansion of the hotel, casino or meeting space.
Caesars Palace also boasts one of the premier retail shopping experiences in
all of Las Vegas, known as The Forum Shops, which is home to stores such as
Gucci, Armani and FAO Schwartz. The Forum Shops also houses world class
restaurants such as Spago and The Palm. Caesars Palace has made approximately
$594 million in maintenance and improvement capital expenditures over the past
three years to create a more exciting gaming environment, to add approximately
1,100 rooms and a new hotel tower, to add gaming space for slot machines and
table games, to construct other facilities for conventions, meeting and banquets
and to construct a new health club and spa. Caesars is currently in discussions
with the Forum Shops' developer for the construction of a third phase of the
Forum Shops, expected to add an additional 300,000 square feet of retail space.
We anticipate that the developer will bear the costs of construction and
maintenance of the new retail space.
CAESARS ATLANTIC CITY
Caesars Atlantic City is a casino/hotel complex located at the center of the
boardwalk in Atlantic City, New Jersey. Caesars Atlantic City has undergone
extensive renovation since 1996, investing approximately $420 million in
maintenance and improvement capital expenditures, to add approximately 620
additional rooms and approximately 38,000 square feet of casino space and to
enhance its convention, meeting and banquet facilities, including expanded
dining facilities, a multi-function grand ballroom and a four-story atrium. The
design incorporates an elaborate Roman theme with Corinthian columns, large
statues and extensive fountains. These improvements are expected to enhance the
appeal of Caesars Atlantic City as a convention site, as well as attract more
walk-in patrons from the boardwalk.
Caesars Atlantic City has approximately 1,149 rooms in service and a 120,000
square foot casino, including 139 gaming tables and 3,589 slot machines. It also
has 12 restaurants and bars, 34,000 square feet of meeting and banquet space, a
1,150-seat showroom, a shopping arcade, a Roman-themed transportation center
which accommodates approximately 2,100 cars and 12 buses, a health club and
tennis courts. The property on which Caesars Atlantic City stands consists of
approximately ten acres.
In August 1996, Caesars Atlantic City acquired the Ocean One retail mall for
approximately $20 million. The Ocean One mall is constructed on a pier which
extends 900 feet over the Atlantic Ocean and is located directly in front of the
Boardwalk entrance to Caesars Atlantic City. Ocean One contains approximately
400,000 square feet of restaurant and retail space on three floors. Under
current applicable local and state laws, Ocean One may not be used for gaming or
lodging activities. Development of Ocean One with gaming and lodging requires
approvals from local and state authorities and the New Jersey Casino Control
Commission.
CAESARS INDIANA
Caesars Indiana's "Glory of Rome" Riverboat is the largest riverboat casino
in the U.S. with approximately 90,000 square feet of gaming space, including 141
gaming tables and 2,791 slot machines. The riverboat commenced operations in
November of 1998 and is located near the Louisville, Kentucky border. Caesars
Indiana is currently constructing a 170,000 square foot pavilion that will house
retail space and restaurants and bars. Caesars Indiana is also planning to
construct a 500-room hotel in 2000.
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CAESARS TAHOE
Caesars Tahoe casino/hotel complex opened in 1979 and is located in
Stateline, Nevada, adjacent to Lake Tahoe. At that time, Caesars Tahoe entered
into a long-term ground and structure lease for the building that houses the
casino/hotel and the 24-acre property on which the casino/hotel stands. This
lease expires in 2004, but contains two 25-year options to renew. Caesars Tahoe
has 440 hotel rooms and suites, a 40,000 square foot casino, nine restaurants, a
1,500-seat showroom, 15,000 square feet of convention space, a Roman-themed
nightclub, bars, shops, outdoor tennis courts and an indoor health spa
containing a swimming pool and a racquetball court.
SHERATON CASINO & HOTEL
The Sheraton Casino & Hotel is located in Robinsonville, Mississippi. The
casino consists of 33,000 square feet of gaming space, including 48 gaming
tables and 1,300 slot machines. The attached hotel has approximately 134 rooms
and eight restaurants and bars.
OTHER DOMESTIC FACILITIES
Caesars is a party to a management agreement with respect to a video lottery
operation at the Dover Downs racetrack in Delaware.
INTERNATIONAL PROPERTIES
Caesars owns a 50% interest in Windsor Casino Limited, which operates the
Windsor Casino hotel/casino complex, owned by the Province of Ontario,
comprising a 100,000 square foot casino and 389 rooms, in Windsor, Ontario,
directly across the river from Detroit, Michigan. Caesars also owns a 95%
interest in Metropolitan Entertainment Group, which operates a casino at the
Sheraton Halifax Hotel & Casino in Halifax, Nova Scotia, and which also operates
the Sheraton Casino Sydney, which is a stand-alone casino, in Sydney, Cape
Breton, Nova Scotia. Metropolitan Entertainment Group funded the construction of
the Nova Scotia properties and is being repaid, with interest out of the
operating revenues generated by the properties. In addition, Caesars operates
the Caesars Gauteng in Kempton Park, Johannesburg, South Africa, Caesars Manila
in Manila, Philippines, and Caesars Palace at Sea, which it operates on two
cruise ships while they are in international waters.
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REGULATION AND LICENSING
Each of our casinos is subject to extensive regulation under laws, rules and
supervisory procedures primarily in the jurisdiction where located or docked.
Some jurisdictions, however, empower their regulators to investigate
participation by licensees in gaming outside their jurisdiction and require
access to and periodic reports respecting the gaming activities. Violations of
laws in one jurisdiction could result in disciplinary action in other
jurisdictions.
In connection with the acquisition, we and certain of our subsidiaries must
be found suitable as holding companies of subsidiaries that hold gaming
licenses. To the extent required, we have filed applications for findings of
suitability in each jurisdiction in which our subsidiaries will conduct gaming
activities. In addition, in certain jurisdictions the gaming regulatory
authorities must pre-approve the acquisition. These approvals have been obtained
in Nevada, New Jersey and Mississippi and we have filed the applications for
these approvals in all other jurisdictions. We cannot assure you that we will
obtain any of these approvals or that we will obtain any approval on a timely
basis. For a discussion of our obligations and Starwood's obligations in the
event regulatory approval is not received, see "The Acquisition--Conditions" and
"Risk Factors--Our ability to consummate the acquisition depends on, among other
things, receipt of regulatory approval, including gaming approvals in various
jurisdictions."
The information set forth below is only a summary of the regulatory
requirements applicable to us. For a more detailed description of the regulatory
requirements applicable to us, including under our Amended and Restated
Certificate of Incorporation, see "Additional Information--Regulation and
Licensing" in our Annual Report on Form 10-K for the year ended December 31,
1998, incorporated by reference in the accompanying prospectus.
Under provisions of gaming laws in which we have operations and under our
Amended and Restated Certificate of Incorporation, certain of our securities are
subject to restrictions on ownership which may be imposed by specified
governmental authorities. The restrictions may require a holder of our
securities to dispose of the securities or, if the holder refuses to dispose of
the securities, we may be obligated to repurchase the securities.
Each holder of a note, by accepting any note, will be deemed to have agreed
to be bound by the requirements imposed on holders of our debt securities by the
gaming authority of any jurisdiction in which we or any of our subsidiaries
conducts or proposes to conduct gaming activity. See "Description of Debt
Securities--Compliance with Gaming Laws." In addition, the indenture governing
the notes provides that each holder and beneficial owner thereof, by accepting
or otherwise acquiring an interest in any of the notes, will be deemed to have
agreed that if the gaming authority of any jurisdiction in which we or any of
our subsidiaries conducts or proposes to conduct gaming requires that a person
who is a holder or beneficial owner must be licensed, qualified or found
suitable under applicable gaming laws, the holder or beneficial owner will apply
for a license, qualification or finding of suitability within the required time
period. If the person fails to apply or become licensed or qualified or is found
unsuitable, we will have the right, at our option:
(1) to require the person to dispose of its notes or beneficial interest
therein within 30 days of receipt of notice of our election or an earlier
date as may be requested or prescribed by the Gaming Authority; or
(2) to redeem the notes at a redemption price equal to the lesser of:
(A) the person's cost; or
(B) 100% of the principal amount, plus accrued and unpaid interest to the
earlier of the redemption date and the date of the finding of
unsuitability, which may be less than 30 days following the notice of
redemption if so requested or prescribed by the Gaming Authority.
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We will notify the trustee under the indenture in writing of any such redemption
as soon as practicable. We will not be responsible for any costs or expenses any
such holder or beneficial owner may incur in connection with its application for
a license, qualification or finding of suitability.
NEVADA GAMING LAWS
The ownership and operation of casino gaming facilities in the State of
Nevada are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder, and various local ordinances and regulations. Our Nevada
gaming operations are subject to the licensing and regulatory control of the
Nevada Gaming Commission, the Nevada State Gaming Control Board, and, depending
on the facility's location, the Clark County Liquor and Gaming Licensing Board
and the City of Reno. The Nevada Gaming Commission, the Nevada State Gaming
Control Board, the Clark County Liquor and Gaming Licensing Board and the City
of Reno are collectively referred to as the "Nevada Gaming Authorities."
Each of our subsidiaries that currently operates a casino in Nevada is
required to be licensed by the Nevada Gaming Authorities. We are required to be
registered by the Nevada Gaming Commission as a publicly-traded corporation and
as such, we are required periodically to submit detailed financial and operating
reports to the Nevada Gaming Commission and furnish any other information that
the Nevada Gaming Commission may require.
The Nevada Gaming Commission may, in its discretion, require the holder of
any debt security of a registered publicly-traded corporation, such as the
notes, to file applications, be investigated and be found suitable to own the
debt security of such corporation. If the Nevada Gaming Commission determines
that a person is unsuitable to own the security, then pursuant to the Nevada
Gaming Control Act, the registered publicly-traded corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Gaming Commission, it:
- pays to the unsuitable person any dividend, interest or any distribution
whatsoever;
- recognizes any voting right by such unsuitable person in connection with
such securities;
- pays the unsuitable person remuneration in any form; or
- makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction.
On December 17, 1998, the Nevada Gaming Commission granted us prior approval
to make public offerings for a period of two years, subject to specified
conditions, which we refer to as the "shelf approval." On October 21, 1999, the
shelf approval was amended in conjunction with the approval of the Caesars
acquisition. The shelf approval also applies to any company we wholly own which
is a publicly-traded corporation pursuant to a public offering. The shelf
approval also includes approval for the licensed subsidiaries to guarantee any
security issued by, or to hypothecate their assets to secure the payment or
performance of any obligations evidenced by a security issued by, us or an
affiliate in a public offering under the shelf registration. The shelf approval,
however, may be rescinded for good cause without prior notice upon the issuance
of an interlocutory stop order by the Chairman of the Nevada Gaming Control
Board. The shelf approval does not constitute a finding, recommendation or
approval of the Nevada Gaming Commission or the Nevada Board as to the accuracy
or adequacy of this prospectus supplement or the investment merits of the
securities offered. Any representation to the contrary is unlawful. The public
offering of the notes will be made pursuant to the shelf approval.
We must obtain prior approval of the Nevada Gaming Commission with respect
to a change in control through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a
person whereby the person obtains control of us. Entities seeking to acquire
control of a registered publicly-traded corporation must satisfy the Nevada
Gaming Control Board and Nevada Gaming Commission in a variety of stringent
standards prior to assuming control of a registered
S-35
corporation. The Nevada Gaming Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction. The acquisition of Caesars World, Inc. and its registered and
licensed Nevada subsidiaries required the prior approval of the Nevada Gaming
Commission upon the recommendation of the Nevada Gaming Control Board. On
October 21, 1999, the Nevada Gaming Commission granted such approval.
NEW JERSEY GAMING LAWS
The ownership and operations of casino gaming facilities in Atlantic City
are subject to the New Jersey Casino Control Act, regulations of the New Jersey
Casino Control Commission and other applicable laws. No casino may operate
unless it obtains the required permits or licenses and approvals from New Jersey
Commission. The New Jersey Commission is authorized under the New Jersey Act to
adopt regulations covering a broad spectrum of gaming and gaming related
activities and to prescribe the methods and forms of applications from all
classes of licensees. The New Jersey Commission has jurisdiction similar to that
of the Nevada Gaming Commission over the holders and beneficial owners of the
debt and equity securities issued by us and may also require their investigation
and approval.
MISSISSIPPI GAMING LAWS
The ownership and operation of casino facilities in Mississippi are subject
to extensive state and local regulation, but primarily the licensing and
regulatory control of the Mississippi Gaming Commission and the Mississippi
State Tax Commission. An owner and operator of casino gaming facilities in
Mississippi and its related holding companies must register under the
Mississippi Gaming Control Act and its gaming operations are subject to the
licensing and regulatory control of the Mississippi Gaming Commission and
various local, city and county regulatory agencies. Although not identical, the
Mississippi Gaming Control Act is similar to the Nevada Gaming Control Act. The
Mississippi Gaming Commission has granted us a "shelf offering" approval that
permits us to make this note offering upon notification to the Commission Staff.
The Mississippi Gaming Commission has adopted regulations which are also similar
in many respects to the Nevada gaming regulations, including the requirement
that any person or entity who acquired any security of an owner and operator of
casino gaming facilities may be subject to a suitability finding.
LOUISIANA GAMING LAWS
The ownership and operation of a riverboat gaming vessel in the State of
Louisiana is subject to the Louisiana Riverboat Economic Development and Gaming
Control Act. The Louisiana Gaming Control Board regulates gaming activities. The
Louisiana Board is responsible for investigating the background of all
applicants seeking a riverboat gaming license, issuing the license and enforcing
the laws, rules and regulations relating to riverboat gaming activities.
The Louisiana Board must find suitable the applicant, its officers,
directors, key personnel, partners and persons holding a 5% or greater interest
in the holder of a gaming license. The Louisiana Board may, in its discretion,
also review the suitability of other security holders of, or persons affiliated
with, a licensee. This finding of suitability requires the filing of an
extensive application to the Louisiana Board disclosing personal, financial,
criminal, business and other information. Our Louisiana affiliate, Bally's
Louisiana, Inc., has filed the required forms with the Louisiana regulatory
authorities with respect to a finding of suitability.
QUEENSLAND GAMING LAWS
Queensland, Australia, like the jurisdictions discussed above, has
comprehensive laws and regulations governing the conduct of casino gaming. All
persons connected with the ownership and operation of a casino, including us,
our subsidiary that manages the Conrad Jupiters, Gold Coast and the Conrad
International Treasury Casino, Brisbane and their principal stockholders,
directors and officers, must be
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found suitable and/or licensed. The Queensland authorities have also conducted
an investigation of, and have found suitable, us and our subsidiary BI Gaming
Corporation, which holds our Australian gaming assets.
URUGUAY GAMING LAWS
Uruguay also has laws and regulations governing the establishment and
operation of casino gaming. The Internal Auditors Bureau of Uruguay, under the
authority of the Executive Power of the Oriental Republic of Uruguay, is
responsible for establishing the terms under which casino operations are
conducted, including suitability requirements of persons associated with gaming
operations, authorized games, specifications for gaming equipment, security,
surveillance and compliance. The Executive Power of the Oriental Republic of
Uruguay has authorized Baluma S.A., a corporation duly organized and existing
under the laws of the Oriental Republic of Uruguay, as owner of the Conrad
International Punta del Este Resort & Casino to conduct casino operations.
CAESARS PROPERTIES
In addition to the foregoing jurisdictions, following our acquisition of
Caesars we will also own and/ or operate properties, and be subject to the
gaming regulations, in the following jurisdictions.
DELAWARE GAMING LAWS
Video lottery operations in the State of Delaware are regulated by the
Delaware State Lottery Office through the powers delegated to the Director of
the lottery pursuant to Title 29 of the Delaware code. Under Delaware's video
lottery program, video lottery machines are permitted at Delaware's licensed
horse racing tracks.
Any person seeking to contract with the Delaware State Lottery Office for
the provision of goods or services related to video lottery operations,
including management services such as those provided by Caesars with respect to
video lottery operation at the Dover Downs race track in Delaware, must be
licensed by the Delaware State Lottery Office as a "technology provider." It is
the ongoing duty of each technology provider licensee to notify the Director of
the lottery of any change in officers, partners, directors, key employees, video
lottery operations employees or owners, collectively the "key individuals." An
owner is a person who owns, directly or indirectly, ten percent or more of an
applicant or licensee. Key individuals are subject to a background
investigation, and the failure of a key individual to satisfy a background
investigation may constitute "cause" for the suspension or revocation of the
technology provider's license.
INDIANA GAMING LAWS
Caesars' Indiana casino riverboat operations are subject to the Indiana
Riverboat Gambling Act and the licensing and regulatory control of the Indiana
Gaming Commission, as well as various local, county and state regulatory
agencies. The Indiana gaming regulations are similar to the gaming regulations
in Nevada and New Jersey.
Indiana's casino gaming laws, regulations and supervisory procedures are
extensive and reflect certain public policy considerations as to:
- the integrity of casino gaming operations and their participants;
- the need for strict governmental and regulatory control of casino gaming
operations;
- the creation of economic development, tourism, taxes and employment; and
- the maintenance and development of public confidence and trust in casino
gaming regulation and control.
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In addition, the riverboat must comply with U.S. Coast Guard requirements as
to boat design, on-board facilities, equipment, personnel and safety and must
hold a certificate of seaworthiness or must be approved by the American Bureau
of Shipping for stabilization and flotation. The U.S. Coast Guard requirements
establish design standards, set limits on the operation of the vessel and
require individual licensing of all personnel involved with the operation of the
vessel. Loss of the vessel's certificate of seaworthiness or the American Bureau
of Shipping approval would preclude its use as a floating casino. The land-based
facilities developed and used in connection with the riverboat are subject to
local zoning and building codes.
Changes to these laws, regulations and supervisory procedures could have an
adverse effect on Caesars' casino gaming operations.
ONTARIO, CANADA, GAMING LAWS
Caesars' Ontario casino gaming operations are subject to the regulatory
control of the Ontario Alcohol and Gaming Commission pursuant to the Ontario
Gaming Control Act and certain contractual obligations to the Ontario Casino
Corporation, a provincial crown corporation owned by the Province of Ontario.
Caesars owns 50% of Windsor Casino Limited, which operates the casino in
Windsor, Ontario, Canada, on behalf of the Ontario Casino Corporation, pursuant
to an operating agreement with the Ontario Casino Corporation. The operating
agreement imposes certain obligations on Windsor Casino Limited relating to the
operation of the Windsor Casino. Pursuant to a support agreement between the
shareholders of Windsor Casino Limited and the Ontario Casino Corporation, the
shareholders, including Caesars, have certain obligations relating to the
operation of Windsor Casino Limited.
Windsor Casino Limited is required under the Ontario Gaming Control Act to
be registered as a casino operator with the Ontario Alcohol and Gaming
Commission and must operate in accordance with the terms and conditions of its
registration.
Pursuant to the Ontario Gaming Control Act and the terms of Windsor Casino
Limited's registration, the Registrar of the Ontario Commission must approve any
change in the directors or officers of Windsor Casino Limited. The Ontario
Gaming Control Act also provides that the Ontario Commission may require the
submission of disclosures and informational material from any person who has an
interest in Windsor Casino Limited. This includes parent companies and their
directors and officers.
The Registrar of the Ontario Commission has the power, subject to the
Ontario Gaming Control Act, to grant, renew, suspend or revoke registrations.
The Registrar is entitled to make such inquiries and conduct such investigations
as are necessary to determine that applicants for registration meet the
requirements of the Ontario Gaming Control Act and to require information or
material from any person who has an interest in an applicant for registration.
The criteria to be considered in connection with registration under the Ontario
Gaming Control Act include the financial responsibility, integrity and honesty
of the applicant and the public interest. The Registrar may, at any time,
revoke, suspend or refuse to renew Windsor Casino Limited's registration for any
reason that would have disentitled it to registration.
Changes to these laws and regulations could have an adverse effect on
Caesars' casino gaming operations.
NOVA SCOTIA, CANADA, GAMING LAWS
Caesars' Nova Scotia casino gaming operations are subject to the regulatory
control of the Nova Scotia Gaming Control Commission pursuant to the Nova Scotia
Gaming Control Act and certain contractual obligations to the Nova Scotia Gaming
Corporation, a provincial crown corporation owned by the Province of Nova
Scotia.
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Caesars owns a 95% partnership interest in Metropolitan Entertainment Group,
which operates the Sheraton Casino Nova Scotia in Sydney and Halifax on behalf
of the Nova Scotia Gaming Corporation pursuant to an operating contract with the
Nova Scotia Gaming Corporation. The operating contract imposes certain
obligations on Metropolitan relating to the operation of the Sydney and Halifax
casinos. Caesars is also a party to the operating contract as a guarantor of
Metropolitan's obligations.
Metropolitan is required under the Nova Scotia Act to be registered as a
casino operator with the Nova Scotia Commission.
Under the Nova Scotia Act, the director of registration of the Nova Scotia
Commission must be notified, within 15 days, of any change in the officers or
directors of Sheraton Casino Nova Scotia. Sheraton Casino Nova Scotia is also
required to file a disclosure form with the director of registration within
15 days of:
- a person acquiring a beneficial interest in the business of the casino;
- a person exercising control, either directly or indirectly, over the
business of the casino; or
- a person providing financing, either directly or indirectly, to the
business of the casino.
The Nova Scotia Act also provides that the Director of Registration may
require information or material from Metropolitan or any person who has an
interest in the casino. This includes parent companies and their directors and
officers.
The Nova Scotia Commission has the power to suspend or to revoke
Metropolitan's registration, at any time, for any reason that would have
disentitled Metropolitan to obtain the registration. Grounds for suspension or
revocation include the financial responsibility, integrity and honesty of the
casino operator and its officers and directors and the public interest.
Changes to these laws and regulations could have an adverse effect on
Caesars' casino gaming operations.
PHILIPPINES GAMING LAWS
Gaming at the Caesars Club of Manila is conducted by the Philippine
Amusement and Gaming Corporation in accordance with its established rules and
regulations and pursuant to an agreement granting Caesars the exclusive right to
operate a casino out of one of the VIP rooms on the entry level of the Heritage
Hotel in Manila, referred to herein as the "exclusive agreement." The Philippine
Amusement and Gaming Corporation restricts the use of said gaming proceeds to
players provided by Caesars. In turn, Caesars agrees not to solicit the business
of any other entities to which the Philippine Amusement and Gaming Corporation
has granted the right to bring patrons to play in the Philippine Amusement and
Gaming Corporation's other casinos. For its services at the Caesars Club of
Manila, the Philippine Amusement and Gaming Corporation is paid 12.50% of gross
gaming revenues up to $10 million, 11.00% of gross gaming revenues between
$10 million and $15 million, and 10.00% of gross gaming revenues in excess of
$15 million. Caesars is subject to background checks and must provide the
Philippine Amusement and Gaming Corporation with documents necessary for this
purpose.
Under the exclusive agreement, the Philippine Amusement and Gaming
Corporation is required to provide, at its own expense, security and
surveillance personnel and facilities for the premises, including the
installation of two fixed cameras on each gaming table. If the Philippine
Amusement and Gaming Corporation is unable to comply with this obligation, and
if Caesars thereafter is unable or declines to continue providing players to
play at the premises, then the Philippine Amusement and Gaming Corporation shall
immediately cease all gaming at the premises.
Under the exclusive agreement, Caesars is obliged to pay necessary expenses
incurred by players to enable them to play at the premises, including airfare,
hotel accommodations, food and beverages,
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transportation services and other hotel expenses, whereas the Philippine
Amusement and Gaming Corporation is obliged to extend to players the same
assistance given to other persons playing under the Philippine Amusement and
Gaming Corporation's Foreign High Roller Marketing Program, including airport
facilitation/visa issuance and negotiating agreements with the hotel to provide
satisfactory accommodations services on a "best efforts" basis.
Caesars has agreed to hold the Philippine Amusement and Gaming Corporation
absolutely free and harmless from any damage, claim or liability that may arise
in connection with any agreement, dealing or transaction which Caesars may have
with the players. Caesars warrants to save the Philippine Amusement and Gaming
Corporation free and harmless from any claim and/or liability from any tax
obligations imposed upon Caesars by any taxing authority, including income
derived from performance under the agreement with the Philippine Amusement and
Gaming Corporation.
The Philippine Amusement and Gaming Corporation in turn has agreed to hold
Caesars absolutely free and harmless from any damage, claim or liability in
connection with any agreement, dealing or transaction that the Philippine
Amusement and Gaming Corporation may have with third parties for the provision
of goods and services as required under the agreement with Caesars.
The Philippine Amusement and Gaming Corporation has the right to terminate
the arrangement with Caesars at any time subject to fifteen days prior written
notice to Caesars in the event Caesars violates any term or condition of the
arrangement, including Caesars' failure to bring in qualified players. Caesars
has the right to terminate the arrangement by giving a 90-day notice to the
Philippine Amusement and Gaming Corporation at any time. Caesars shall terminate
the arrangement upon written notice to the Philippine Amusement and Gaming
Corporation at any time, effective upon receipt, if required to do so by any
government gaming authority with jurisdiction over any privileged license held
by Caesars or its affiliates.
SOUTH AFRICA GAMING LAWS
Caesars South African operations are subject to the Gauteng Gambling and
Betting Act No. 4 of 1995 and the regulations issued thereunder. Under
Section 38(1) of the Gauteng Gambling and Betting Act and regulation 20 of the
regulations issued thereunder, if an entity has directly or indirectly procured
a controlling or financial interest of 1% or more in a casino license holder in
Gauteng, then the provisions of Section 38(1) apply and the acquiring entity
will have to apply for the consent of the Gauteng Gambling Board for the holding
of such an interest.
Under Regulation 88(2) of the Gauteng Gambling and Betting Act, the
acquiring entity must apply to the Gauteng Gambling Board for consent to hold
such an interest within 14 days after the transaction closes and the interest is
procured.
The application for the consent of the Gauteng Gambling Board must be made
within a period and in a manner prescribed by the Gauteng Gambling Board. To
this end, the Gauteng Gambling Board has issued a standard application form.
In making such an application, all the relevant provisions of the Gauteng
Gambling and Betting Act relating to an application for a casino license apply.
These include:
- the application itself;
- representations by interested persons;
- response by the applicant to such representations;
- further information and oral representations;
- public inspection of the application and representations;
- obtaining of a police report;
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- the holding of a hearing in respect of the application which is open to
members of the public and where witnesses are called; and
- a decision being given on the application and conditions being applied in
the event of the application being granted.
A non-refundable license fee of R5,700.00 (approximately $913) is payable
with the application. Under Section 23 of the Gauteng Gambling and Betting Act,
the Gauteng Gambling Board may recover from the applicant all reasonable
expenses incurred by the Gauteng Gambling Board in conducting the necessary
investigation in respect of the application.
Section 38(3) of the Gauteng Gambling and Betting Act provides that where
consent is not granted, the acquiring entity shall, within the prescribed period
and in the manner prescribed or determined by the Gauteng Gambling Board,
dispose of the interest in question.
In addition, Regulation 88(1) provides that the casino license holder must
notify the Gauteng Gambling Board of the acquiring entity's identity and address
as soon as practicable after it becomes aware of the procurement of an interest
in it.
IRS REGULATIONS
The Internal Revenue Service requires operators of casinos located in the
United States to file information returns for U.S. citizens, including names and
addresses of winners, for keno and slot machine winnings in excess of stipulated
amounts. The IRS also requires operators to withhold taxes on some keno, bingo
and slot machine winnings of nonresident aliens. We are unable to predict the
extent, to which these requirements, if extended, might impede or otherwise
adversely affect operations of, and/or income from, the other games.
Regulations adopted by the Financial Crimes Enforcement Network of the
Treasury Department and the gaming regulatory authorities in some of the
domestic jurisdictions in which we operate casinos, or in which we have applied
for licensing to operate a casino, require the reporting of currency
transactions in excess of $10,000 occurring within a gaming day, including
identification of the patron by name and social security number. This reporting
obligation began in May 1985 and may have resulted in the loss of gaming
revenues to jurisdictions outside the United States which are exempt from the
ambit of these regulations.
OTHER LAWS AND REGULATIONS
Each of the casino hotels and riverboat casinos described in this prospectus
supplement is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. We believe that we have obtained all
required licenses and permits and our businesses are conducted in substantial
compliance with applicable laws except for regulatory approvals in connection
with the acquisition described above, which is currently in progress.
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DESCRIPTION OF OTHER INDEBTEDNESS
The following is a brief summary of important terms of our material
indebtedness:
REVOLVING CREDIT FACILITIES. In December 1998, we entered into two
revolving credit facilities with a syndicate of financial institutions,
providing for borrowings of up to $2.15 billion, consisting of:
- a 364-day senior unsecured revolving credit facility of up to
$650 million; and
- a five-year senior unsecured revolving credit facility of up to $1.5
billion.
At June 30, 1999, approximately $1.4 billion of the aggregate commitment was
outstanding, leaving approximately $700 million available to us at that date.
In connection with the acquisition, on August 31, 1999 we entered into a new
$2.0 billion revolving credit facility which replaced the $650 million 364-day
facility. In addition to the new $2.0 billion 364-day facility, we also entered
into a $1.0 billion 364-day facility which may be used only to provide funding
for the Caesars acquisition. Availability under the $1.0 billion facility will
be reduced by the net proceeds of any public notes we may issue. Therefore, the
facility will be reduced to an approximately $607 million revolving credit
facility upon the issuance of the $400 million notes described in this
prospectus supplement.
The 364-day revolving credit facilities mature August 2000 and the five-year
revolving credit facility matures December 2003. Both the 364-day revolving
credit facilities and the five-year revolving credit facility may be extended in
one year increments at our request with the prior written consent of the
lenders. For additional details on the terms of our revolving credit facility,
including the terms of various covenants to which we are currently subject, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in our Form 10-Q for the quarter
ended June 30, 1999.
SUBSEQUENT NOTES OFFERINGS. In connection with the acquisition, we may
issue approximately $1.2 billion in additional notes, including this offering.
The terms of these subsequent notes have not been determined. We cannot assure
you that any such notes will be issued.
HILTON DEBT. Concurrently with our spin-off from Hilton, we assumed primary
liability for $625 million of Hilton's fixed rate debt. The payment terms of
this debt assumption mirror the terms of Hilton's existing $300 million 7 3/8%
notes due 2002 and its $325 million 7% notes due 2004. We entered into
supplemental indentures with the trustee under these notes providing for our
assumption of the payment obligations under the existing indentures.
7 7/8% SENIOR SUBORDINATED NOTES DUE 2005. In December 1998, we issued
$400 million of 7 7/8% senior subordinated notes due December 2005 in a private
placement offering. The 7 7/8% notes are redeemable at any time prior to their
maturity at the redemption prices described in the indenture governing the
7 7/8% notes. The 7 7/8% notes are unsecured senior subordinated obligations and
are subordinated to all of our senior debt.
7.95% SENIOR NOTES DUE 2003. In August 1999, we issued $300 million
aggregate principal amount of 7.95% senior notes due 2003 in a private placement
offering. The 7.95% notes are redeemable at any time prior to their maturity at
the redemption prices described in the indenture governing the 7.95% notes. The
7.95% notes are unsecured senior obligations and rank equally with all of our
senior unsecured debt.
COMMERCIAL PAPER PROGRAM. We established a $1 billion commercial paper
program as of December 31, 1998. To the extent that we incur debt under this
program, we must maintain an equivalent amount of credit available under our
revolving credit facility. We have borrowed under the program for various
periods during 1999. At June 30, 1999, we had outstanding borrowings of
$24 million under the commercial paper program bearing an average interest rate
of 5.5%.
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DESCRIPTION OF NOTES
The notes offered by this prospectus supplement and the accompanying
prospectus constitute a series of debt securities, which are described more
fully in the accompanying prospectus, to be issued pursuant to an indenture
between Park Place and Norwest of Minneapolis, as trustee. The following
description of the particular terms of the notes offered hereby supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the debt securities set forth in the accompanying
prospectus. Capitalized terms used and not otherwise defined in the following
discussion are defined below under "Certain Definitions."
The following description is a summary of selected portions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of these notes. In this description, the words "Park Place" refer only
to Park Place Entertainment Corporation and not to any of its subsidiaries.
RANKING
The notes:
- are unsecured general obligations of Park Place;
- are equal in right of payment with all existing and future unsecured
senior Debt of Park Place;
- are senior in right of payment to all existing and future subordinated
Debt of Park Place.
The notes will effectively rank junior to secured indebtedness of Park
Place, if any, and to all liabilities of Park Place's subsidiaries, including
trade payables.
Assuming completion of this offering, Park Place's subsidiaries would have
had approximately $16 million of indebtedness outstanding at June 30, 1999. The
indenture will permit Park Place and its subsidiaries to incur additional Debt.
PRINCIPAL, MATURITY AND INTEREST
The notes will be limited to $400 million in aggregate principal amount.
Park Place will issue the notes in denominations of $1,000 and integral
multiples of $1,000. The notes will mature on November 15, 2006.
Interest on the notes will accrue at the rate of 8 1/2% per year. Interest
will be payable semi-annually in arrears on May 15 and November 15, beginning on
May 15, 2000. Park Place will make each interest payment to the holders of
record of the notes on the immediately preceding May 1 and November 1.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
OPTIONAL REDEMPTION
Upon not less than 30 nor more than 60 days' notice, Park Place may redeem
the notes in whole but not in part at any time at a redemption price equal to
100% of the principal amount thereof plus the Make-Whole Premium, together with
accrued and unpaid interest thereon, if any, to the applicable redemption date.
SELECTION AND NOTICE
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address.
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Notes called for redemption become due on the date fixed for redemption. On
and after the redemption date, interest ceases to accrue on notes called for
redemption.
MANDATORY REDEMPTION
Park Place will not be required to make any mandatory sinking fund payments
in respect of the notes.
ADDITIONAL COVENANTS OF PARK PLACE
The covenant provisions of the indenture described under the caption
"Description of Debt Securities" in the accompanying prospectus will apply to
the notes. In addition to the foregoing, the following covenants of Park Place
will apply to the notes for the benefit of the holders of the notes:
LIMITATION ON LIENS. Other than as set forth below under "Exempted Liens
and Sale and Lease-Back Transactions," neither Park Place nor any of its
Subsidiaries may create, assume or suffer to exist any Lien:
(1) upon any Principal Property;
(2) upon any shares of capital stock of any Restricted Subsidiary owned by
Park Place or any Restricted Subsidiary; or
(3) securing Debt of any Restricted Subsidiary,
without equally and ratably securing the notes with, or prior to, the Debt
secured by such Lien, for so long as such Debt shall be so secured,
PROVIDED, HOWEVER, that this limitation will not apply to:
(a) Liens existing on the date of issuance of the notes;
(b) Liens existing:
- on property at the time of acquisition through a merger, a
consolidation or otherwise by Park Place or a Restricted
Subsidiary; or
- Liens existing on property or securing Debt of, or Capital Stock of
any corporation, partnership or other entity at the time such
corporation, partnership or other entity becomes a Restricted
Subsidiary;
(c) Liens to secure Debt with respect to all or any part of the
acquisition cost or the cost of construction or improvement of property,
provided, such Debt is incurred and related Liens are created within
24 months of the acquisition, completion of construction or improvement or
commencement of full operation, whichever is later, and such Debt does not
exceed the aggregate amount of the acquisition cost and/or the construction
cost thereof;
(d) Liens on shares of capital stock or property of a Restricted
Subsidiary to secure Debt with respect to all or part of the acquisition
cost of such Restricted Subsidiary, provided that such Debt is incurred and
related Liens are created within 24 months of the acquisition of such
Restricted Subsidiary and such Debt does not exceed the acquisition cost of
such Restricted Subsidiary;
(e) Liens to secure Debt incurred to construct additions to, or to make
Capital Improvements to, properties of Park Place or any Restricted
Subsidiary, provided such Debt is incurred and related Liens are created
within 24 months of completion of construction or Capital Improvements and
such indebtedness does not exceed the cost of such construction or Capital
Improvements;
(f) Liens in favor of Park Place or another Restricted Subsidiary;
(g) Liens to secure Debt on which interest payments are exempt from
Federal income tax under Section 103 of the Internal Revenue Code of 1986,
as amended;
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(h) Liens on the equity interest of Park Place or any Restricted
Subsidiary in any Joint Venture or any Restricted Subsidiary which owns an
equity interest in such Joint Venture to secure Debt, provided the amount of
such Debt is contributed and/or advanced solely to such Joint Venture;
(i) any extension, renewal or replacement, in whole or in part, of any
Liens referred to in the foregoing clauses (a) through (h) or of any Debt
secured thereby, including premium, if any, provided that the aggregate
principal amount secured does not exceed:
- the greater of (1) the principal amount secured thereby at the time
of such extension, renewal or replacement, or, as the case may be,
repayment or extinguishment, and (2) 80% of the fair market value
(in the opinion of the Park Place board of directors) of the
properties subject to such extension, renewal or replacement, plus
- any reasonable fees and expenses associated with such extension,
renewal or replacement,
and provided, further, that in the case of a replacement thereof, such Debt
is incurred and related Liens are created within 24 months of the repayment
or extinguishment of the Debt or Liens referred to in the foregoing clauses
(a) through (h);
(j) purchase money liens on personal property;
(k) Liens to secure payment of workers' compensation or insurance
premiums, or relating to tenders, bids or contracts (except contracts for
the payment of money);
(l) Liens in connection with tax assessments or other governmental
charges, or as security required by law or governmental regulation as a
condition to the transaction of any business or the exercise of any
privilege or right;
(m) mechanic's, materialman's, carrier's or other like Liens, arising in
the ordinary course of business; and
(n) Liens in favor of any domestic or foreign government or governmental
body in connection with contractual or statutory obligations.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Other than as provided
below under "--Exempted Liens and Sale and Lease-Back Transactions," neither
Park Place nor any Restricted Subsidiary will enter into any arrangement with
any lessor (other than Park Place or a Restricted Subsidiary), providing for the
lease to Park Place or a Restricted Subsidiary for a period of more than three
years (including renewals at the option of the lessee) of any Principal Property
that has been or is to be sold or transferred by Park Place or such Restricted
Subsidiary to such lessor or to any other Person, and for which funds have been
or are to be advanced by such lessor or other Person on the security of the
leased property ("Sale and Lease-Back Transaction"), unless either:
(a) Park Place or such Restricted Subsidiary would be entitled, pursuant
to the provisions described in clauses (a) through (n) under "--Limitation
on Liens" above, to create, assume or suffer to exist a Lien on the property
to be leased without equally and ratably securing the notes; or
(b) an amount equal to:
- the greater of the net cash proceeds of such sale or the fair
market value of such property (in the opinion of Park Place's board
of directors), less
- the fair market value (in the opinion of Park Place's board of
directors) of any noncash proceeds of the sale of such property
(provided such noncash proceeds constitute "Principal Property,"
acquired on the date the property sold in the Sale and Lease-Back
Transaction was acquired by Park Place or any of its Restricted
Subsidiaries),
is applied within 180 days to the retirement or other discharge of the notes
or Debt ranking on a parity with the notes.
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EXEMPTED LIENS AND SALE AND LEASE-BACK TRANSACTIONS. Notwithstanding the
restrictions set forth in "--Limitation on Liens" and "--Limitation on Sale and
Lease-Back Transactions," Park Place or any Restricted Subsidiary may create,
assume or suffer to exist Liens or enter into Sale and Lease-Back Transactions
not otherwise permitted as described above, provided that at the time of such
event, and after giving effect thereto, the sum of outstanding Debt secured by
such Liens (not including Liens permitted under "--Limitation on Liens" above)
plus all Attributable Debt in respect of such Sale and Lease-Back Transactions
entered into (not including Sale and Lease-Back Transactions permitted under
"--Limitation on Sale and Lease-Back Transactions"), measured, in each case, at
the time any such Lien is incurred or any such Sale and Lease-Back Transaction
is entered into, by Park Place and Restricted Subsidiaries does not exceed 15%
of Consolidated Net Tangible Assets.
REPORTS
Whether or not required by the Commission, so long as any notes are
outstanding, Park Place will file with the applicable trustee such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 or Section 15(d) of the Exchange Act in respect
of a security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations.
COMPLIANCE WITH GAMING LAWS
Each holder of a note, by accepting any note, shall be deemed to have agreed
to be bound by the requirements imposed on holders of debt securities of Park
Place by the gaming authority of any jurisdiction of which Park Place or any of
its Subsidiaries conducts or proposes to conduct gaming activities. For a
description of the regulatory requirements applicable to Park Place, see
"Regulation and Licensing" herein, "Mandatory Disposition Pursuant to Gaming
Laws" in the accompanying prospectus and "Regulation and Licensing" in the our
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, which is
incorporated by reference in the accompanying prospectus.
EVENTS OF DEFAULT
The following additional remedy will apply to the notes: In the case of an
Event of Default arising from certain events of bankruptcy or insolvency of Park
Place, all outstanding notes will become due and payable immediately without
further action or notice by the holders of notes or the trustee.
In addition, the following event of default replaces the fifth Event of
Default identified in the accompanying prospectus under "Description of Debt
Securities--Events of Default" with respect to the notes: the acceleration of
the maturity of indebtedness of Park Place (other than Non-recourse
Indebtedness), at any one time, in an aggregate amount in excess of the greater
of (i) $25 million and (ii) 5% of Consolidated Net Tangible Assets, if such
acceleration is not annulled within 30 days after written notice to Park Place
by the trustee and the holders of at least 25% in principal amount of the
outstanding notes.
CERTAIN DEFINITIONS
"Attributable Debt" with respect to any Sale and Lease-Back Transaction that
is subject to the restrictions described under "--Limitation on Sale and
Lease-Back Transactions" means the present value of the minimum rental payments
called for during the term of the lease (including any period for which such
lease has been extended), determined in accordance with generally accepted
accounting principles, discounted at a rate that, at the inception of the lease,
the lessee would have incurred to borrow over a similar term the funds necessary
to purchase the leased assets.
"Capital Improvements" means additions to properties or renovations or
refurbishing of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof.
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"Capital Stock" means with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of Park Place and its Subsidiaries
(less applicable depreciation, amortization and other valuation reserves) after
deducting therefrom (a) all current liabilities of Park Place and its
Subsidiaries (excluding (i) the current portion of long-term indebtedness, (ii)
intercompany liabilities and (iii) any liabilities which are by their terms
renewable or extendible at the option of the obligor thereon to a time more than
12 months from the time as of which the amount thereof is being computed) and
(b) all goodwill, trade names, trademarks, patents, unamortized debt discount
and any other like intangibles, all as set forth on the most recent consolidated
balance sheet of Park Place and computed in accordance with generally accepted
accounting principles.
"Credit Facilities" means, with respect to Park Place, one or more debt
facilities or commercial paper facilities, in each case with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Debt" means notes, bonds, debentures or other similar evidences of Debt for
borrowed money or any guarantee of any of the foregoing.
"Default" means any event that after notice or lapse of time, or both, would
become an Event of Default.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Joint Venture" means any partnership, corporation or other entity, in which
up to and including 50% of the partnership interests, outstanding voting stock
or other equity interest is owned, directly or indirectly, by Park Place and/or
one or more Subsidiaries.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Make-Whole Premium" means, with respect to any note at any redemption date,
the excess, if any, of (a) the present value of the sum of the principal amount
and premium, if any, that would be payable on such note on its maturity date and
all remaining interest payments (not including any portion of such payments of
interest accrued as of the redemption date) to and including such maturity date,
discounted on a semi-annual bond equivalent basis from such maturity date to the
redemption date at a per annum interest rate equal to the sum of the Treasury
Yield (determined on the Business Day immediately
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preceding the date of such redemption), plus 50 basis points, over (b) the
principal amount of the note being redeemed.
"Non-recourse Indebtedness" means indebtedness the terms of which provide
that the lender's claim for repayment of such indebtedness is limited solely to
a claim against the property which secures such indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"Principal Property" means any real estate or other physical facility or
depreciable asset, the net book value of which on the date of determination
exceeds the greater of $25 million or 2% of Consolidated Net Tangible Assets of
Park Place.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the stated
maturity of the notes or is redeemable at the option of the holder thereof at
any time prior to the stated maturity of the notes, or is convertible into or
exchangeable for debt securities at any time prior to the stated maturity of the
notes.
"Restricted Subsidiary" means any Subsidiary of Park Place organized and
existing under the laws of the United States of America and the principal
business of which is carried on within the United States of America (x) which
owns, or is a lessee pursuant to a capital lease of, any Principal Property or
(y) in which the investment of Park Place and all its Subsidiaries exceeds 5% of
Consolidated Net Tangible Assets as of the date of such determination other
than, in the case of either clause (x) or (y), (i) each Subsidiary whose
business primarily consists of finance, banking, credit, leasing, insurance,
financial services or other similar operations, or any combination thereof, and
(ii) each Subsidiary formed or acquired after the date hereof for the purpose of
developing new assets or acquiring the business or assets of another Person and
which does not acquire any part of the business or assets of Park Place or any
Restricted Subsidiary.
"Significant Subsidiary" of Park Place means any Restricted Subsidiary of
Park Place that is a "significant subsidiary" as defined in Rule 1.02(v) of
Regulation S-X under the Securities Act.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation is, at the time, directly or
indirectly, owned by Park Place or by one or more Subsidiaries thereof, or by
Park Place and one or more Subsidiaries.
"Treasury Securities" mean any investment in obligations issued or
guaranteed by the United States government or any agency thereof.
"Treasury Yield" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the date
fixed for redemption (or, if such Statistical Release is no longer published,
any publicly available source of similar data)) most nearly equal to the then
remaining average life of the notes, provided that if the average life of the
notes is not equal to the constant maturity of a United States Treasury security
for which a weekly average yield is given, the Treasury yield shall be obtained
by linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given, except that if the average life of the notes is less than one
year,
S-48
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"wholly owned" with respect to any Subsidiary, means any Subsidiary of any
Person of which at least 99% of the outstanding Capital Stock is owned by such
Person or another wholly-owned Subsidiary of such Person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
BOOK-ENTRY SYSTEM, FORM AND DELIVERY
The notes will be represented by one or more global securities registered in
the name of Cede & Co., the nominee of the Depository Trust Company, as
"Depositary," and the provisions set forth under "Description of Debt
Securities--Denominations, Registration, Transfer and Exchange" in the
accompanying prospectus will apply to the notes.
The Depositary is a limited-purpose trust company organized under New York
banking law, a "banking organization" within the meaning of New York banking
law, a member of the United States Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary holds securities that its participants deposit with
the Depositary. The Depositary also facilitates the settlement among its
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its direct participants
and by The New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to indirect participants in the Depositary such as
securities brokers and dealers, banks and trust companies that clear through, or
maintain a custodial relationship with, a direct participant, either directly or
indirectly. The rules applicable to the Depositary and its participants are on
file with the Securities and Exchange Commission.
Purchases of the notes under the Depositary's system must be made by or
through direct participants, which will receive a credit for the notes on the
Depositary's records. The beneficial ownership interest of each actual purchaser
of each note is in turn to be recorded on the direct and indirect participants'
respective records. Beneficial owners will not receive written confirmation from
the Depositary of their purchase, but beneficial owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant through
which the beneficial owner entered into the transaction. Transfers of ownership
interest in the notes are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interest in notes except in
the event that use of the book-entry system for the notes is discontinued. As a
result, the ability of a person having a beneficial interest in the notes to
pledge such interest to persons or entities that do not participate in the
Depositary's system, or to otherwise take actions with respect to such interest,
may be affected by the lack of a physical certificate evidencing such interest.
In addition, the laws of some states require that certain persons take physical
delivery in definitive form of securities that they own and that security
interests in negotiable instruments can only be perfected by delivery of
certificates representing the instruments. Consequently, the ability to transfer
notes evidenced by the global notes will be limited to such extent.
To facilitate subsequent transfers, all notes deposited with the Depositary
by participants in the Depositary will be registered in the name of Cede & Co.
The deposit of the notes with the Depositary and their registration in the name
of Cede & Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual beneficial owners of the notes; the Depositary's records
reflect only the identity
S-49
of the direct participants to whose accounts such notes are credited, which may
or may not be the beneficial owners. The participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Payments of principal, interest and premium, if any, on the notes will be
made to Cede & Co. The Depositary's practice is to credit direct participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason to
believe that it will not receive payment on such payment date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities for the accounts of
customers in bearer form or registered in "street-name," and will be the
responsibility of each participant and not of the Depositary, the underwriters,
or Park Place, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, interest and premium, if any, to
Cede & Co. is the responsibility of Park Place or the respective trustees.
Disbursement of such payments to direct participants is the responsibility of
the Depositary, and disbursement of such payments to the beneficial owners of
the notes is the responsibility of direct and indirect participants in the
Depositary.
CERTIFICATED NOTES
The Depositary may discontinue providing its services as securities
depository with respect to the notes at any time by giving reasonable notice to
Park Place. Under such circumstances and in the event that a successor
securities depository is not obtained, certificates for the notes are required
to be printed and delivered. In addition, Park Place may decide to discontinue
use of the system of book-entry transfers through the Depositary (or a successor
securities depository). In that event, certificates will be printed and
delivered.
Park Place will not have any responsibility or obligation to participants in
the Depositary or the persons for whom they act as nominees with respect to the
accuracy of the records of the Depositary, its nominee or any direct or indirect
participant with respect to any ownership interest in the notes, or with respect
to payments to or providing of notice for the direct participants, the indirect
participants or the beneficial owners of the notes.
The information contained herein under the caption "Description of
Notes--Book-Entry System, Form and Delivery" concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that Park Place
believes to be reliable. Neither Park Place, the trustee nor the underwriters,
dealers or agents take responsibility for the accuracy or completeness of this
information.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
Settlement for the notes will be made by the underwriters in immediately
available funds. Payments in respect of the notes represented by global notes
(including principal, premium, if any, and interest) will be made in immediately
available funds to the accounts specified by the Depositary. With respect to
notes represented by Certificated Notes, Park Place will make all payments of
principal, premium, if any, and interest, by mailing a check to the registered
address of each holder of such notes. The notes will trade in the Depositary's
Same-Day Funds Settlement System until maturity, or until the notes are issued
in certificated form, and secondary market trading activity in the notes will
therefore be required by the Depositary to settle in immediately available
funds. No can provide no assurance as to the effect, if any, of settlement in
immediately available funds on trading activity in the notes.
S-50
UNDERWRITING
Subject to the terms and conditions set forth in the purchase agreement
among us and the underwriters in the table below, we have agreed to sell to the
underwriters, and each of the underwriters severally and not jointly has agreed
to purchase from us, the aggregate principal amount of the notes set forth
opposite its name below. The underwriters have agreed, subject to the terms and
conditions set forth in the purchase agreement, to purchase all of the notes
being sold pursuant to that agreement if any of the notes being sold pursuant to
that agreement are purchased.
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- ----------- ----------------
Merrill Lynch, Pierce Fenner & Smith
Incorporated...................................... $120,000,000
Banc of America Securities LLC.............................. 100,000,000
Deutsche Bank Securities Inc................................ 60,000,000
SG Cowen Securities Corporation............................. 22,000,000
Scotia Capital (USA) Inc.................................... 22,000,000
BNY Capital Markets, Inc.................................... 18,000,000
First Union Securities, Inc................................. 18,000,000
PNC Capital Markets, Inc.................................... 18,000,000
Bear, Stearns & Co. Inc..................................... 12,000,000
Norwest Investment Services, Inc............................ 10,000,000
------------
Total............................................. $400,000,000
============
The purchase agreement provides that the obligations of the underwriters to
pay for and accept delivery of the notes are subject to, among other conditions,
the delivery of specified legal opinions by their counsel.
We will indemnify the underwriters against liabilities incurred in
connection with the offering, and will contribute to payments that the
underwriters may be required to make in connection with the offering.
The underwriters propose initially to offer the notes directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement, and to certain dealers at such price less a concession not in excess
of .375% of the principal amount of the notes. The underwriters may allow, and
such dealers may reallow, a discount not in excess of .25% of the principal
amount of the notes to certain other dealers. After the initial offering of the
notes, the offering price, concession and discount may be changed.
In connection with the offering, certain persons participating in the
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the notes after the offering. Specifically, the underwriters may
bid for and purchase the notes in the open market to stabilize the price of the
notes. The underwriters may also overallot this offering, creating a syndicate
short position. In addition, the underwriters may bid for and purchase the notes
in market-making transactions and impose penalty bids. These activities may
stabilize or maintain the market price of the notes above market levels that may
otherwise prevail. The underwriters are not required to engage in these
activities and, if commenced, may end these activities at any time. Neither we
nor the underwriters make any representation or prediction as to the magnitude
or direction of any effect these transactions may have on the price of the
notes.
There is no public trading market for the notes and we do not intend to
apply for listing of the notes on any national securities exchange or for
quotation of the notes on any automated dealer quotation system. We have been
advised by the underwriters that they presently intend to make a market in the
notes after the consummation of the offering, although they are under no
obligation to do so and may discontinue any market-making activities at any time
without any notice. Prior to the offering, there has
S-51
been no active market for the notes. No assurance can be given as to the
liquidity of, or trading market for, the notes or an active public market for
the notes to develop. If an active trading market for the notes does not
develop, the market price and liquidity of the notes may be adversely affected.
If the notes are traded, they may trade at a discount from their initial
offering price, depending on prevailing interest rates, the market for similar
securities, our performance and certain other factors.
Some of the underwriters and their affiliates have provided investment and
commercial banking and financial advisory services from time to time for us in
the ordinary course of business for which they have received customary fees. Any
of the underwriters or their respective affiliates may in the future engage in
investment banking or other transactions of a financial nature with us or our
affiliates, including the provision of advisory services and the making of loans
to us or our affiliates, for which they would receive customary fees or other
payments.
LEGAL MATTERS
Latham & Watkins, Los Angeles, California, will pass upon various legal
matters for us relating to the issuance and sale of the notes. Cahill Gordon &
Reindel (a partnership including a professional corporation), New York, New
York, will pass upon various legal matters for the underwriters relating to the
offering.
INDEPENDENT PUBLIC ACCOUNTANTS
The combined consolidated financial statements of Starwood Hotels and
Resorts Worldwide, Inc. Gaming Operations To Be Sold To Park Place Entertainment
Corporation as of December 31, 1998 and 1997 and for the years then ended,
included in this prospectus supplement, have been audited by Arthur Andersen
LLP, independent public accountants, as stated in their report appearing herein.
In that report, that firm states that, with respect to Sheraton Halifax and
Sheraton Sydney, their opinion is based on the report of Ernst & Young LLP.
S-52
INDEX TO FINANCIAL STATEMENTS
PAGE
--------
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. GAMING OPERATIONS
TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
Report of Independent Public Accountants.................. F-2
Auditors' Report.......................................... F-3
Combined Consolidated Balance Sheets at June 30, 1999
(unaudited) and December 31, 1998 and 1997.............. F-4
Combined Consolidated Statements of Income for the six
months ended June 30, 1999 and 1998 (unaudited) and the
years ended December 31, 1998 and 1997.................. F-5
Combined Consolidated Statement of Comprehensive Income
for the six months ended June 30, 1999 and 1998
(unaudited) and the years ended December 31, 1998 and
1997.................................................... F-6
Combined Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and 1998 (unaudited) and the
years ended December 31, 1998 and 1997.................. F-7
Notes to Combined Consolidated Financial Statements....... F-8
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Starwood Hotels & Resorts Worldwide, Inc.:
We have audited the accompanying combined consolidated balance sheets of
Starwood Hotels & Resorts Worldwide, Inc. Gaming Operations To Be Sold to Park
Place Entertainment Corporation (the "Company") as described in Note 1 to the
Financial Statements as of December 31, 1998 and 1997, and the related combined
consolidated statements of operations, comprehensive income and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Sheraton Casinos Nova Scotia, which includes: the Sheraton Halifax
and Sheraton Sydney, which statements reflect total assets, total revenues and
operating income of 2.0%, 3.3% and 16.0% in 1998, and 1.6%, 3.9% and 18.2% in
1997, respectively of the consolidated totals. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for those entities, is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of the Company as described in Note 1 to the Financial
Statements as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the years then ended, in conformity with
generally accepted accounting principles.
As explained in the Note 2 to the Financial Statements, effective
January 1, 1997, the Company changed its method of accounting for start-up
costs.
ARTHUR ANDERSEN LLP
New York, New York
May 21, 1999
F-2
AUDITORS' REPORT
To the Partners of METROPOLITAN
ENTERTAINMENT GROUP, OPERATING
AS SHERATON CASINOS NOVA SCOTIA
We have audited the balance sheets of METROPOLITAN ENTERTAINMENT GROUP
OPERATING AS SHERATON CASINOS NOVA SCOTIA (the "Partnership") as at
December 31, 1998 and 1997, and the statements of income, partners' equity and
cash flow for the years then ended (not included herein). These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the partnership as at December 31, 1998 and
1997, and the results of its operations and the changes in its financial
position for the years then ended in accordance with accounting principles
generally accepted in Canada.
Ernst & Young, LLP
Chartered Accountants
Halifax, Canada
January 29, 1999
F-3
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF DECEMBER 31,
----------------------- AS OF
1998 1997 JUNE 30, 1999
---------- ---------- --------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 102,664 $ 63,488 $ 75,020
Receivables, net....................................... 122,860 136,933 104,233
Inventories............................................ 15,341 16,226 15,415
Prepaid expenses and other............................. 31,884 39,892 20,481
---------- ---------- ----------
Total current assets..................................... 272,749 256,539 215,149
---------- ---------- ----------
Property and equipment, net.............................. 1,992,590 1,767,408 1,989,862
Goodwill, net............................................ 983,748 1,010,389 970,085
Investments.............................................. 47,898 17,684 55,963
Other assets............................................. 92,729 90,933 101,561
---------- ---------- ----------
$3,389,714 $3,142,953 $3,332,620
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses.................. $ 216,620 $ 234,098 $ 195,156
Current maturities of long-term debt and capital
leases............................................... 10,212 4,033 10,615
Accrued taxes payable.................................. 28,469 34,533 32,075
---------- ---------- ----------
Total current liabilities................................ 255,301 272,664 237,846
Due to parent and affiliates............................. 1,134,157 886,811 1,038,487
Long-term debt and capital leases, net of current
maturities............................................. 165,815 166,444 185,362
Deferred income taxes, net............................... 79,717 63,037 82,482
Other non-current liabilities............................ 31,156 38,296 27,489
Commitments and Contingencies
Minority interest........................................ 11,167 3,641 9,002
Shareholder's equity:
Starwood/ITT investment................................ 1,227,264 1,227,264 1,227,264
Retained earnings...................................... 489,014 483,303 526,304
Cumulative translation adjustment...................... (3,877) 1,493 (1,616)
---------- ---------- ----------
Total shareholder's equity............................... 1,712,401 1,712,060 1,751,952
---------- ---------- ----------
Total liabilities and shareholder's equity............... $3,389,714 $3,142,953 $3,332,620
========== ========== ==========
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-4
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------- -------------------
1998 1997 1999 1998
---------- ---------- -------- --------
(UNAUDITED)
Revenues:
Casino......................................... $ 936,649 $ 898,244 $521,706 $435,199
Hotel.......................................... 104,968 57,302 59,031 50,963
Food and beverage.............................. 101,190 68,416 54,347 49,155
Earnings of unconsolidated affiliate........... 16,151 14,040 18,051 7,647
Other.......................................... 97,622 85,165 45,787 44,572
---------- ---------- -------- --------
Total revenues................................... 1,256,580 1,123,167 698,922 587,536
Costs and expenses:
Casino......................................... 527,597 537,064 293,125 247,747
Hotel.......................................... 32,570 18,724 16,226 15,243
Food and beverage.............................. 87,998 60,177 46,606 42,592
Other operating expenses....................... 50,094 51,387 32,171 25,761
Selling, general and administrative............ 207,886 167,735 129,413 95,774
Pre-opening expenses........................... 41,661 20,878 934 26,469
Depreciation and amortization.................. 143,291 73,854 87,646 60,153
Provision for doubtful accounts................ 29,903 39,065 14,242 13,618
Special charges................................ 39,000 62,481 -- --
---------- ---------- -------- --------
Total costs and expenses......................... 1,160,000 1,031,365 620,363 527,357
Operating income before management service
fees......................................... 96,580 91,802 78,559 60,179
---------- ---------- -------- --------
Management service fees........................ 32,705 28,711 15,719 15,748
Operating income................................. 63,875 63,091 62,840 44,431
Other (income) expense:
Interest expense, net.......................... 26,143 11,053 20,239 10,728
Minority interest.............................. (10,675) 632 (2,165) (2,146)
---------- ---------- -------- --------
Income before income taxes and cumulative effect
of accounting change........................... 48,407 51,406 44,766 35,849
Provision for income taxes..................... 28,507 30,335 21,396 17,979
---------- ---------- -------- --------
Income before cumulative effect of accounting
change......................................... 19,900 21,071 23,370 17,870
Cumulative effect of accounting change........... -- 5,180 -- --
---------- ---------- -------- --------
Net income....................................... $ 19,900 $ 15,891 $ 23,370 $ 17,870
========== ========== ======== ========
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-5
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- -------------------
1998 1997 1999 1998
-------- -------- -------- --------
(UNAUDITED)
Net income.............................................. $19,900 $15,891 $23,370 $17,870
Other comprehensive income (loss)
Foreign currency translation arising during the
period.............................................. (5,370) (458) 2,261 (1,381)
------- ------- ------- -------
Comprehensive income.................................... $14,530 $15,433 $25,631 $16,489
======= ======= ======= =======
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-6
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------- ----------------------
1998 1997 1999 1998
--------- ---------- --------- ----------
(UNAUDITED)
Cash flows from operating activities:
Net income.......................................... $ 19,900 $ 15,891 $ 23,370 $ 17,870
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization..................... 143,291 73,854 87,646 60,153
Provision for doubtful accounts................... 29,903 39,065 14,242 13,618
Special charges................................... 39,000 35,472 -- --
Earnings in excess of distributions from
unconsolidated affiliates....................... (8,104) (7,277) (7,381) (3,828)
Changes in assets and liabilities due to operating
activities:
Receivables, net................................ (30,030) (49,476) 4,385 13,542
Inventories..................................... 885 (2,207) (74) (260)
Prepaid expenses and other...................... (16,792) (29,998) 11,403 6,291
Accounts payable and accrued expenses........... (17,478) 53,559 (26,183) (54,089)
Accrued and deferred income taxes............... 10,616 31,641 25,011 19,985
Other, net........................................ (7,993) (34,453) (15,718) (28,499)
--------- ---------- --------- ----------
Net cash provided by operating activities... 163,198 126,071 116,701 44,783
Cash flows from investing activities:
Purchases of property and equipment............... (329,946) (672,414) (65,776) (200,064)
Investments in joint ventures..................... (22,110) -- (684) --
--------- ---------- --------- ----------
Net cash used in investing activities....... (352,056) (672,414) (66,460) (200,064)
Cash flows from financing activities:
Proceeds from long-term borrowings................ 6,831 26,022 19,950 --
Payments of long-term borrowings.................. (1,281) (27,721) -- (2,844)
Net (payments) borrowings from affiliates......... 247,346 574,956 (95,670) 190,737
Payment of dividends and equity transactions with
affiliates...................................... (14,188) (36,829) -- (2,145)
Minority interest................................. (10,674) 2,237 (2,165) (15,117)
--------- ---------- --------- ----------
Net cash (used in) provided by financing
activities................................ 228,034 538,665 (77,885) 170,631
Increase (decrease) in cash and cash equivalents.... 39,176 (7,678) (27,644) 15,350
Cash and cash equivalents at the beginning of
year.............................................. 63,488 71,166 102,664 63,488
--------- ---------- --------- ----------
Cash and cash equivalents at the end of year........ $ 102,664 $ 63,488 $ 75,020 $ 78,838
========= ========== ========= ==========
Supplemental cash flow disclosures:
Interest paid to third parties, net of amounts
capitalized..................................... $ 1,932 $ -- $ 5,447 $ 747
========= ========== ========= ==========
Income taxes paid................................. $ 17,077 $ 10,335 $ 19,442 $ 6,282
========= ========== ========= ==========
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-7
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements include certain gaming operations of Starwood
Hotels & Resorts Worldwide, Inc. ("Starwood") to be sold to Park Place
Entertainment Corporation ("PPE") pursuant to a definitive agreement entered
into between Starwood and PPE on April 27, 1999. The gaming operations include
Caesars World, Inc., comprised primarily of Caesars Palace, Caesars Atlantic
City, Caesars Tahoe, Caesars Indiana, and its equity investments in casinos in
South Africa, Manila and Canada, and the Sheraton Tunica, Sheraton Halifax and
Sheraton Sydney (collectively the "Company"). All significant intercompany
balances and transactions within the Company have been eliminated. Investments
in unconsolidated affiliates are stated at cost adjusted by equity in
undistributed earnings.
Prior to February 23, 1998, the Company was owned by ITT Corporation ("ITT")
upon which date ITT was acquired by Starwood ("ITT Merger"). The acquisition was
treated as a reverse purchase for financial accounting purposes, whereupon, ITT
continued as the surviving corporation for accounting purposes. Accordingly, no
adjustments have been made to the carrying amounts of assets and liabilities as
a result of the Starwood acquisition.
INTERIM FINANCIAL INFORMATION
The combined consolidated financial statements for the six months ended
June 30, 1999 and 1998 included herein have been prepared by the Company,
without audit. Certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the disclosures
are adequate to make the information presented not misleading. In the opinion of
management, all adjustments (which include normal recurring adjustments)
necessary for a fair statement of results for the interim periods have been
made. The results for the six-month periods are not necessarily indicative of
results to be expected for the full fiscal year.
NATURE OF OPERATIONS
The Company is primarily engaged in the ownership, operation and development
of gaming facilities. The Company's gaming operations are located in several key
domestic jurisdictions and in certain countries outside the United States.
CASINO REVENUE AND PROMOTIONAL ALLOWANCES
Casino revenue represents the net win from gaming wins and losses. Revenue
excludes the retail value of rooms, food, beverage, entertainment and other
promotional allowances provided on a complimentary basis to customers. The
estimated retail value of these promotional allowances was $174,267 and $139,979
F-8
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for the years ended December 31, 1998 and 1997, respectively. The estimated
costs of providing such promotional allowances have been classified primarily as
casino costs and expenses as follows:
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
Rooms................................................... $ 27,391 $ 21,789
Food and beverage....................................... 86,271 77,702
Other operating expenses................................ 10,807 11,173
-------- --------
$124,469 $110,664
======== ========
CURRENCY TRANSLATION ADJUSTMENT
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the year-end exchange rates and the related translation gains
and losses are reflected in shareholder's equity.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
GOODWILL
Goodwill arose in connection with the acquisition of Caesars World, Inc. by
ITT in 1995 and is amortized using the straight-line method over 40 years.
Accumulated amortization was $108,248 and $80,542 at December 31, 1998 and 1997,
respectively.
The Company periodically reviews the carrying value of goodwill to assess
recoverability from future operations using undiscounted cash flows. Impairments
would be recognized in operating results if a permanent diminution in value is
deemed to have occurred.
INVENTORIES
Inventories are stated at the lower of cost or market, determined
principally on the first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and includes interest on funds
borrowed to finance construction. Capitalized interest was $11,381 and $24,878
in 1998 and 1997, respectively. Depreciation and amortization are provided for
on the straight-line method over the following estimated useful lives:
Buildings and improvements.................... 5 to 40 years
Leasehold improvements........................ 3 to 40 years
Furniture, fixtures and equipment............. 2 to 10 years
Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance charges are expensed as
incurred. The cost and related accumulated depreciation applicable to assets
retired are removed from the accounts and the gain or loss on disposition is
recognized in income.
F-9
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company reviews the carrying value of its assets when events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. If it is determined that an impairment loss has occurred based upon
expected undiscounted cash flows, then a loss is recognized in the income
statement reducing the carrying amount of the asset to fair value.
AMORTIZATION OF LOAN COSTS
Debt discount and loan issuance costs in connection with long-term debt are
capitalized and amortized to interest expense during the period the debt is
outstanding using the effective interest method.
INCOME TAXES
The Company's domestic operations are in Starwood's consolidated Federal
income tax return. The Company records income taxes based upon the amount that
would have been incurred had each company filed a separate return. The Company
accounts for income taxes according to Statement of Financial Accounting
Standards No. 109. Deferred income taxes are provided for temporary differences
between book and tax recognition of revenues and expenses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company extends credit to certain casino patrons, a substantial portion
of whom reside in countries other than the United States, following background
investigations and evaluation of credit worthiness. The Company maintains an
allowance for doubtful casino accounts receivable which is based on management's
estimate of the amount expected to be uncollectible considering historical
experience and the information management obtains regarding the credit
worthiness of the customer. The collectibility of these receivables could be
affected by future business or economic trends or other significant events in
the countries in which such customers reside. Although management believes the
allowance is adequate, the estimated amount of cash collections with respect to
the casino accounts receivable could change.
NOTE 2. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1997, the Company changed its method of accounting for
start-up costs on major gaming projects to expense these costs as incurred.
Prior to 1997, the Company capitalized these costs and amortized them over a
three-year period. The Company's 1997 results include a charge of $7,970 before
income taxes of $2,790 as the cumulative effect of this accounting change.
NOTE 3. SPECIAL CHARGES
In 1998, the Company abandoned plans to develop a shared services group
within the gaming business and wrote-off its investment relating to information
systems under development which aggregated approximately $24.8 million.
Additionally, reserves related to certain casino accounts receivables have been
recorded as special charges (See Note 5).
F-10
NOTE 3. SPECIAL CHARGES (CONTINUED)
In November 1997, ITT entered into a definitive agreement to be acquired by
Starwood. As a result, the Company recorded a special charge of approximately
$27 million relating to the conversion of the accounting for stock options
issued to employees of the Company under the ITT Stock Option Plan to variable
accounting due to limited stock appreciation rights subject to exercise.
In 1997, the Company also deferred or abandoned a number of potential
development projects and wrote-off costs associated with such projects which
aggregated approximately $35.5 million. The decision to defer or abandon such
projects resulted from the uncertainties caused by the potential change in
control of ITT following Hilton Hotels Corporation unsolicited takeover offer in
February 1997.
NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"("SFAS 130"). SFAS
130 establishes new rules for the reporting and displaying of comprehensive
income and its components. The Company has included the required statements of
comprehensive income in the accompanying financial statements.
In 1998, the Company adopted Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information". The
Statement requires the Company to report segment financial information
consistent with the presentation made to the Company's management for decision
making purposes. The Company is managed as one segment and all revenues are
derived solely from casino operations and related activities.
For the years ended December 31, 1998 and 1997, approximately 6% of total
revenues and approximately 46% and 48%, respectively, of operating income was
derived from the Company's foreign operations.
NOTE 5. RECEIVABLES
Components of receivables were as follows:
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
Accounts and notes receivable
Casino................................................ $135,992 $181,137
Hotel................................................. 13,092 8,067
Other................................................. 22,989 15,218
-------- --------
172,073 204,422
Less allowance for doubtful accounts.................... (49,213) (67,489)
-------- --------
$122,860 $136,933
======== ========
In the third quarter of 1998, due to the economic deterioration in Asia, the
Company recorded an additional marker reserve of approximately $14 million.
At December 31, 1998 and 1997, approximately 58% and 61%, respectively, of
the Company's casino receivables were from customers whose primary residence is
outside the United States with one country making up approximately 22% of the
total gross casino receivables.
F-11
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
AT DECEMBER 31,
-----------------------
1998 1997
---------- ----------
Land................................................. $ 423,757 $ 368,101
Buildings and improvements........................... 1,247,054 705,699
Leasehold improvements............................... 72,261 64,446
Furniture, fixtures and equipment.................... 434,048 222,507
Construction in progress............................. 58,346 549,832
---------- ----------
2,235,466 1,910,585
Less accumulated depreciation and amortization....... (242,876) (143,177)
---------- ----------
$1,992,590 $1,767,408
========== ==========
NOTE 7. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
In 1998, Caesars World, Inc. entered into a joint venture agreement with
Global Resorts, Inc., and the Black Empowerment Group to operate Caesars
Gauteng, a temporary casino, located in Johannesburg, South Africa. The
permanent casino, being built on the same site, is expected to be completed in
2000. The Company is to receive 50% of the management fee, based on 5% of net
revenues. During 1998, the Company contributed $22,111, representing its 25%
ownership interest in the joint venture. The temporary facility opened in the
middle of December 1998, therefore, the joint venture had no significant income
or losses from operations for the year.
In 1993, Caesars World, Inc. entered into a 50/50 joint venture agreement
with Hilton Hotels Corporation to operate Windsor Casino, Limited located in
Windsor, Canada. As of December 31, 1998 and 1997, Caesars World, Inc.'s
investment in this joint venture was $25,787 and $17,684, respectively. For the
years ended December 31, 1998 and 1997, Caesars World, Inc. earned income of
$16,151 and $14,040, respectively, in relation to this joint venture. No cash
advances have been made by Caesars World, Inc. to this joint venture during 1998
and 1997.
NOTE 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
Accounts payable........................................ $ 20,775 $ 15,165
Chip float.............................................. 23,848 23,895
Construction payable.................................... 24,693 75,095
Accrued salaries, wages and employee benefits........... 40,779 27,607
Other accrued expenses.................................. 106,525 92,336
-------- --------
$216,620 $234,098
======== ========
F-12
NOTE 9. LONG-TERM DEBT
Long-term debt including capital leases consisted of the following:
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
Senior subordinated notes, due August 15, 2002, at 8 7/8
percent payable semi-annually in February and August...... $150,000 $150,000
Note payable to vendor due November 1999, in monthly
installments of $158, including interest at 10% per
annum..................................................... 1,655 1,655
Mortgage note, due September 2011, in monthly installments
of $100, including interest at 10% per annum; with a
balloon payment of $500 at September 25, 2011............. 807 842
Harrison County Facility Loan, due ratably over three-year
period beginning 1999, including interest at 8% per
annum..................................................... 1,798 --
Capital lease obligations (See Note 11)..................... 21,767 17,980
-------- --------
176,027 170,477
Less current maturities..................................... (10,212) (4,033)
-------- --------
$165,815 $166,444
======== ========
On August 15, 1992, Caesars World, Inc. issued $150,000 of 8 7/8 percent
Senior Subordinated Notes (the "Notes") that mature in 2002. The Notes are
subordinated to all senior indebtedness (as defined in the Indenture) and the
Notes are effectively subordinated to liabilities of the Company's subsidiaries
and are senior in the right of payment to other subordinated indebtedness. The
Notes are redeemable at the Company's option, in whole or in part, beginning
August 15, 1997, at a premium price of 103.27 percent, declining annually to par
at August 15, 2000, and thereafter. The original issue discount and costs are
being amortized over the term of the Notes.
The Notes contain covenants, among others, that require the maintenance of
certain financial ratios and include restrictions on the Company and its
subsidiaries with respect to additional debt, dividends, stock repurchases,
sales of certain assets, investments and capital expenditures, mergers,
consolidations and similar transactions, liens, acquisitions, disposition of
property, and prepayment of other debt.
The annual maturities of long-term debt, excluding capital leases, as of
December 31, 1998, follow:
YEAR ENDING DECEMBER 31,
- ------------------------
1999........................................................ $ 2,870
2000........................................................ 619
2001........................................................ 21
2002........................................................ 150,023
2003........................................................ 26
Thereafter.................................................. 701
--------
$154,260
========
F-13
NOTE 10. INCOME TAXES
The Company determines its provision for income taxes and related asset and
liability accounts on a separate entity basis. Income tax data from continuing
operations is as follows:
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
Pretax income
U.S.................................................. $21,000 $21,291
Foreign.............................................. 27,407 30,115
------- -------
$48,407 $51,406
======= =======
Provision (benefit) for income tax
Current:
Federal.............................................. $ 2,784 $ 1,288
State................................................ (2,851) 779
Foreign.............................................. 11,867 12,960
------- -------
Total Current.......................................... 11,800 15,027
Deferred:
Federal.............................................. 15,226 14,760
State................................................ 1,481 548
Foreign.............................................. -- --
------- -------
Total Deferred......................................... 16,707 15,308
------- -------
$28,507 $30,335
======= =======
The income tax effects of temporary differences between financial and income
tax reporting that gave rise to deferred income tax assets and liabilities were
as follows:
AT DECEMBER 31,
---------------------
1998 1997
--------- ---------
Deferred tax assets:
Bad debt reserves................................... $ 17,465 $ 24,225
Deferred compensation............................... 9,453 9,453
Accrued expenses.................................... 22,344 19,225
Other............................................... 39,669 46,244
--------- ---------
Total deferred tax asset.............................. 88,931 99,147
--------- ---------
Deferred tax liabilities:
Depreciation........................................ (35,348) (28,598)
Asset basis difference.............................. (100,587) (100,587)
Other............................................... (32,713) (32,999)
--------- ---------
Total deferred tax liability.......................... (168,648) (162,184)
--------- ---------
Net deferred tax liability............................ $ (79,717) $ (63,037)
========= =========
F-14
NOTE 10. INCOME TAXES (CONTINUED)
The provision for income taxes differed from the amount computed at the
statutory rate of 35% as follows:
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
Federal................................................... $16,942 $17,992
State income taxes, net of federal benefit................ (891) 863
Foreign income taxes in excess of the statutory rate...... 2,275 2,420
Non-deductible goodwill................................... 9,495 9,506
Other, net................................................ 686 (446)
------- -------
$28,507 $30,335
======= =======
NOTE 11. LEASES
The Caesars Tahoe land and building are leased pursuant to an operating
lease which expires in 2004 and is renewable for two additional 25-year periods.
The lease provides for a minimum rent of $2,831 for the period from August 1,
1997 to July 1, 1998, increasing by $75 per year on August 1, 1998 and in each
subsequent year, and for percentage rent of 20 percent of the casino/hotel's net
profit (as therein defined). Percentage rent expense included in selling,
general and administrative expenses was $1,614 and $949 for the years ended
December 31, 1998 and 1997, respectively. The aggregate fixed lease payments,
including amounts paid on a mortgage note retired in prior years, are amortized
on a straight-line basis over the remaining initial lease term. At December 31,
1998 and 1997, there was $5,318 and $6,516, respectively, of prepaid rent
included in "Other Assets" related to this lease.
At December 31, 1998, the Company was obligated under non-cancelable
operating leases and capital leases to make future minimum lease payments as
follows:
YEAR ENDING DECEMBER 31, OPERATING CAPITAL
- ------------------------ --------- --------
1999..................................................... $ 5,351 $ 7,342
2000..................................................... 5,045 7,150
2001..................................................... 4,785 7,149
2002..................................................... 4,623 2,188
2003..................................................... 4,250 917
Thereafter............................................... 9,600 --
------- -------
Total minimum lease payments............................. $33,654 $24,746
======= =======
Less amount representing interest........................ (2,979)
Present value of minimum lease payments.................. 21,767
Less current maturities.................................. 7,342
-------
Long-term obligations.................................... $14,425
=======
F-15
NOTE 11. LEASES (CONTINUED)
Rental expense was comprised of the following:
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
Minimum rentals under lease obligations................... $ 7,876 $ 7,868
Less sublease income...................................... (2,158) (1,889)
Contingent rentals under operating and capital leases..... 2,123 1,800
------- -------
$ 7,841 $ 7,779
======= =======
NOTE 12. STOCK OPTIONS
The Company participates in its parent's stock option plans. The Company
applies APB Opinion No. 25 and related interpretations in accounting for
stock-based compensation plans. Accordingly, compensation expense recognized was
different than what would have otherwise been recognized under the fair value
based method defined in SFAS No. 123, "Accounting for Stock-Based Compensation."
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, the Company's net income would
have been reduced to the pro forma amount of $13,312 for the year ended December
31, 1998. The fair value of the option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1998: dividend yield of 3.0%; expected volatility
of 47.6%; risk-free interest rate of 4.5%; and expected lives of three to four
years for all options.
At the date of the ITT Merger, each ITT stock option and related stock
appreciation right that was outstanding became fully exercisable. In November
1997, due to the election of the holder of each ITT stock option to receive
cash, Starwood Units or a combination, variable accounting required an expense
to be recognized for the difference between the option price and the formula
market price. There is no pro forma effect to income in 1997 as a result of this
variable accounting.
At December 31, 1998, Starwood had 564,000 and 606,914 options outstanding
relating to Company employees at exercise prices of $49.19 and $54.85,
respectively. There are 246,811 stock options exercisable with an exercise price
of $54.85. During 1998, Starwood issued all of its stock options at market value
and the weighted average fair value of these options was $18.54.
NOTE 13. EMPLOYEE BENEFIT PLANS
The Company has defined benefit pension plans covering any officer or other
employee designated as a key executive of the Company and its subsidiaries. The
benefits are based on years of service (not to exceed 30) and the employee's
highest five years of compensation during the last 10 years of employment. The
Company has funded the vested benefits of certain current employees by making
contributions to revocable trusts. Income earned by the trusts accrues to the
benefit of the Company. At December 31, 1998, the amount in these revocable
trusts was $14,854 and is recorded in "Other Assets." Such trusts shall become
irrevocable in the event of a change of control (as defined).
F-16
NOTE 13. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plans' status and amounts recognized in
the Company's financial statements:
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year................. $ 18,102 $ 18,261
Service cost................................................ 1,659 1,287
Interest cost............................................... 1,150 1,221
Actuarial (gain) loss....................................... 2,206 (1,535)
Curtailments................................................ (4,100) --
Gross benefits paid......................................... (1,156) (1,132)
-------- --------
Net benefit obligation end of year.......................... $ 17,861 $ 18,102
======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year.............. $ -- $ --
Employer contributions...................................... 1,156 1,132
Gross benefits paid......................................... (1,156) (1,132)
-------- --------
Fair value of plan assets at end of year.................... $ -- $ --
======== ========
RECONCILIATION OF FUNDED STATUS:
Funded status at end of year................................ $(17,861) $(18,102)
Unrecognized net actuarial (gain) loss...................... 44 (1,736)
Unrecognized net transition obligation...................... -- 189
-------- --------
Net amount recognized at end of year........................ $(17,817) $(19,649)
======== ========
Assumptions used in accounting for the Company's defined benefit plans were:
AT DECEMBER 31,
----------------------
1998 1997
-------- --------
Discount rate for obligations............................... 6.50% 7.25%
Rate of increase in compensation levels..................... 5.00% 5.00%
Expected long-term rate of return on plan assets............ N/A N/A
F-17
NOTE 13. EMPLOYEE BENEFIT PLANS (CONTINUED)
The periodic net pension expense included the following components:
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
Service cost............................................... $ 1,659 $1,287
Interest cost.............................................. 1,150 1,222
Amortization of net transition amount...................... 31 40
Recognized net gain........................................ (16) --
------- ------
SFAS 87 cost............................................... 2,824 2,549
Curtailment credit......................................... (3,500) --
------- ------
Net periodic benefit cost.................................. $ (676) $2,549
======= ======
Effective February 23, 1998, Starwood adopted the Company's
401(k)-retirement plan covering substantially all of its non-union employees.
The plan provides for the Company to contribute 1 percent of certain
compensation for eligible employees who may also contribute up to 5 percent of
their base compensation to this plan and their contributions are matched by the
Company in an amount equal to 50 percent of each employee's contribution.
Employees may also contribute an additional 11 percent of base compensation to
the plan, with certain limitations, which is not matched by the Company. The
matching contributions vest to the employee ratably based on the employee's
years of service and fully vest after five years of service. The Company's one
percent contributions and all employee contributions vest immediately. The
Company's basic one percent and matching contributions for the years ended
December 31, 1998 and 1997 were $6,234 and $5,174, respectively.
In addition to the Company's plans described above, union employees are
covered by various multi-employer pension plans. The Company charged to expense
approximately $4,347 and $3,639 in 1998 and 1997, respectively, for such plans.
For the union sponsored plans, information from the plans' sponsors is not
available to permit the Company to determine its share of unfunded vested
benefits, if any.
NOTE 14. FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments at
December 31, 1998 and 1997 are as follows:
1998 1997
--------------------- ---------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
Cash and cash equivalent............ $102,664 $102,664 $ 63,488 $ 63,488
Long-term debt...................... 176,027 176,777 170,477 173,852
CASH AND CASH EQUIVALENTS
The estimated fair value of cash and cash equivalents is estimated based on
the quoted market price of the investments, where available. If quoted market
prices are not available, fair values are based on quoted market prices of
comparable investments.
LONG-TERM DEBT
The estimated fair value of long-term debt is based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities.
F-18
NOTE 15. RELATED PARTY TRANSACTIONS
Starwood charges the Company a management service fee equal to 2.75% of net
revenues. The fee represents compensation for certain support services in the
fields of management, operations, administration, finance, treasury, tax,
personnel, accounting, legal, intellectual property, information systems, real
estate and insurance applicable to the business operations of the Company. The
service charge was $32,705 and $28,711 for the years ended December 31, 1998 and
1997, respectively.
In addition, Starwood charges the Company interest associated with certain
funds advanced to the Company. For the years ended December 31, 1998 and 1997,
Starwood charged the Company $23,926 and $21,153, respectively, as interest
expense.
A subsidiary of the Company also advances to and receives funds and services
with ITT Sheraton Corporation and its wholly owned subsidiary, Sheraton Gaming
Corporation, for operating capital, construction funding, upper management
payroll and benefits, reservation fees, and other marketing programs.
NOTE 16. COMMITMENTS AND CONTINGENCIES
DEVELOPMENT OBLIGATION
The New Jersey Casino Control Act obligation provides, among other things,
for an investment obligation on licensees based upon 1.25% of their gross casino
revenues, as defined. This obligation may be satisfied by investing in qualified
eligible direct investments, by purchasing bonds issued by the Casino
Reinvestment Development Authority ("CRDA"), and/or by making qualified
contributions. At December 31, 1998, all CRDA investment obligations had been
substantially satisfied or prepaid.
CAESARS INDIANA
RDI/Caesars Riverboat Casino LLC (the "LLC") is a limited liability company
formed under the laws of the state of Indiana. The members of the LLC include
Riverboat Development, Inc. and Roman Holding Corporation of Indiana, which is
owned by the Company. Pursuant to an operating agreement between the members,
certain equity and income (loss) allocations are provided. The agreement
provides that if any member has a deficit balance in their capital account, the
profits shall be allocated in proportion to those deficit balances until the
capital accounts of all members have been increased to zero. Profits are next
allocated so that the capital accounts of the members are proportionate to their
Units (as defined in the agreement). Thereafter, profits are allocated so that
RDI receives 25% of the LLC's profits less an imputed interest expense and Roman
receives all remaining profits.
DISPUTE WITH NOVA SCOTIA GAMING CORPORATION
Metropolitan Gaming Corporation (MEG), is a partnership between ITT Sheraton
Canada Ltd. and Purdy's Wharf Developments Limited which operates the casinos in
Halifax and Sydney. MEG is in dispute with the Nova Scotia Gaming Corporation
over the expense treatment of the Goods and Services Tax and the Harmonized
Sales Tax ("GST/HST") as it relates to deductibility for the purposes of the
income guarantee as defined in the Operating Contract. The parties expect to
enter into arbitration as provided for in the Contract. The outcome of the
arbitration is binding on both parties and cannot be appealed. The maximum
contingent liability related to the GST/HST dispute, including the effect of the
income guarantee, in the event of an outcome which is unfavorable to MEG, is
estimated to be approximately $14 million.
F-19
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LICENSE RENEWAL
During 1996, the New Jersey Casino Control Commission (the "CCC") renewed
the Company's license to operate its casino hotel complex in Atlantic City. A
casino license is not transferable, and must be renewed every four years by
filing an application which must be acted upon by the CCC no later than 30 days
prior to the expiration of the license then in force.
LITIGATION
On April 26, 1994, William H. Poulos brought an action in the U.S. District
Court for the Middle District of Florida, Orlando Division-William H. Poulos, ET
AL V. CAESARS WORLD, INC. ET AL-Case No. 39-478-CIV-ORL-22--in which various
parties (including the Company) alleged to operate casinos or be slot machine
manufacturers were named as defendants. The plaintiff sought to have the action
certified as a class action suit.
An action subsequently filed on May 10, 1994 in the United States District
Court for the Middle District of Florida--WILLIAM AHEARN, ET AL V. CAESARS
WORLD, INC. ET AL--Case No. 94-532--CIV-ORL-22--made similar allegations and was
consolidated with the Poulos action.
Both actions included claims under the Federal Racketeering-Influenced and
Corrupt Organizations Act and under state law, and sought compensatory and
punitive damages. The plaintiffs claimed that the defendants are involved in a
scheme to induce people to play electronic video poker and slot machines based
on false beliefs regarding how such machines operate and the extent to which a
player is likely to win on any given play.
In December 1994, the consolidated actions were transferred to the U.S.
District Court for the District of Nevada.
On September 26, 1995, Larry Schreier brought an action in the U.S. District
Court for the District of Nevada--LARRY SCHREIR, ET AL V. CAESARS WORLD, INC. ET
AL-Case No. CV-95-00923-DWH (RJJ).
The plaintiff's allegations in the Schreier action were similar to those
made by the plaintiffs in the Poulos and Ahearn actions, except that Schreier
claimed to represent a more precisely defined class of plaintiffs than Poulos or
Ahearn.
In December 1996, the court ordered the Poulos, Ahearn and Schreier actions
consolidated under the title WILLIAM H. POULOS, ET AL V. CAESARS WORLD, INC. ET
AL-Case No. CV-S-94-11236-DAE (RJJ)--(Base File), and required the plaintiffs to
file a consolidated and amended complaint. On February 14, 1997, the plaintiffs
filed a consolidated and amended complaint.
In March 1997, various defendants filed motions to dismiss or stay the
consolidated action until the plaintiffs submitted their claims to gaming
authorities and those authorities considered the claims submitted by the
plaintiffs.
In December 1997, the court denied all of the motions submitted by the
defendants, and ordered the plaintiffs to file a new consolidated and amended
complaint. That complaint was filed in February 1998. The plaintiffs have filed
a motion seeking an order certifying the action as a class action. Certain of
the defendants have opposed the motion. The Court has not ruled on the motion.
There are additional lawsuits currently pending against the Company arising
in the normal course of business. Management believes the final disposition of
the foregoing action will not have a material adverse effect on the Company's
financial position or its results of operations.
F-20
PROSPECTUS
$1,000,000,000
[LOGO]
DEBT SECURITIES, PREFERRED STOCK,
DEPOSITARY SHARES, COMMON STOCK AND WARRANTS
---------------------
We may offer and sell from time to time in one or more classes or series and
in amounts, at prices and on terms that we will determine at the time of
offering, with an aggregate initial offering price of up to $1,000,000,000:
- debt securities, which may consist of debentures, notes or other types of
debt;
- shares of preferred stock, $.01 par value per share;
- shares of preferred stock represented by depositary shares;
- shares of common stock, $.01 par value per share; and
- warrants to purchase debt securities, preferred stock, depositary shares
or common stock.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and any supplement carefully
before you invest.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE MISSISSIPPI GAMING COMMISSION, THE NEW JERSEY CASINO CONTROL COMMISSION NOR
THE LOUISIANA GAMING CONTROL BOARD HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL AND IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 8, 1999
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS AND THE
ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DO THIS PROSPECTUS AND THE ACCOMPANYING
SUPPLEMENT TO THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
INFORMATION CONTAINED IN THIS PROSPECTUS AND THE SUPPLEMENT TO THIS PROSPECTUS
IS ACCURATE AS OF THE DATES ON THEIR COVERS. WHEN WE DELIVER THIS PROSPECTUS OR
A SUPPLEMENT OR MAKE A SALE PURSUANT TO THIS PROSPECTUS, WE ARE NOT IMPLYING
THAT THE INFORMATION IS CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
------------------------
TABLE OF CONTENTS
PAGE
----
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Incorporation Of Certain Documents By Reference............. 1
Disclosure Regarding Forward-Looking Statements............. 2
The Company................................................. 2
Use Of Proceeds............................................. 3
Ratio Of Earnings To Fixed Charges.......................... 3
Description Of Debt Securities.............................. 3
Description Of Capital Stock................................ 12
Common Stock................................................ 12
Preferred Stock............................................. 13
Description Of Depositary Shares............................ 15
Description Of Warrants..................................... 18
Plan Of Distribution........................................ 20
Legal Matters............................................... 21
Experts..................................................... 21
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "Commission") utilizing a "shelf"
registration process. Under this shelf registration process, we may sell any
combination of the securities described in this prospectus in one or more
offerings up to an aggregate initial offering price of $1,000,000,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the next heading
"Where You Can Find More Information."
When we refer to "we," "our" and "us" in this prospectus, we mean Park Place
Entertainment Corporation, excluding, unless the context otherwise requires or
as otherwise expressly stated, our subsidiaries. When we refer to "you" or
"yours," we mean the holders of the applicable series of securities.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities and
Exchange Act of 1934, and file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, proxy statements and other information we file at the Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Please call the Commission at 1-800-SEC-0300 for
further information on the public reference rooms. You may also access filed
documents at the Commission's web site at http://www.sec.gov. In addition, you
may inspect reports and other information we file at the office of the New York
Stock Exchange ("NYSE") at 20 Broad Street, New York, New York 10005.
We have filed a registration statement on Form S-3 and related exhibits with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"). The registration statement contains additional information about us and
the securities. You may inspect the registration statement and exhibits without
charge and obtain copies from the Commission at prescribed rates at the
locations set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
Commission will automatically update and supersede this information. We
incorporate by reference the following documents we filed with the Commission:
- Amendment No. 1 to the Company's Registration Statement on Form 10 filed
with the Commission on December 18, 1998;
- Quarterly Report on Form 10-Q for the quarter ended September 30, 1998;
- Current Reports on Form 8-K filed with the Commission on November 25,
1998, December 16, 1998, January 8, 1999, January 20, 1999 and
February 5, 1999;
- The description of the Company's Preferred Share Purchase Rights contained
in our Registration Statement on Form 8-A filed with the Commission on
December 30, 1998; and
- all documents filed by us with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act after the date of this
prospectus and before the termination of the offering.
You may request a free copy of any of the documents incorporated by
reference in this prospectus (other than exhibits, unless they are specifically
incorporated by reference in the documents) by writing or telephoning us at the
following address:
Investor Relations
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
Las Vegas, Nevada 89109
(702) 699-5000
You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the dates on the front of these documents.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference,
contains "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements are indicated by words or phrases
such as "anticipate," "estimate," "plans," "projects," "continuing," "ongoing,"
"expects," "management believes," "the Company believes," "the Company intends,"
"we believe," "we intend" and similar words or phrases. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us and our subsidiaries, including, among
other things, factors discussed in our filings with the Commission and the
following:
- the effect of economic, credit and capital market conditions in general
and on gaming companies in particular;
- our construction and development activities;
- our ability to successfully integrate our operations with Grand Casinos,
Inc.;
- the impact of competition, particularly from other gaming and hotel/gaming
operations;
- changes in laws or regulations, third party relations and approvals and
decisions of courts, regulators and governmental bodies; and
- changes in customer demand.
Consequently, actual events and results may vary significantly from those
included in or contemplated or implied by such statements.
THE COMPANY
We are the world's largest gaming company, as measured by casino square
footage and revenues, and the only casino gaming company with a leading presence
in Nevada, New Jersey and Mississippi--the three largest gaming markets in the
United States.
We were formed to succeed to the gaming business of Hilton Hotels
Corporation ("Hilton"). On December 31, 1998, Hilton distributed all of our
common stock to Hilton's stockholders and we became a publicly traded
corporation. Following the Hilton Distribution, we acquired the Mississippi
gaming operations of Grand Casinos, Inc. by means of a merger of our
wholly-owned subsidiary into Grand with Grand surviving the merger. Immediately
prior to the merger, Grand separated its Mississippi gaming business from its
non-Mississippi business (comprised primarily of the management of Indian-owned
2
casinos and certain other assets and liabilities) through the distribution of
all of the common stock of Lakes Gaming, Inc. to the shareholders of Grand.
Our principal executive offices are located at 3930 Howard Hughes Parkway,
Las Vegas, Nevada 89109, and our telephone number is (702) 699-5000.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for
general corporate purposes, including repaying, redeeming or repurchasing
existing debt, and for working capital, capital expenditures and other
acquisitions. We may invest funds not required immediately for such purposes in
short-term investment grade securities.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges are as follows for the periods
indicated:
NINE MONTHS
ENDED
SEPTEMBER 30, FISCAL YEARS ENDED DECEMBER 31,
---------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
Ratio of earnings to fixed charges.......................... 3.4x 3.8x 2.4x 2.1x 4.0x 3.8x 4.1x
We have computed the ratio of earnings to fixed charges by dividing income
before income taxes and minority interests plus fixed charges (excluding
capitalized interest) by fixed charges.
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of our debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the series in a supplement to this
prospectus. Accordingly, for a description of the terms of any series of debt
securities, you must refer to both the prospectus supplement relating to that
series and the description of the debt securities set forth in this prospectus.
A prospectus supplement may change any of the terms of the debt securities
described in this prospectus.
We may offer under this prospectus up to $1,000,000,000 aggregate principal
amount of debt securities, or if debt securities are issued at a discount, or in
a foreign currency or composite currency, such principal amount as may be sold
for an initial public offering price of up to $1,000,000,000.
The debt securities will be issued under an indenture between us and a
trustee chosen by us. We have summarized select portions of the indenture below.
The summary does not restate the indenture in its entirety. The form of the
indenture, which is subject to such amendments or supplements as may be adopted
from time to time, has been filed as an exhibit to the registration statement
and we urge you to read the indenture because it, and not this description,
defines your rights as holders of debt securities issued under the indenture.
Capitalized terms used in the summary have the meaning specified in the
indenture.
GENERAL
The debt securities will be our direct obligations, which may be secured or
unsecured, and which may be senior or subordinated indebtedness. We may issue an
unlimited amount of debt securities, in one or more series, under the indenture.
The terms of each series of debt securities will be established by a Board
Resolution or in a supplemental indenture. We need not issue all debt securities
of one series at the same time and, unless otherwise provided, we may reopen a
series, without the consent of the holders of the debt securities of that
series, for issuances of additional debt securities of that series.
3
There may be more than one trustee under the indenture, each with respect to
one or more series of debt securities. Any trustee may resign or be removed by
us and we will appoint a successor trustee. Each trustee will be a trustee of a
trust under the indenture separate and apart from the trust administered by any
other trustee under the indenture. Except as otherwise indicated in this
prospectus, any action taken by the trustee may be taken by the trustee only
with respect to the series of debt securities for which it is the trustee.
We will set forth in a prospectus supplement (including any pricing
supplement) relating to any series of debt securities being offered, the
aggregate principal amount and the following terms of the debt securities:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the price (expressed as a percentage of the aggregate principal amount) at
which we will sell the debt securities;
- whether we will issue the debt securities at a discount and the portion of
the principal amount of the debt securities payable upon declaration of
acceleration of the maturity of the securities or upon redemption, if
other than the principal amount, and the rate at which the original issue
discount will accrue;
- the date on which we will pay the principal on the debt securities;
- the rate (which may be fixed or variable) or the method used to determine
the rate (including any commodity, commodity index, stock exchange index
or financial index) at which the debt securities will bear interest, the
date from which interest will accrue, the date on which interest will be
payable and any regular record date for the interest payable on any
interest payment date;
- the place where we will pay (or the method of payment of) principal,
premium and interest on the debt securities, and where holders may
surrender the debt securities for conversion, registration of transfer or
exchange;
- any obligation we have to redeem or purchase the debt securities pursuant
to any sinking fund or analogous provisions or at the option of a holder
of debt securities;
- our right to redeem the debt securities and the date on which and the
price at which and the terms and conditions upon which we may redeem the
debt securities;
- the denominations in which we will issue the debt securities, if other
than denominations of $1,000 and any integral multiple thereof;
- provisions, if any, for the defeasance or discharge of our obligations
with respect to the debt securities;
- whether we will issue the debt securities in registered or bearer form;
- the currency in which we will pay principal, premium and interest on the
debt securities;
- if we will pay principal, premium or interest on the debt securities in
one or more currencies other than those in which the debt securities are
denominated, the manner in which we will determine the exchange rate on
these payments;
- the manner in which we will determine the amounts of payment of principal,
premium or interest on the debt securities if these amounts may be
determined by reference to an index based on a currency other than that in
which the debt securities are denominated or designated or by reference to
a commodity, commodity index, stock exchange index or financial index;
4
- any addition to, or change or deletion of, any events of default or
covenants in the indenture;
- a discussion of any material and/or special United States Federal income
tax considerations applicable to the debt securities;
- any depositaries, trustees, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to the debt
securities other than those originally appointed;
- whether we will issue the debt securities in the form of global securities
and whether we will issue the global securities in temporary or permanent
global form;
- any rights of the holders of the debt securities to convert the debt
securities into other securities or property and the terms and conditions
of the conversion;
- any subordination provisions relating to the debt securities;
- any listing of the debt securities on a securities exchange;
- any provisions relating to any security provided for the debt securities;
and
- any other terms of the debt securities that will not be inconsistent with
the indenture.
We may issue debt securities at a discount below their stated principal
amount. Even if we do not issue the debt securities below their stated principal
amount, for United States Federal income tax purposes the debt securities may be
deemed to have been issued with a discount because of certain interest payment
characteristics. We will set forth in a prospectus supplement the United States
Federal income tax considerations applicable to debt securities issued at a
discount or deemed to be issued at a discount. We will also set forth in a
prospectus supplement the special United States Federal income tax
considerations or other restrictions or terms applicable to debt securities
issuable in bearer form, offered exclusively to foreigners or denominated in a
foreign currency.
DENOMINATIONS, REGISTRATION, TRANSFER AND EXCHANGE
Unless we specify otherwise in the prospectus supplement, the debt
securities of any series will be issuable only in denominations of $1,000 and
integral multiples thereof, and will be payable only in U.S. dollars.
We may issue the debt securities in whole or in part in the form of one or
more global securities that will be deposited with, or on behalf of, a
depositary identified in the applicable prospectus supplement. We may issue the
global securities in either registered or bearer form and in either temporary or
permanent form. We will describe the specific terms of the depositary
arrangement with respect to a series of debt securities in the prospectus
supplement.
You may transfer or exchange certificated debt securities at any office we
maintain for this purpose in accordance with the terms of the indenture. We will
not charge a service fee for any transfer or exchange of certificated debt
securities, but we may require payment of a sum sufficient to cover any tax or
other governmental charge we are required to pay in connection with a transfer
or exchange.
You may effect the transfer of certificated debt securities and the right to
receive the principal, premium and interest on certificated debt securities only
by surrendering the certificate representing those certificated debt securities
and either reissuance by us or the trustee of the certificate to the new holder
or the issuance by us or the trustee of a new certificate to the new holder.
We are not required to:
- register, transfer or exchange debt securities of any series during a
period beginning at the opening of business 15 days before the day we
transmit a notice of redemption of debt securities of the series selected
for redemption and ending at the close of business on the day of the
transmission, or
5
- to register, transfer or exchange any debt security so selected for
redemption in whole or in part, except the unredeemed portion of any debt
security being redeemed in part.
COVENANTS
We will set forth in the applicable prospectus supplement any restrictive
covenants applicable to an issue of debt securities.
CONSOLIDATION, MERGER OR SALE OF ASSETS
We may not consolidate or merge with or into, or sell, assign, convey or
transfer our properties and assets substantially in their entirety (computed on
a consolidated basis) to another corporation, person or entity unless:
- in the case of a consolidation or merger, (a) we are the surviving
corporation, or (b) the successor or transferree is an entity organized
and validly existing under the laws of the United States, any State
thereof or the District of Columbia and expressly assumes our obligations
under the debt securities and the indenture; and
- immediately after giving effect to the transaction, no event of default
exists.
EVENTS OF DEFAULT
Each of the following is an Event of Default with respect to a series of
debt securities:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days;
- default in the payment of principal of or premium on any debt security of
that series when due and payable;
- default in the deposit of any sinking fund payment, when and as due in
respect of any debt security of that series;
- default in the performance or breach by us of any other covenant or
warranty in the indenture (other than a covenant or warranty that has been
included in the indenture solely for the benefit of a series of debt
securities other than that series), which default continues uncured for a
period of 60 days after we receive written notice from the trustee or we
and the trustee receive written notice from the holders of at least 25% in
principal amount of the outstanding debt securities of that series as
provided in the indenture;
- the acceleration of the maturity date of any of our indebtedness, other
than Non-recourse Indebtedness (as defined below), at any one time, in an
amount exceeding the greater of (1) $25 million and (2) 5% of Consolidated
Net Tangible Assets (as defined below), if the acceleration is not
annulled within 30 days thereafter;
- certain events of bankruptcy, insolvency or reorganization; and
- any other Event of Default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement
accompanying this prospectus.
"Non-recourse Indebtedness" means indebtedness the terms of which provide
that the lender's claim for repayment of such indebtedness is limited solely
to a claim against the property which secures such indebtedness.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of the Company and its
subsidiaries (less applicable depreciation, amortization and other valuation
reserves) after deducting therefrom (a) all current liabilities of the
Company and its
6
subsidiaries (excluding (i) the current portion of long-term indebtedness,
(ii) intercompany liabilities and (iii) any liabilities which are by their
terms renewable or extendible at the option of the obligor thereon to a time
more than 12 months from the time as of which the amount thereof is being
computed) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and any other like intangibles, all as set forth
on the most recent consolidated balance sheet of the Company and computed in
accordance with generally accepted accounting principles.
If an Event of Default with respect to outstanding debt securities of any
series occurs and is continuing, then the trustee or the holders of at least 25%
in principal amount of outstanding debt securities of that series may declare,
in a written notice, the principal amount (or specified amount) plus accrued and
unpaid interest (and premium, if payable) on all debt securities of that series
to be immediately due and payable. At any time after a declaration of
acceleration with respect to debt securities of any series has been made, the
holders of a majority in principal amount of the outstanding debt securities of
that series may rescind and annul the acceleration if:
- the holders act before the trustee has obtained a judgment or decree for
payment of the money due;
- we have paid or deposited with the trustee a sum sufficient to pay overdue
interest and overdue principal other than the accelerated interest and
principal; and
- we have cured or the holders have waived all Events of Default, other than
the non-payment of accelerated principal and interest with respect to debt
securities of that series, as provided in the indenture.
We refer you to the prospectus supplement relating to any series of debt
securities that are discount securities for the particular provisions relating
to acceleration of a portion of the principal amount of the discount securities
upon the occurrence of an Event of Default.
The trustee has no obligation to exercise any of its rights or powers under
the indenture at the request of any holder of outstanding debt securities,
unless the trustee receives indemnity satisfactory to it against any loss,
liability or expense. Subject to certain rights of the trustee, the holders of a
majority in principal amount of the outstanding debt securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to the debt securities of that
series.
No holder of any debt security of any series will have any right to
institute any judicial or other proceeding with respect to the indenture or for
the appointment of a receiver or trustee, or for any remedy under the indenture,
unless:
- that holder has previously given to the trustee written notice of a
continuing Event of Default with respect to debt securities of that
series; and
- the holders of at least a 25% in principal amount of outstanding debt
securities of that series have made written request, and offered
reasonable indemnity, to the trustee to institute the proceeding as
trustee, and the trustee has not received from the holders of a majority
in principal amount of the outstanding debt securities of that series a
direction inconsistent with that request and has failed to institute the
proceeding within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal, premium
and any interest on that debt security on or after the due dates expressed in
that debt security and to institute suit for the enforcement of payment.
Within 120 days after the end of our fiscal year we will furnish to the
trustee a statement as to compliance with the indenture. The trustee may
withhold notice to the holders of debt securities of any series of any Default
or Event of Default (except in payment on any debt securities of that series)
with
7
respect to debt securities of that series if it in good faith determines that
withholding notice is in the interest of the holders of those debt securities.
MODIFICATION AND WAIVER
We may modify the indenture, without prior notice to or consent of any
holders, for any of the following purposes:
- to evidence the succession of another corporation to our rights and the
assumption by the successor of our covenants and obligations in the
indenture and the debt securities;
- to add to the covenants for the benefit of the holders of the debt
securities or to surrender any right or power conferred upon us in the
indenture;
- to add any Events of Default;
- to add or change any provision of the indenture to permit or facilitate
the issuance of debt securities of any series in bearer form, to permit
bearer securities to be issued in exchange for registered securities, to
permit bearer securities to be issued in exchange for bearer securities of
other denominations or to permit the issuance of debt securities of any
series in uncertificated form, provided that the action will not adversely
affect the interests of the holders of debt securities or coupons in any
material respect;
- to change or eliminate any provision of the indenture, provided that the
change or elimination will become effective only when there is no
outstanding debt security issued under the indenture or coupon of any
series created prior to the modification which is entitled to the benefit
of the provision and as to which the modification would apply;
- to secure the debt securities or to provide that any of our obligations
under the debt securities or the indenture will be guaranteed and the
terms and conditions for the release or substitution of the security or
guarantee;
- to supplement any provisions of the indenture to permit or facilitate the
defeasance and discharge of any series of debt securities, provided that
the action will not adversely affect the interests of the holders of the
debt securities or coupons in any material respect;
- to establish the form or terms of debt securities and coupons as permitted
by the indenture;
- to evidence and provide for a successor or other trustee with respect to
one or more series of debt securities and to add or change any provision
of the indenture to provide for or facilitate the administration of the
trusts by more than one trustee; or
- to cure any ambiguity, to correct or supplement any provision of the
indenture which may be defective or inconsistent with any other provision
of the indenture, to eliminate any conflict between the terms of the
indenture and the debt securities and the Trust Indenture Act or to make
any other provisions which will not be inconsistent with any provision of
the indenture; provided such other provisions will not adversely affect
the interest of the holders of outstanding debt securities or coupons in
any material respect.
We may modify and amend the indenture with the written consent of at least a
majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments; PROVIDED, HOWEVER, that such
modifications may not, without the consent of the holder of each outstanding
debt security of each series affected thereby:
- change the stated maturity of any debt security or coupon;
- reduce the principal amount of any payment to be made on any debt security
or coupon;
8
- reduce the rate of interest (or extend the time for payment of interest)
or premium payable upon redemption of any debt security;
- change the coin or currency in which any debt security or any premium or
interest is payable;
- reduce the amount of the principal of a discount security that would be
due and payable upon a declaration of acceleration of the maturity;
- impair the right to institute suit for the enforcement of any payment on
or after the due date thereof;
- alter any redemption provisions in a manner adverse to the holders of the
debt securities;
- reduce the percentage in principal amount of the outstanding debt
securities;
- adversely affect the right of any holder to convert any debt security;
- modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of each
outstanding debt security affected thereby; or
- modify any provision described in the applicable prospectus supplement as
requiring the consent of each affected holder of debt securities.
A modification which changes or eliminates any covenant or other provision
of the indenture relating to one or more particular series of debt securities
and coupons, or which modifies the rights of the holder of debt securities and
coupons of that series, will be deemed not to affect the rights of the holders
of debt securities and coupons of any other series.
The holders of at least a majority in principal amount of the outstanding
debt securities of any series, by notice to the trustee, may on behalf of the
holders of all debt securities of that series waive any default and its
consequences under the indenture, except:
- a continuing default in the payment of interest on, premium or the
principal amount of any debt security held by a nonconsenting holder; or
- a default of a covenant or provision which cannot be modified or amended
without the consent of the holder of each outstanding debt security of
each series affected. Defeasance of Debt Securities and Certain Covenants
in Certain CircumstancesLegal Defeasance.We may be discharged from any and
all obligations in respect of the debt securities of any series except for
certain obligations:
- to pay additional amounts, if any, upon the occurrence of certain tax,
assessment or government charge events with respect to payments on the
debt securities;
- to register the transfer or exchange of debt securities of the series;
- to replace stolen, lost or mutilated debt securities of the series;
- to maintain paying agencies; and
- to hold money in payment for trust.
We will be discharged upon our deposit with the trustee, in trust, of money
and/or government obligations that will provide money in an amount sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay and discharge each installment of principal, premium and
interest on and any mandatory sinking fund payments in respect of the debt
securities of that series on the stated maturity of those payments.
We may be discharged only if, among other things, we have delivered to the
trustee an opinion of counsel stating that we have received from, or there has
been published by, the United States Internal
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Revenue Service a ruling (the "IRS Ruling") or, since the date of execution of
the indenture, there has been a change in the applicable United States Federal
income tax law, in either case to the effect that, the holders of the debt
securities of that series will not recognize income, gain or loss for United
States Federal income tax purposes as a result of the deposit, defeasance and
discharge.
DEFEASANCE OF CERTAIN COVENANTS. Upon compliance with certain conditions,
we may omit to comply with certain restrictive covenants contained in the
indenture and any omission to comply with the obligations will not constitute a
Default or Event of Default with respect to the debt securities. The conditions
include, among others:
- depositing with the trustee money and/or government obligations that,
through the payment of interest and principal in accordance with their
terms, will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay
principal, premium and interest on and any mandatory sinking fund payments
in respect of the debt securities of that series on the date those
payments are due; and
- delivering to the trustee an IRS Ruling or an opinion of counsel to the
effect that the holders of the debt securities of the series will not
recognize income, gain or loss for United States Federal income tax
purposes as a result of the deposit and related covenant defeasance.
LIMITED LIABILITY OF CERTAIN PERSONS
No stockholder, incorporator, employee officer or director, as such, past,
present or future of our company or any successor corporation or any of our
affiliates will have any personal liability for our obligations under the
indenture or the debt securities because of his, her or its status as a
stockholder, incorporator, employee officer or director.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
Each holder, by accepting the debt securities, will be deemed to have agreed
to apply for a license, qualification or a finding of suitability within the
required time period if required to do so under the applicable gaming laws of
the gaming authority of any jurisdiction of which we or any of our subsidiaries
conducts or proposes to conduct gaming. If the holder fails to apply or become
licensed or qualified or is found unsuitable, we have the right, at our option
to:
- require that person to dispose of their debt securities or beneficial
interest within 30 days of receipt of notice of our election or such
earlier date as may be requested by the gaming authority; or
- redeem those debt securities at a redemption price equal to the lesser of
(i) that person's cost or (ii) 100% of their principal amount, plus
accrued and unpaid interest, if any, to the earlier of the redemption date
or the date of the finding of unsuitability.
We will notify the trustee in writing of any such redemption as soon as
practicable. We will not be responsible for any costs or expenses any holder may
incur in connection with its application for a license, qualification or a
finding of suitability.
CONVERSION RIGHTS
We will set forth in the applicable prospectus supplement the terms and
conditions, if any, upon which the debt securities are convertible into common
stock or preferred stock. Those terms will include:
- whether the debt securities are convertible into common stock or preferred
stock;
- the conversion price (or manner of calculation);
- the conversion period;
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- provisions regarding whether conversion will be at our option or the
option of the holders;
- the events requiring an adjustment of the conversion price; and
- provisions affecting conversion in the event of the redemption of the debt
securities.
PAYMENT AND PAYING AGENTS
The indenture will require us to duly and punctually pay the principal,
premium and interest on the debt securities as provided in the debt securities
and the indenture.
If debt securities of a series are issuable only as registered securities,
we will maintain in each place of payment for that series an office or agency
where:
- holders may present or surrender for payment debt securities of that
series;
- holders may surrender debt securities of that series for registration of
transfer or exchange; and
- we may be served with notices and demands regarding the debt securities of
that series.
If debt securities of a series are issuable as bearer securities, we will
maintain or cause to be maintained:
- in the Borough of Manhattan, the City and State of New York, an office or
agency where holders may present or surrender for payment any registered
securities of that series, where holders may surrender for registration or
transfer any registered securities of that series, where holders may
surrender debt securities of that series for exchange or redemption, where
we may be served with notices and demands regarding the debt securities of
that series and where holders may present or surrender for payment bearer
securities of that series and related coupons in the circumstances
described in the following paragraph (and not otherwise);
- subject to any applicable laws or registration, in a place of payment for
that series which is located outside the United States, an office or
agency where holders may present and surrender for payment debt securities
of that series and related coupons; PROVIDED, HOWEVER, that if the debt
securities of that series are listed on The Stock Exchange of the United
Kingdom and the Republic of Ireland, the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and such stock
exchange so requires, we will maintain a paying agent for the debt
securities of that series in London, Luxembourg or any other required city
located outside the United States, so long as the debt securities of that
series are listed on that exchange; and
- subject to any applicable laws or regulations, in a place of payment for
that series located outside the United States, an office or agency where
holders may surrender any registered securities of that series for
registration of transfer, where holders may surrender for exchange or
redemption debt securities of that series and where we may receive notices
and demands regarding the debt securities of that series.
We will give prompt written notice to the applicable trustee of the
locations, and any change in the locations, of such offices or agencies. If at
any time we fail to maintain any required office or agency or fail to furnish
the applicable trustee with the address, holders may make or serve such
presentations, surrenders, notices and demands at the corporate trust office of
the applicable trustee, except that holders may present and surrender bearer
securities of that series and the related coupons for payment at the offices
specified in the applicable debt security. We will appoint the applicable
trustee (or in the case of bearer securities, we may appoint such other agent as
may be specified in the applicable prospectus supplement) as our agent to
receive the foregoing presentations, surrenders, notices and demands.
We will make no payment of principal, premium or interest on bearer
securities at any of our offices or agencies in the United States or by check
mailed to any address in the United States or by transfer to an
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account maintained with a bank located in the United States; PROVIDED, HOWEVER,
that, if the debt securities of a series are denominated and payable in U.S.
dollars, we will pay principal and any premium and interest on the debt
securities of that series, if specified in the applicable prospectus supplement,
at the office of our paying agent in the Borough of Manhattan, the City and
State of New York, if (but only if) payment in U.S. dollars of the full amount
of such principal, premium, interest or additional amounts, as the case may be,
at all offices or agencies outside the United States maintained for the purpose
by us in accordance with the indenture is illegal or effectively precluded by
exchange controls or other similar restrictions.
DESCRIPTION OF CAPITAL STOCK
GENERAL
This prospectus describes certain general terms of our capital stock. For a
more detailed description of these securities, we refer you to the applicable
provisions of Delaware law and our Amended and Restated Certificate of
Incorporation (the "Amended and Restated Certificate"). When we offer to sell a
particular series of these securities, we will describe the specific terms of
the series in a supplement to this prospectus. Accordingly, for a description of
the terms of any series of securities, you must refer to both the prospectus
supplement relating to that series and the description of the securities set
forth in this prospectus. A prospectus supplement may change any of the terms of
the securities described in this prospectus.
Pursuant to our Amended and Restated Certificate, our authorized capital
stock consists of 400,000,000 shares of common stock, par value $0.01 per share,
and 100,000,000 shares of preferred stock, par value $0.01 per share. At
January 1, 1999, we had outstanding approximately 303,000,000 shares of common
stock and no shares of preferred stock.
COMMON STOCK
Subject to any preferential rights that our board of directors may grant in
connection with the future issuance of preferred stock, each holder of common
stock is entitled to one vote per share on all matters voted upon by the
stockholders. Each holder of common stock is entitled to receive ratably any
dividends declared on the common stock by the board of directors from funds
legally available for distribution. In the event of our liquidation, dissolution
or winding up, after we pay all debts and other liabilities and any liquidation
preference on the preferred stock, each holder of common stock would be entitled
to share ratably in all of our remaining assets. The common stock has no
subscription, redemption, conversion or preemptive rights. All shares of common
stock are fully paid and nonassessable.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, we are
subject to Section 203 of the General Corporation Law of the State of Delaware
(the "DGCL"), which restricts certain business combinations between us and an
"interested stockholder" (in general, a stockholder owning 15% or more of our
outstanding voting stock) or that stockholder's affiliates or associates for a
period of three years following the date on which the stockholder becomes an
"interested stockholder." The restrictions do not apply if:
- prior to an interested stockholder becoming such, our board of directors
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder;
- upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owns at least 85% of
our voting stock outstanding at the time the transaction commenced,
subject to certain exceptions; or
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- on or after the date an interested stockholder becomes such, the business
combination is both approved by our board of directors and authorized at
an annual or special meeting of our stockholders (and not by written
consent) by the affirmative vote of at least 66 2/3% of the outstanding
voting stock not owned by the interested stockholder.
PREFERRED STOCK
Under the Amended and Restated Certificate, our board of directors is
authorized generally without stockholder approval to issue shares of preferred
stock from time to time, in one or more classes or series. Prior to the issuance
of shares of each series, the board of directors is required by the DGCL and the
Amended and Restated Certificate to adopt resolutions and file a certificate of
designation with the Secretary of State of the State of Delaware. The
certificate of designation fixes for each class or series the designations,
powers, preferences, rights, qualifications, limitations and restrictions,
including, but not limited to, the following:
- the number of shares constituting each class or series;
- voting rights;
- rights and terms of redemption (including sinking fund provisions);
- dividend rights and rates;
- dissolution;
- terms concerning the distribution of assets;
- conversion or exchange terms;
- redemption prices; and
- liquidation preferences.
All shares of preferred stock offered hereby will, when issued, be fully
paid and nonassessable and will not have any preemptive or similar rights. Our
board of directors could authorize the issuance of shares of preferred stock
with terms and conditions which could have the effect of discouraging a takeover
or other transaction that might involve a premium price for holders of the
shares or which holders might believe to be in their best interests.
We will set forth in a prospectus supplement relating to the class or series
of preferred stock being offered the following terms:
- The title and stated value of the preferred stock;
- The number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
- The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation applicable to the preferred stock;
- Whether dividends are cumulative or non-cumulative and, if cumulative, the
date from which dividends on the preferred stock will accumulate;
- The procedures for any auction and remarketing, if any, for the preferred
stock;
- The provisions for a sinking fund, if any, for the preferred stock;
- The provision for redemption, if applicable, of the preferred stock;
- Any listing of the preferred stock on any securities exchange;
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- The terms and conditions, if applicable, upon which the preferred stock
will be convertible into common stock, including the conversion price (or
manner of calculation) and conversion period;
- Voting rights, if any, of the preferred stock;
- Whether interests in the preferred stock will be represented by depositary
shares;
- A discussion of any material and/or special United States Federal income
tax considerations applicable to the preferred stock;
- The relative ranking and preferences of the preferred stock as to dividend
rights and rights upon the liquidation, dissolution or winding up of our
affairs;
- Any limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the class or series of preferred
stock as to dividend rights and rights upon liquidation, dissolution or
winding up of our affairs; and
- Any other specific terms, preferences, rights, limitations or restrictions
of the preferred stock.
RANK
Unless we specify otherwise in the applicable prospectus supplement, the
preferred stock will rank, with respect to dividends and upon our liquidation,
dissolution or winding up:
- senior to all classes or series of our common stock and to all of our
equity securities ranking junior to the preferred stock;
- on a parity with all of our equity securities the terms of which
specifically provide that the equity securities rank on a parity with the
preferred stock; and
- junior to all of our equity securities the terms of which specifically
provide that the equity securities rank senior to the preferred stock.
The term "equity securities" does not include convertible debt securities.
PREFERRED STOCK PURCHASE RIGHTS
On December 29, 1998, our Board of Directors adopted a Preferred Share
Purchase Rights Plan ("Rights Plan") and declared a dividend distribution of one
Right on each outstanding share of our common stock and one Right on each share
of common stock issued between such date and the earliest of the Distribution
Date and the Expiration Date (as these terms are defined in the Rights Plan).
Stockholders may transfer the Rights with the common stock only until they
become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Exempt Persons, as defined below) acquires 15% or more of the then
outstanding shares of common stock or announces a tender offer which would
result in ownership by a person or group of 15% or more of the then outstanding
shares of common stock. Each Right entitles stockholders to buy one
one-hundredth of a share of a new series of junior participating preferred stock
at an exercise price of $40.
If a person or group (other than Exempt Persons) acquires 15% or more of our
shares of common stock, each holder of a Right will be entitled to receive upon
exercise a number of shares of our common stock having a market value equal to
two times the then current purchase price of the Right. If, after a person or
group acquires 15% or more of our shares of common stock, we are acquired in a
merger or engage in certain other business combination transactions or transfers
of assets, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price.
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Following the acquisition by a person or group of beneficial ownership of
15% or more of our common stock (other than Exempt Persons) and prior to an
acquisition of 50% or more of our common stock, our board of directors may
exchange the Rights (other than Rights owned by the person or group), in whole
or in part, at an exchange ratio described in the Rights Plan.
Prior to the acquisition by a person or group of beneficial ownership of 15%
or more of our common stock, the Rights are redeemable for $.001 per Right at
the option of the board of directors.
"Exempt Person" means:
- us or any of our subsidiaries;
- any of our or our subsidiaries' employee benefit plans;
- any entity or trustee holding shares of our capital stock for or pursuant
to the terms of any such plan or for the purpose of funding other employee
benefits for our or our subsidiaries' employees; or
- Barron Hilton or the Conrad N. Hilton Fund.
REGISTRAR AND TRANSFER AGENT
ChaseMellon Shareholder Services LLC is the registrar and transfer agent for
the common stock.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
We may issue depositary shares, each of which will represent a fractional
interest of a share of a particular series of preferred stock, as specified in
the applicable prospectus supplement. We will deposit with a depositary (the
"preferred stock depositary") shares of preferred stock of each series
represented by depositary shares. We will enter into a deposit agreement (each a
"deposit agreement") with the preferred stock depositary and holders from time
to time of the depositary receipts issued by the preferred stock depositary
which evidence the depositary shares ("depositary receipts"). Subject to the
terms of the deposit agreement, each owner of a depositary receipt will be
entitled, in proportion to the holder's fractional interest in the preferred
stock, to all the rights and preferences of the series of the preferred stock
represented by the depositary shares (including dividend, voting, conversion,
redemption and liquidation rights).
Immediately after we issue and deliver the preferred stock to a preferred
stock depositary, we will cause the preferred stock depositary to issue the
depositary receipts on our behalf. You may obtain copies of the applicable form
of deposit agreement and depositary receipt from us upon request. The statements
made in this section relating to the deposit agreement and the depositary
receipts are summaries of certain anticipated provisions. These summaries are
not complete and we may modify them in a prospectus supplement. For more detail
we refer you to the deposit agreement itself, which we will file as an exhibit
to the registration statement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or other
cash distributions received in respect of the preferred stock to the record
holders of depositary receipts in proportion to the number of the depositary
receipts owned by the holders, subject to the obligations of holders to file
proofs, certificates and other information and to pay certain charges and
expenses to the preferred stock depositary.
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In the event of a distribution other than in cash, the preferred stock
depositary will distribute property received by it to the record holders of
depositary receipts in proportion to the number of the depositary receipts owned
by the holders, unless the preferred stock depositary determines that it is not
feasible to make the distribution, in which case the preferred stock depositary
may, with our approval, sell the property and distribute the net proceeds from
the sale to the holders.
No distribution will be made in respect of any depositary share that
represents any preferred stock converted into other securities.
WITHDRAWAL OF STOCK
Upon surrender of the depositary receipts at the corporate trust office of
the preferred stock depositary (unless we have previously called for redemption
or converted into other securities the related depositary shares), the holders
will be entitled to delivery at that office of the number of whole or fractional
shares of the preferred stock and any money or other property represented by the
depositary shares. Holders of depositary receipts will be entitled to receive
shares of the related preferred stock as specified in the applicable prospectus
supplement, but holders of the shares of preferred stock will not thereafter be
entitled to receive depositary shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever we redeem shares of preferred stock held by the preferred stock
depositary, the preferred stock depositary will concurrently redeem the number
of depositary shares representing shares of the preferred stock so redeemed,
provided we have paid the applicable redemption price for the preferred stock to
be redeemed plus an amount equal to any accrued and unpaid dividends to the date
fixed for redemption. The redemption price per depositary share will be equal to
the corresponding proportion of the redemption price and any other amounts per
share payable with respect to the preferred stock. If fewer than all the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected pro rata (as nearly as may be practicable without creating
fractional depositary shares) or by any other equitable method determined by us.
From and after the date fixed for redemption:
- all dividends in respect of the shares of preferred stock called for
redemption will cease to accrue;
- the depositary shares called for redemption will no longer be deemed to be
outstanding; and
- all rights of the holders of the depositary receipts evidencing the
depositary shares called for redemption will cease, except the right to
receive any moneys payable upon the redemption and any money or other
property to which the holders of the depositary receipts were entitled
upon redemption and surrender to the preferred stock depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the preferred stock depositary will mail the
information contained in the notice of meeting to the record holders of the
depositary receipts. Each record holder of these depositary receipts on the
record date (which will be the same date as the record date for the preferred
stock) will be entitled to instruct the preferred stock depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
represented by the holder's depositary shares. The preferred stock depositary
will vote the amount of preferred stock represented by the depositary shares in
accordance with the instructions, and we will agree to take all reasonable
action necessary to enable the preferred stock depositary to do so. The
preferred stock depositary will abstain from voting the amount of preferred
stock represented by the depositary shares for which it does not receive
specific instructions from the holders of depositary receipts evidencing the
depositary shares. The preferred stock depositary will not be responsible for
any failure to carry out
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any instruction to vote, or for the manner or effect of any vote made, as long
as the action or non-action is in good faith and does not result from the
preferred stock depositary's negligence or willful misconduct.
LIQUIDATION PREFERENCE
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of each depositary receipt will be entitled to the fraction
of the liquidation preference accorded each share of preferred stock represented
by the depositary shares, as set forth in the applicable prospectus supplement.
CONVERSION OF PREFERRED STOCK
The depositary shares, as such, are not convertible into common stock or any
of our other securities or property. Nevertheless, if we so specify in the
applicable prospectus supplement relating to an offering of depositary shares,
holders may surrender depositary receipts to the preferred stock depositary with
written instructions to the preferred stock depositary to instruct us to convert
the preferred stock represented by the depositary shares into whole shares of
common stock, other shares of our preferred stock or other shares of stock. We
have agreed that upon receipt of the instructions and any amounts payable, we
will convert the depositary shares using the same procedures as those provided
for converting preferred stock. If the depositary shares evidenced by a
depositary receipt are to be converted in part only, the preferred stock
depositary will issue a new depositary receipt(s) for any depositary shares not
converted. No fractional shares of common stock will be issued upon conversion,
and if the conversion would result in a fractional share being issued, we will
pay an amount in cash equal to the value of the fractional interest based upon
the closing price of the common stock on the last business day prior to the
conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We may amend the form of depositary receipt and any provision of the deposit
agreement at any time by agreement between us and the preferred stock
depositary. However, any amendment that materially and adversely alters the
rights of the holders of depositary receipts or that would be materially and
adversely inconsistent with the rights granted to the holders of the related
preferred stock will not be effective unless the holders of at least 66 2/3% of
the depositary shares evidenced by the depositary receipts then outstanding
approve the amendment. No amendment will impair the right, subject to the
exceptions set forth in the depositary agreement, of any holder of depositary
receipts to surrender any depositary receipt with instructions to deliver to the
holder the related preferred stock and all money and other property, if any,
represented by the depositary receipt, except in order to comply with law. Every
holder of an outstanding depositary receipt at the time any such amendment
becomes effective will be deemed, by continuing to hold the receipt, to consent
and agree to the amendment and to be bound by the deposit agreement as amended.
We may terminate the deposit agreement upon not less than 30 days' prior
written notice to the preferred stock depositary if a majority of each series of
preferred stock affected by the termination consents to the termination. Upon
termination, the preferred stock depositary will deliver or make available to
each holder of depositary receipts, upon surrender of the depositary receipts
held by the holder, the number of whole or fractional shares of preferred stock
represented by the depositary shares evidenced by the depositary receipts
together with any other property held by the preferred stock depositary with
respect to the depositary receipt.
In addition, the deposit agreement will automatically terminate if:
- all outstanding depositary shares have been redeemed;
- there has been a final distribution of the related preferred stock in
connection with our liquidation, dissolution or winding up and the
distribution has been distributed to the holders of depositary receipts
evidencing the depositary shares representing the preferred stock; or
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- each share of the related preferred stock has been converted into our
securities which are not represented by depositary shares.
CHARGES OF PREFERRED STOCK DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the deposit agreement. In addition, we will pay the
fees and expenses of the preferred stock depositary in connection with the
performance of its duties under the deposit agreement. However, holders of
depositary receipts will pay the fees and expenses of the preferred stock
depositary for any duties requested by the holders to be performed which are
outside of those expressly provided for in the deposit agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by delivering to us
notice of its election to do so, and we may at any time remove the preferred
stock depositary. Any such resignation or removal will take effect upon our
appointment of a successor preferred stock depositary. We must appoint a
successor preferred stock depositary within 60 days after delivery of the notice
of resignation or removal, and any preferred stock depositary must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
MISCELLANEOUS
The preferred stock depositary will forward to holders of depositary
receipts any reports and communications the preferred stock depositary receives
from us relating to the preferred stock.
We will not be liable, nor will the preferred stock depositary be liable, if
we are prevented from or delayed in, by law or any circumstances beyond our
control, performing our obligations under the deposit agreement. Our obligations
and the obligations of the preferred stock depositary under the deposit
agreement will be limited to performing our duties in good faith and without
negligence (in the case of any action or inaction in the voting of preferred
stock represented by the depositary shares), gross negligence or willful
misconduct. We will not be obligated, nor will the preferred stock depositary be
obligated, to prosecute or defend any legal proceeding in respect of any
depositary receipts, depositary shares or shares of preferred stock represented
thereby unless satisfactory indemnity is furnished to us. We may rely, and the
preferred stock depositary may rely, on written advice of counsel or
accountants, or information provided by persons presenting shares of preferred
stock represented thereby for deposit, holders of depositary receipts or other
persons we believe in good faith to be competent to give such information, and
on documents we believe in good faith to be genuine and signed by a proper
party.
In the event the preferred stock depositary receives conflicting claims,
requests or instructions from holders of depositary receipts, on the one hand,
and us, on the other hand, the preferred stock depositary will be entitled to
act on such claims, requests or instructions received from us.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities ("debt warrants"),
preferred stock ("preferred stock warrants"), depositary shares ("depositary
shares warrants") or common stock ("common stock warrants," collectively with
the debt warrants, the preferred stock warrants and the depositary shares
warrants ("warrants")). We may issue warrants independently or together with any
other securities we offer pursuant to a prospectus supplement and the warrants
may be attached to or separate from the securities. We will issue each series of
warrants under a separate warrant agreement that we will enter into with a bank
or trust company, as warrant agent. We will set forth additional terms of the
warrants and the applicable warrant agreements in the applicable prospectus
supplement.
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DEBT WARRANTS
We will describe in the applicable prospectus supplement the terms of the
debt warrants being offered, the warrant agreement relating to the debt warrants
and the debt warrant certificates representing the debt warrants, including the
following:
- the title of the debt warrants;
- the aggregate number of the debt warrants;
- the price or prices at which the debt warrants will be issued;
- the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the debt warrants, and the
procedures and conditions relating to the exercise of the debt warrants;
- the designation and terms of any related debt securities with which the
debt warrants are issued, and the number of the debt warrants issued with
each security;
- the date, if any, on and after which the debt warrants and the related
debt securities will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of each
debt warrant, and the price at which the principal amount of the debt
securities may be purchased upon exercise;
- the date on which the right to exercise the debt warrants will commence,
and the date on which the right will expire;
- the maximum or minimum number of the debt warrants which may be exercised
at any time;
- a discussion of the material United States Federal income tax
considerations applicable to the exercise of the debt warrants; and
- any other terms of the debt warrants and terms, procedures and limitations
relating to the exercise of the debt warrants.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations, and may exercise debt warrants at the
corporate trust office of the warrant agent or any other office indicated in the
applicable prospectus supplement. Prior to the exercise of their debt warrants,
holders of debt warrants will not have any of the rights of holders of the
securities purchasable upon the exercise and will not be entitled to payments
principal, premium or interest on the securities purchasable upon the exercise.
OTHER WARRANTS
We will describe in the applicable prospectus supplement the terms of the
preferred stock warrants, depositary shares warrants and common stock warrants
being offered, including the following:
- the title of the warrants;
- the securities for which the warrants are exercisable;
- the price or prices at which the warrants will be issued;
- the number of the warrants issued with each share of preferred stock,
common stock or depositary share;
- any provisions for adjustment of the number or amount of shares of
preferred stock, common stock or depositary shares receivable upon
exercise of the warrants or the exercise price of the warrants;
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- if applicable, the date on and after which the warrants and the related
preferred stock, common stock or depositary shares will be separately
transferable;
- if applicable, a discussion of the material United States Federal income
tax considerations applicable to the exercise of the warrants;
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants;
- the date on which the right to exercise the warrants will commence, and
the date on which the right will expire; and
- the maximum or minimum number of the warrants which may be exercised at
any time.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of the warrant to purchase for cash at
the exercise price set forth in the applicable prospectus supplement the
principal amount of debt securities or shares of preferred stock, common stock
or depositary shares being offered. Holders may exercise warrants at any time up
to the close of business on the expiration date set forth in the applicable
prospectus supplement. After the close of business on the expiration date,
unexercised warrants are void.
Holders may exercise warrants as set forth in the prospectus supplement
relating to the warrants being offered. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the prospectus supplement,
we will, as soon as practicable, forward the debt securities, depositary shares
or shares of preferred stock or common stock purchasable upon the exercise. If
less than all of the warrants represented by the warrant certificate are
exercised, we will issue a new warrant certificate for the remaining warrants.
PLAN OF DISTRIBUTION
We may sell the securities:
- directly to purchasers;
- through agents;
- through dealers;
- through underwriters; or
- through a combination of any of the foregoing methods of sale.
We may distribute the securities from time to time in one or more
transactions at:
- a fixed price or prices, which may be changed;
- market prices prevailing at the time of sale;
- prices related to such prevailing market prices; or
- negotiated prices.
We may solicit directly offers to purchase the securities being offered
pursuant to this prospectus. We may also designate agents to solicit offers to
purchase the securities from time to time. We will name in a prospectus
supplement any agent involved in the offer or sale of our securities.
If we utilize a dealer in the sale of the securities being offered pursuant
to this prospectus, we will sell the securities to the dealer, as principal. The
dealer may then resell the securities to the public at varying prices to be
determined by the dealer at the time of resale.
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If we utilize an underwriter in the sale of the securities being offered
pursuant to this prospectus, we will execute an underwriting agreement with the
underwriter at the time of sale and we will set forth the name of any
underwriter in the prospectus supplement which the underwriter will use to make
resales of the securities to the public. In connection with the sale of the
securities, we, or the purchasers of securities for whom the underwriter may act
as agent, may compensate the underwriter in the form of underwriting discounts
or commissions. The underwriter may sell the securities to or through dealers,
and the underwriter may compensate those dealers in the form of discounts,
concessions or commissions.
We will describe in the applicable prospectus supplement any compensation we
pay to underwriters, dealers or agents in connection with the offering of the
securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers. Dealers and agents participating in the
distribution of the securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the debt securities may be deemed to be underwriting discounts and
commissions. We may enter into agreements to indemnify underwriters, dealers and
agents against certain civil liabilities, including liabilities under the
Securities Act, or to contribute to payments they may be required to make in
respect thereof.
If we so specify in the applicable prospectus supplement, we will authorize
underwriters, dealers and agents to solicit offers by certain institutions to
purchase the securities pursuant to contracts providing for payment and delivery
on future dates. The institutions with which the contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others. The purchaser's
obligations under the contracts will not be subject to any conditions except
that:
- the purchase of the securities will not at the time of delivery be
prohibited under the laws of the jurisdiction to which the purchaser is
subject; and
- if the securities are also being sold to underwriters, we will have sold
to the underwriters the securities not sold for delayed delivery.
The underwriters, dealers and agents will not be responsible for the
validity or performance of the contracts. We will set forth in the prospectus
supplement relating to the contracts the price to be paid for the securities,
the commissions payable for solicitation of the contracts and the date in the
future for delivery of the securities.
The underwriters, dealers and agents may engage in transactions with us, or
perform services for us, in the ordinary course of business.
LEGAL MATTERS
Latham & Watkins, Los Angeles, California, will pass upon the validity of
the securities being offered pursuant to this prospectus.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
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$400,000,000
[LOGO]
8 1/2% SENIOR NOTES DUE 2006
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PROSPECTUS SUPPLEMENT
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LEAD MANAGER
JOINT BOOK RUNNING MANAGER
MERRILL LYNCH & CO.
CO-LEAD MANAGER
JOINT BOOK RUNNING MANAGER
BANC OF AMERICA SECURITIES LLC
CO-LEAD MANAGER
DEUTSCHE BANC ALEX. BROWN
SG COWEN
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SCOTIA CAPITAL
BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
PNC CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
NOVEMBER 9, 1999
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