EXHIBIT 99.2
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
IN RE: NO. 95-12735-TMB
CRESCENT CITY CAPITAL DEVELOPMENT SECTION "A" CHAPTER 11
CORPORATION
A REORGANIZATION CASE
DEBTOR UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE
REVISED SECOND AMENDED DISCLOSURE STATEMENT
JAN M. HAYDEN (La. Bar #6672)
ROBYN J. SPALTER (La. Bar #21116)
BRONFIN & HELLER, LLC
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
Telephone: (504) 568-1888
TABLE OF CONTENTS
I. Introduction.............................................................................................1
II. History of Crescent City.................................................................................3
III. Significant Prefiling Events.............................................................................6
IV. Significant Post-Filing Events...........................................................................8
V. Status of River City and Grand Palais Proceedings.......................................................10
VI. Ownership and Management................................................................................10
VII. Liquidation Analysis....................................................................................10
VIII. Summary of Claims and Assets............................................................................13
A. Claims and Assets..............................................................................13
B. Assumptions Regarding Claims and Assets........................................................14
C. Treatment of Joint Creditors of the Joint Venture and Grand Palais.............................16
D. Secured Claims Against the M/V CRESCENT CITY QUEEN.............................................16
E. Claim Variances................................................................................16
IX. Summary of the Plan.....................................................................................23
A. Sale to Purchaser..............................................................................23
B. Means of Implementation of the Plan............................................................23
C. Classification and Treatment of Claims.........................................................34
Class 1: Bondholder Claim......................................................................35
Class 2: Secured Claims.......................................................................36
Class 3A: General Unsecured Claims.............................................................40
Class 3B: Convenience Claims...................................................................41
Class 3C: CGII Claim...........................................................................41
Class 4: Subordinated Unsecured Claims........................................................42
Class 5: Equity Interests......................................................................42
Class 6: Mirage Administrative/Secured Claim...................................................42
X. Retention of Jurisdiction...............................................................................42
XI. Conclusion..............................................................................................44
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DISCLOSURE STATEMENT
This Revised Second Amended Disclosure Statement of Crescent City
Capital Development, Inc. (the "Disclosure Statement") has been prepared by the
Debtor pursuant to ss.1125 of Title 11 of the United States Code (the
"Bankruptcy Code"), and describes the terms and provisions of the Debtor's
Second Amended Plan of Reorganization (the "Plan") in the Bankruptcy Case of the
Debtor pending before the United States Bankruptcy Court for the Eastern
District of Louisiana (the "Bankruptcy Court") under Chapter 11 of the
Bankruptcy Code. To the extent there are any inconsistencies between this
Disclosure Statement and the Plan, the Plan controls.
A number of terms used in this Disclosure Statement are defined for use
in the Plan. Capitalized terms used, but not otherwise defined in this
Disclosure Statement, have the respective meaning ascribed to them in the Plan.
I. INTRODUCTORY STATEMENT
On July 26, 1995, an involuntary petition was filed against Crescent
City Capital Development Corporation (hereinafter "Crescent City" or "Debtor").
On July 28, 1995, Crescent City consented to entry of an order for relief. The
order for relief was entered on August 1, 1995. On October 13, 1995, the Debtor
filed a Plan of Reorganization which was amended on December 8, 1995 and is
referred to hereafter as the "First Amended Plan". The First Amended Plan was
confirmed on January 12, 1996 but pursuant to the terms of the First Amended
Plan, did not become effective until a closing with Mirage. This closing did not
occur and thus, the First Amended Plan did not become effective. Furthermore,
the First Amended Plan specifically provided that if the plan could not be
consummated, the Confirmation Order would be revoked. It is anticipated that on
or before the date set for the hearing on confirmation of Debtor's Plan, the
Confirmation Order with respect to the First Amended Plan will be revoked. The
Debtor has now filed its Second Amended Plan of Reorganization.
Pursuant to the terms of the Bankruptcy Code, acceptance of the Plan by
holders of claims or interests may not be solicited unless, at the time of or
before such solicitation, there is transmitted to the holders, a copy or summary
of the Plan and a written disclosure statement approved by the Court as
containing adequate information. Crescent City has prepared this disclosure
statement to disclose that information which, in its opinion, is necessary to
make an informed evaluation of the Plan. This Disclosure Statement, including
the summary of the Plan contained herein, has been presented to and approved by
the Bankruptcy Court. The Court's approval does not constitute a judgment by the
Court as to the desirability of the Plan, but only that the Disclosure Statement
contains information sufficient to enable a typical creditor to make an informed
judgment about the Plan. However, if any class or classes of creditors whose
claims are impaired fails to accept the Plan, it may still be confirmed under
the provisions of ss. 1129(b) of the United States Bankruptcy Code.
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In order to vote on the Plan, a creditor or holder must have filed a
proof of claim prior to September 21, 1995 unless such creditor's claim is
scheduled by Crescent City and is not listed in the schedules as disputed,
unliquidated or contingent. Any creditor whose claim is scheduled as undisputed,
liquidated, and not contingent, is to the extent scheduled, deemed to have filed
a claim. In order for the Plan to be accepted by creditors, more than one-half
in number and two-thirds (2/3) in amount of claims filed, allowed (for voting
purposes) and voting in each impaired class of creditors must vote to accept the
Plan. The interest holders under the Plan are impaired. Therefore, they will not
vote and are deemed to reject the Plan. If the Debtor is unable to obtain the
requisite acceptances, it may be able to obtain confirmation of the Plan,
despite the non-acceptance of one or more classes pursuant to 11 U.S.C. ss.1129.
The ballots for the Class 1 Claimants will be mailed to the Bondholders
of Record as of March 10, 1996 or to the beneficial holders, if known to the
Debtor. If a ballot is received from the beneficial holder then that ballot will
be counted. If the only ballot received is from the Record holder then that
ballot shall be counted. The vote of the Class 1 Claims will be determined by
the ballots actually returned by the Bondholders. The Indenture Trustee will not
vote on behalf of the Bondholders or the Class 1 Claims.
A creditor or interest holder may vote on the Plan by filling out and
mailing or faxing to Jan M. Hayden the enclosed ballot which the Court has
provided. The ballots must be received by April 29, 1996 at 5:00 P.M. CST.
Unless the court orders otherwise, no vote received after such time will be
counted nor included in the tally in any manner. Whether a creditor or interest
holder votes on the Plan or not, such claim holder will be bound by the terms of
the Plan if the Plan is accepted. You are therefore, urged to complete, date,
sign, and promptly mail the ballot to Jan M. Hayden, Bronfin & Heller, L.L.C.,
650 Poydras Street, Suite 2500, New Orleans, Louisiana, Louisiana 70130 in the
envelope provided or fax it to Jan M. Hayden at (504) 522-0949.
NO REPRESENTATION OR STATEMENTS OTHER THAN THESE SET FORTH IN THIS
DISCLOSURE STATEMENT CONCERNING CRESCENT CITY OR THE PLAN HAVE BEEN AUTHORIZED
BY CRESCENT CITY OR THE BANKRUPTCY COURT. ANY REPRESENTATIONS OR INDUCEMENTS
MADE TO SECURE YOUR ACCEPTANCE WHICH ARE OTHER THAN AS CONTAINED IN THIS
DISCLOSURE STATEMENT SHOULD NOT BE RELIED UPON BY YOU IN ARRIVING AT YOUR
DECISION, AND SUCH ADDITIONAL REPRESENTATIONS AND INDUCEMENTS SHOULD BE REPORTED
TO COUNSEL FOR CRESCENT CITY WHO IN TURN SHALL DELIVER SUCH INFORMATION TO THE
BANKRUPTCY COURT FOR SUCH ACTION AS MAY BE DEEMED APPROPRIATE.
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THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT AND THE ATTACHED
SCHEDULES HAS NOT BEEN SUBJECT TO A CERTIFIED AUDIT. DUE TO THE COMPLEXITY OF
THE DEBTOR'S FINANCIAL MATTERS, THE DEBTOR IS UNABLE TO WARRANT THAT THE
INFORMATION CONTAINED HEREIN IS WITHOUT INACCURACY OR OMISSIONS, ALTHOUGH GREAT
EFFORT HAS BEEN MADE TO BE ACCURATE.
II. HISTORY OF CRESCENT CITY
The State of Louisiana legalized riverboat gaming in 1991, adopting
legislation permitting the issuance of a maximum of 15 gaming licenses. Crescent
City was originally incorporated on June 11, 1993. On February 10, 1995, the
Louisiana Riverboat Gaming Commission granted to Crescent City, a certificate of
preliminary approval to construct, manage, own and operate the M/V CRESCENT CITY
QUEEN. On February 11, 1994, the Riverboat Gaming Enforcement Division (the
"State Police") issued Crescent City a conditional operators license. Crescent
City received a certificate of final approval on April 4, 1995.
In developing its Louisiana operations, the Debtor's parent company,
Capital Gaming International, Inc. ("CGII") had originally reached an agreement
in principal with Republic Corporate Services, Inc. ("Republic") pursuant to
which the parties formed a joint venture for the purposes of developing,
licensing and operating a riverboat gaming vessel in Louisiana. Republic was to
receive 20% of the pre-tax profits and an additional 8% of pre-tax profits
(limited to $1.6 million annually) of Crescent City, in return for which CGII
was to receive the right to 40% of Republic's pre-tax profits as well as certain
consulting, public relations, marketing and marketing support services. In
August, 1993, Republic granted CGII an option to purchase Republic's interest in
Crescent City for $26 million. This option was exercised on April 19, 1994.
As a result of this transaction, Crescent City is a wholly owned
subsidiary of CGII. Crescent City owns a state of the art riverboat, the M/V
CRESCENT CITY QUEEN. The construction of the vessel was commenced in January,
1994, and was completed in March, 1995. The vessel cost approximately $29.9
million to construct and is a replica of a turn of the century paddle wheel
riverboat. The vessel is approved for a capacity of 2500 persons including
staff. The Las Vegas style casino features 30,000 sq. ft. of casino space with
approximately 1,150 slot machines and 50 table games. Subsequent to the
bankruptcy filing, Crescent City voluntarily surrendered its certificate of
inspection because of the cost associated with such renewal. Upon sale of the
vessel, the vessel will need to be reinspected.
Crescent City entered into a joint venture agreement with Grand Palais
Riverboat, Inc. ("Grand Palais") a wholly owned subsidiary of Hemmeter
Enterprises, Inc. ("Hemmeter"), dated June 29, 1994, amended on July 7, 1994, to
form the River City Joint Venture ("Joint Venture"). The purpose of the Joint
Venture was to construct, develop, own and operate a two vessel terminal and
docking support facility for the M/V CRESCENT CITY QUEEN as well as the M/V
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GRAND PALAIS. The facility owned by the Joint Venture is presently composed of
approximately 51 acres of land at the Robin Street wharf near downtown New
Orleans. Crescent City and Grand Palais are separate licensees who each own and
operated their respective riverboats from the common berth and terminal.
Pursuant to the Joint Venture Agreement, Crescent City and Grand
Palais were 50/50 participants in a joint venture named River City Joint
Venture. Although the original cost projections for the River City Casino were
approximately $196 million, the cost of construction of the project exceeded
$223 million. Pursuant to the Joint Venture Agreement, all costs in excess of
$196 million, required the specific consent of both joint venturers.
On March 29, 1995, the Joint Venture opened for business with the
sailing of the M/V GRAND PALAIS. The M/V CRESCENT CITY QUEEN opened for business
on April 4, 1995. Soon after opening of the River City Casino complex, it became
apparent that operating revenues would not be sufficient to meet operating
costs. In addition to the construction overruns associated with the project,
Crescent City's difficulties were attributable to the New Orleans market
conditions in connection with the gaming industry. Crescent City's operating
difficulties were not unique in the New Orleans area. As is well known, both the
temporary land based casino and another downtown riverboat casino experienced
disappointing gaming revenues far below projections in 1995.
Both Crescent City and Grand Palais began funding the operating
shortfalls of the Joint Venture. In an effort to respond to cash shortage needs
credited by the poor performance, the Joint Venture, Crescent City and Grand
Palais entered into a forbearance agreement with the general contractor of the
land based improvements for the Joint Venture. Additionally, Crescent City's
management sought to obtain the additional funding needed to satisfy the cost
increases and operating shortfalls through a combination of capital
contributions and loans from third party sources. The Joint Venture also
attempted to work with vendors to obtain deferrals of payments.
Following an intensive review of the initial two months of operations,
Crescent City determined that as a result of (i) the occurrence of substantial
operating losses amounting to approximately $10.1 million, (ii) the fact that
the project was 67% below projected revenues, (iii) the lack of additional
available capital for investment, (iv) substantial construction overruns of
approximately $31.8 million, (v) the delayed completion of certain I-10 access
ramps to River City, (vi) a historic flood in the first two weeks of May, 1995,
and (vii) the significantly lower than expected patronage from tourists, prudent
and responsible business judgment mandated that operating losses be immediately
curtailed and that the riverboat gaming operations be temporarily suspended. At
approximately the same time, Grand Palais ceased gaming operations on its
vessel.
On July 21, 1995, Crescent City notified Hemmeter and Grand Palais that
the actions of Grand Palais and/or Hemmeter in connection with entering into a
transaction to sell Grand Palais and its assets to Players International, Inc.
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and an affiliate of Hyatt Corporation frustrated the purpose of the Joint
Venture and constituted a breach of the Joint Venture Agreement and a breach of
the fiduciary duties owing to Crescent City and accordingly, Crescent City
deemed such actions to constitute a termination of the Joint Venture Agreement.
Hemmeter and Grand Palais objected to the company's characterization of the
events leading up to the agreement between Players International, Inc. and Hyatt
Corporation.
On June 13, 1995, Bagby Elevator Company, Inc. ("Bagby") and Island
Oasis Frozen Cocktail Company, Inc. ("Island Oasis") filed an action under
admiralty law against the M/V CRESCENT CITY QUEEN, her engines, tackle, apparel,
furniture, etc., in rem, under Docket No. 95-1887 of the United States District
Court for the Eastern District of Louisiana (the "Complaint"). This Complaint
embodied an admiralty and maritime claim within the jurisdiction of the United
States District Court for the Eastern District of Louisiana pursuant to Rules C
and D of the supplemental rules for certain admiralty and maritime claims and
within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. Both
Bagby and Island Oasis have asserted maritime liens for providing necessaries to
the M/V CRESCENT CITY QUEEN.
The M/V CRESCENT CITY QUEEN was seized by the U.S. Marshal for the
Eastern District of Louisiana in accordance with an Order issued by the
Honorable G. Thomas Porteous, Jr., United States District Judge, in Civil Action
No. 95-1887.
As a result of the seizure, the U.S. Marshal boarded and maintained
possession and provided security for the vessel including its contents, all at
the expense of Bagby and Island Oasis. As a result, Bagby and Island Oasis
incurred the expense of the custodial legis for the security of the vessel in
the amounts which they assert are $24,612.91 and $26,092.91 respectively.
The U.S. Marshal maintained its arrest and seizure of the vessel after
the bankruptcy filing and while the Chapter 11 proceeding was ongoing. The
seizure of the M/V CRESCENT CITY QUEEN was terminated on August 21, 1995 at 4:10
p.m. through a consent order of the U.S. District Court for the Eastern District
of Louisiana. Bagby and Island Oasis have appealed this order. It should be
noted, that Bagby and Island Oasis assert, that there presently exists a dispute
as to whether jurisdiction lodges with the Bankruptcy Court as a result of the
Standing Order for Reference issued by the United States District Court for the
Eastern District of Louisiana or whether the U.S. District Court maintains
jurisdiction over the admiralty matter.
Crescent City aggressively pursued various alternatives aimed at either
attracting new equity investors to participate in and revitalize the gaming
operation or to sell all or part of Crescent City's gaming operations. During
this period, Crescent City and CGII were assisted by Donaldson, Lufkin &
Jenrette in locating potential investors and purchasers. These efforts combined
with the fact that the closing of the vessels was one of the more noteworthy
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events in the nationwide gaming community, allowed the Debtor to fully explore
the opportunities available for both sales and investments. Crescent City has
had contact with no less than ten (10) potential investors and/or purchasers and
in four of these instances it reached the point of drafting documents. Through
the negotiating/drafting process and the Debtor's own due diligence, the Debtor
has been able to ascertain the market value of its assets and the ability and
interest of any purchaser to close a deal. The results of those initial efforts
was the Mirage Agreement which formed the basis of the First Amended Plan. After
Mirage refused to close, the Debtor again contacted various potential
purchasers. These subsequent efforts resulted in the Magic Agreement which forms
the basis of this Second Amended Plan of Reorganization.
III. SIGNIFICANT PREFILING EVENTS
Originally, Crescent City had intended to locate the New
Orleans casino at the Julia Street wharf in downtown New Orleans and had
commenced negotiations with the Dock Board to enter into a berth and terminal
lease permitting Crescent City to conduct riverboat gaming operations at the
Julia Street wharf. Subsequently, Crescent City and Grand Palais reexamined the
location of the riverboat casino and decided upon the current site. The Joint
Venture acquired title to this property the ("New Orleans 2000 Property") on
July 14, 1994 for a purchase price of $37.5 million. At the closing, the Joint
Venture paid $15 million in cash and New Orleans 2000 Property retained an in
rem mortgage in the amount of $22.5 million. The New Orleans 2000 Property is
also encumbered by a second mortgage in favor of First National Bank of Commerce
as collateral agent for the Indenture Trustee and the indenture trustee, Shawmut
Bank of Connecticut, of Hemmeter.
Additionally, on June 30, 1994, the Joint Venture purchased
approximately 2 acres of riverfront land on the Orange Street wharf from the
Alabama Great Southern Railroad Company for a total cash purchase price of $2
million. This property is adjacent to the New Orleans 2000 Property. The Joint
Venture has also acquired three additional parcels of land located adjacent to
the New Orleans 2000 Property. The total purchase price of these parcels of land
was approximately $1.8 million. First National Bank of Commerce holds a first
mortgage on these properties in the amount of $2.5 million. The second mortgage
on these properties is held by First National Bank of Commerce as collateral
agent for the Indenture Trustee and Shawmut Bank of Connecticut, indenture
trustee of Hemmeter.
During the period when the Joint Venture contemplated locating the New
Orleans River City Casino at Julia Street wharf, Crescent City entered into a
berth infrastructure reimbursement agreement with the Board of Commissioners of
the Port of New Orleans (the "Dock Board") pursuant to which Crescent City
agreed to pay $7,551,500.00 (plus additional costs as defined in the agreement),
constituting one-third (1/3) of the total cost of certain inter-related
infrastructure improvements. In order to fund its reimbursement obligations to
the Dock Board, Crescent City initially provided a letter of credit, and
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thereafter, in substitution thereof deposited $6,371,987.23 in escrow with FNBC
for the benefit of the Dock Board (the "Dock Board Escrow Account"). As of March
26, 1996, there was a remaining balance of $2,269,566.96 in the Dock Board
Escrow Account.
On January 31, 1995, the Dock Board approved the terms of the berthing
and terminal lease agreements with Crescent City, Grand Palais and the River
City Joint Venture. Pursuant to the berthing agreement, Crescent City was to be
provided berthing space for its riverboat by the Dock Board. The berthing
agreement provided for payment to the Dock Board in a combination of percentage
of revenues as well as certain fixed payments and contributions towards certain
costs incurred by the Dock Board.
The funds for construction of the M/V CRESCENT CITY QUEEN and Crescent
City's contributions to the land-based improvements were provided pursuant to
the private placement sale on February 17, 1994 of CGII's 11-1/2% Notes due 2001
(the "Notes") and common stock and warrants which resulted in total gross
proceeds of $159,711,455 (the "Proceeds"). The Note offering was structured as
an "A-B" exchange wherein the Company covenanted to make an exchange offer
pursuant to which the private Series A Notes could be exchanged for publicly
traded Series B Notes in the same amount and tenor pursuant to an effective
registration statement filed with the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933. That registration statement was declared
effective on August 12, 1994. Each of the holders of the Series A Notes then
tendered their Series A Notes to the Trustee, who issued the Series B Notes in
exchange therefor on or about September 12, 1994.
Pursuant to the terms of the Indenture and Cash Collateral and
Disbursement Agreement governing the Notes, on February 17, 1994, $70,300,000 of
the Proceeds were deposited by the Trustee into an account in the name of CGII
referenced as the CCCD Construction Account (which consisted of sub-accounts for
the ship and the land-based improvements) (the "Account") in which the Trustee
for the Noteholders had a security interest. These funds were disbursed, during
the progress of construction, upon submission of a draw request from Crescent
City to CGII for submission to the Trustee for the note holders, once compliance
with the requirements of the Cash Collateral and Disbursement Agreement was
verified. In addition to the $70 million, additional funds were expended out of
proceeds allocated for working capital and general corporate purposes and other
unrestricted corporate funds. In order to construct the vessel and land based
improvements CGII was required to infuse $2.7 million of these general funds.
The Notes were guaranteed by Crescent City on February 17, 1994. On
that same date, in order to secure its guaranty, Crescent City also granted the
Trustee a security interest in substantially all of its assets pursuant to two
Security Agreements, one covering the M/V CRESCENT CITY QUEEN and all component
parts, which was under construction (the "Riverboat Security Agreement") and the
other covering substantially all of its other assets (the "General Security
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Agreement"). Upon completion of the construction of the M/V CRESCENT CITY QUEEN
in March of 1995 and the documentation of the vessel, the Trustee was granted a
First Preferred Ship Mortgage dated March 23, 1995 as required pursuant to the
Indenture. The First Preferred Ship Mortgage was recorded on March 24, 1995.
On September 22, 1994 a collateral mortgage in favor of First National
Bank of Commerce, as collateral agent for the Indenture Trustee and Shawmut Bank
of Connecticut, the indenture trustee of Hemmeter, on most of the real estate
then owned by the Joint Venture was recorded. Pursuant to a Pledge and Security
Agreement executed by the Joint Venture on October 28, 1994 and by the Trustee
on November 18, 1994, Joint Venture pledged the collateral mortgage note as
security for the Notes (and certain obligations of Hemmeter Enterprises,
Incorporated). In March of 1995, the Joint Venture executed an Act of Supplement
to Collateral Mortgage adding the remainder of the property then owned by the
Joint Venture to the collateral mortgage, which was recorded on March 27, 1995.
On April 28, 1995, subsequent to the execution of the Berthing
Agreement by Crescent City, and the Terminal and Use Agreement by River City
Joint Venture in February of 1995, Crescent City executed a collateral mortgage
(and related documents) on the Berthing Agreement in favor of the Indenture
Trustee as further security for the Notes. The Joint Venture also executed a
collateral mortgage (and related documents) on the Terminal and Use Agreement in
favor of the Trustee as further security for the Notes (and as security for
certain obligations of Hemmeter Enterprises, Inc.). These collateral mortgages
were recorded on April 28, 1995.
IV. SIGNIFICANT POST-FILING EVENTS
As noted above, an involuntary petition seeking relief under Chapter 11
was filed against Crescent City on July 26, 1995. Similar petitions were filed
against Grand Palais, the former joint venturer of Crescent City, and the Joint
Venture on the same date. Grand Palais consented to entry of an order for relief
on July 27, 1995 and that order for relief was entered on the same date. No
order for relief has been entered in the Joint Venture's proceeding.
Immediately after the filing of the petition for relief herein,
Crescent City and Grand Palais filed complaints against the State of Louisiana
through the Department of Public Safety and Corrections, Riverboat Gaming
Enforcement Division of the Office of State Police ("State Police") seeking to
enjoin the State Police as to several activities. In particular, the debtors
sought to prohibit the State Police from conducting a hearing to revoke Crescent
City's and Grand Palais' gaming licenses. The Court entered temporary
restraining orders in each proceeding. Thereafter, the State Police filed
answers to the complaints and also motions seeking orders from the Court either
declaring that the automatic stay did not apply to their actions or in the
alternative requesting that the automatic stay be modified. Subsequently, on
October 2, 1995, the Bankruptcy Court entered orders declaring that the
automatic stay applied and prevented the State Police from taking any action to
revoke or terminate either gaming license. Additionally, the court refused to
lift the automatic stay or to provide adequate protection to the State Police.
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The State Police filed a motion for rehearing, which was denied. The State
Police have now appealed that ruling which appeal is pending before the District
Court.
Prior to the Commencement Date, Debtor entered into the Mirage
Agreement whereby Mirage was to acquire 100% of the stock of the Debtor and
thus, substantially all of its assets, for $55 million in cash and the
assumption of $6.5 million in debt. The First Amended Plan, which encompassed
this transaction was confirmed. However, Mirage, through a series of events,
failed to perform under the Mirage Agreement and the confirmed First Amended
Plan, and on January 25, 1996, Mirage gave notice to the Debtor of its intent to
terminate the Mirage Agreement. The Debtor has asserted that Mirage has breached
its agreement and for reasons discussed in more detail below believes it has a
valid cause of action against Mirage for breach of the Mirage Agreement.
Shortly after the Commencement Date, Crescent City sought and obtained
an interim court order authorizing Crescent City to borrow operating funds from
CGII in order to fund its operations. Thereafter, another interim order was
entered authorizing Crescent City to borrow additional operating funds from
CGII. The total approved by the court was $1.3 million. Subsequently, the Court
approved replacement Debtor-in-Possession financing by Mirage in the amount of
$2 million. This replacement postpetition financing is secured by a first lien
against all of the assets of Crescent City, except for liens held by equipment
vendors, the Dock Board or any other claim amount that is senior to the lien of
the Indenture Trustee, up to an aggregate amount of $3,000,000.00. This lien is
superior to any lien held by the Indenture Trustee. As a result of Mirage's
attempt to terminate the agreement, it has also taken the position that the
Debtor is in default under the Agreement and that the $2 million is now due. The
Debtor, however, asserts that it is not in default and, in fact, asserts that
none of the $2 million is due Mirage due to its breach of the Mirage Agreement.
At this time the Debtor has operated on limited Debtor-In-Possession ("DIP")
financing provided by CGII, in the approximate amount of $180,000.00. Shortly,
the Debtor expects to seek authority to borrow $1 million from Magic. The DIP
financing will contain essentially the same terms and conditions as the Mirage
DIP, but will be junior to the Mirage DIP.
On February 9, 1996, the Dock Board filed a Motion for Limited Relief
from the Automatic Stay seeking the release of the funds in the Dock Board
Escrow Account in which the Dock Board asserted a security interest. On March
11, 1996, the Dock Board's Motion for Limited Relief from the Automatic Stay was
granted. Pursuant to the Bankruptcy Court's Order, the funds in the Dock Board
Escrow Account, in the amount of $2,269,566.96, were tuned over by First
National Bank of Commerce to the Dock Board on March 26, 1996.
An Official Unsecured Creditors Committee was formed in this proceeding
and it has actively participated in negotiating the terms of this plan. The
Committee in that connection has attempted to obtain detailed listings of the
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names and addresses of all persons who purchased and owned the bonds and stock
interests of the debtor at different points the last year. This information is
not available.
V. STATUS OF RIVER CITY AND GRAND PALAIS PROCEEDINGS
Although an involuntary petition was filed against River City, no
answer was filed and an order for relief has been entered. However, the
automatic stay has been lifted as to all real estate owned by River City. It
should be noted that a number of claims including preference claims may exist at
the River City level. The Grand Palais proceedings have been active, and a plan
has been confirmed which provides for the company to be sold to Casino America.
The Debtor cannot estimate the recovery, if any, that creditors may receive in
either of these proceedings.
VI. OWNERSHIP AND MANAGEMENT
A. CRESCENT CITY MANAGEMENT
The Board of Directors is composed as follows:
I. G. Davis, Jr. Chairman of The Board
Edward M. Tracy Vice Chairman of The Board
Col. Clinton L. Pagano Director
The officers of Crescent City are as follows:
Edward M. Tracy President and CEO
Col. Clinton L. Pagano Executive Vice President of Compliance
Robert J. Specht Assistant Secretary
No officers or directors receive any compensation from Debtor and the
only compensation they do receive for services rendered to Debtor is from CGII.
B. CRESCENT CITY OWNERSHIP
The stock of Crescent City is owned 100% by CGII.
C. CGII LIABILITY TO THE BONDHOLDERS
As of this date, there have been no meaningful negotiations between
CGII and the Bondholders regarding a settlement of CGII's liability to the
Bondholders following consummation of Crescent City's Plan. However, whatever
settlement is reached will not affect the Bondholders' payments under this Plan
in that the payments under the Plan represent a settlement in full of all claims
by and between the Bondholders and Crescent City.
VII. LIQUIDATION ANALYSIS
First Trust, the Indenture Trustee for the Bondholders asserts a first
security interest in essentially all of the Debtor's assets except as may be
primed by the CGII Debtor-in-Possession financing or any other priming liens.
Set forth below is a more detailed analysis of the Debtor's assets and how they
are encumbered. The only assets in which Indenture Trustee may not have a
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security interest are the License, certain claims of the Debtor against third
parties and the goodwill of the Debtor. The following is a listing of the major
assets of the Debtor and the Debtor's estimate of their value upon liquidation
in a Chapter 7 proceeding:
Undeposited Patron Markers & Miscellaneous Receivables $6,000(1)
Overpayment of State Gaming Tax 20,000(2)
Vessel & Gaming Equipment 20,000,000
License & Goodwill --0--
Claims and/or Causes of Actions against Third Parties unknown
As the majority of the assets, if not all, are encumbered beyond their
value by virtue of the Indenture Trustee's security interest, these assets would
produce no benefit to the creditors other than the Indenture Trustee and the
Bondholders in Chapter 7. Additionally, certain vendors, including IGT and
Bally's, as assignee of Gulf Gaming, assert security interests in certain
equipment and supplies. Finally, although the Debtor disputes the validity of
its claim, Mirage has asserted a secured administrative claim in excess of $2
million which, if valid, is against all of the assets of the estate.
The Indenture Trustee also asserts a security interest in the Debtor's
License. It is unclear, at this juncture, whether the Indenture Trustee has a
valid security interest in the License as neither the Debtor nor the Creditors'
Committee have conceded that such a License can be subject to a security
interest. For purposes of this liquidation analysis, it is assumed that the
Bondholders do not have a security interest in the License. Even if the
Bondholders do not have a security interest in the License, there would be no
value upon liquidation in a Chapter 7 flowing from the License to the creditors.
This is because under Louisiana gaming regulations, the License, as a separate
asset, cannot be transferred. The only way to transfer the economic interest in
a license is to transfer an interest in an entity that owns a license. Thus, as
provided for under this Chapter 11 plan, the stock in the Debtor must be sold to
another entity. A Chapter 7 trustee, however, would not have the ability to sell
the stock as the stock is not an asset of the Debtor corporation. Thus, if the
Chapter 7 trustee cannot transfer the stock interest in the entity owning the
gaming license, the Debtor asserts that no value for the License can be
recovered in a Chapter 7.
The Debtor also holds certain claims against third parties. One of the
largest of these claims is the claim in the amount of $19.6 Million asserted by
Debtor against Grand Palais Riverboat, Inc. in Grand Palais' bankruptcy
proceeding.
- - --------
(1) The book value of these assets is $30,000.00 but the Debtor
believes that this sum represents the appropriate liquidation
value when one considers the collectibility of the claims and
cost of collection.
(2) This amount may be subject to set off or recoupment and not
available for distribution to creditors.
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At this point in time creditors should not rely on any recovery of this claim.
Any recovery is not only dependent on prosecuting complex litigation, but at
this point in time it may be unlikely that any unsecured creditors will be able
to receive a substantial distribution in the Grand Palais matter without
successfully seeking recovery from other Hemmeter related entities. Although it
is anticipated that First Trust, as Indenture Trustee for the Bondholders, will
assert that its security interest is broad enough to encompass the Grand Palais
claim, there is the potential that this claim could be recovered in a Chapter 7
to benefit the unsecured creditors. Any of the parties mentioned herein should
be put on notice that the Debtor or the Liquidating Trust may pursue claims
against them. This includes, but is not limited to, those creditors mentioned in
the Claims Variance section herein. The Debtor also has a claim against Mirage
arising out of Mirage's alleged breach of the Mirage Agreement. The Debtor
believes that the potential for recovery is significant. It should be noted that
the Debtor's claim, absent its ability to mitigate its damages by entering into
another sale, would be at least equal to the purchase price of $55 million and
the costs incurred by the Debtor in connection with its negotiation of and
performance under the Magic Agreement and the Mirage Agreement.
Furthermore, the Debtor may have preference actions which may produce
value for the unsecured creditors in a Chapter 7 liquidation or in a Chapter 11
proceeding. At this time, the Debtor has not conducted a detailed analysis of
these potential claims and thus cannot accurately estimate their value. The
analysis the Debtor has done indicates that only $1.3 Million was paid by
Crescent City out of the Crescent City bank accounts during the 90 day
preference period. Attached hereto as Exhibit "A" are the registers for the
Crescent City bank accounts for the ninety (90) days before the filing of the
petition. These registers identify possible preference defendants. Of these
payments, the vast portion appears to be for current taxes, in the approximate
amount of $760,000.00, or for contemporaneous services. For this reason the
Debtor is doubtful that there will be any substantial recoveries of preference
claims. However, the value of these claims remain the same in both a Chapter 11
and Chapter 7. Because in both a Chapter 11 and a Chapter 7, the claims are
preserved for the benefit of the creditors, the Debtor does not believe the
value of the claims are relevant to the analysis of whether creditors will
receive more or less under this plan than they would receive in a Chapter 7.
The Debtor does not at this point in time believe that it has viable
claims against CGII. First, although ordinarily a guarantor has right of
subrogation against the principal obligor, the debtor does not believe it has
any subrogation claims against CGII for the Debtor's guarantee of CGII's
Bondholder Debt as such rights are waived in the Indenture, at page 110, unless
the Bondholders have been paid in full. Certainly, the Bondholders are not being
paid in full in these proceedings and for the reasons noted below it is unlikely
that they will be paid by CGII.
The Debtor also does not believe at this time that it has any claims
against CGII that arise out of theories of alter- ego or veil piercing. However,
no thorough investigation has been done into this issue. Most importantly the
Debtor does not believe any claims against CGII are worth pursuing due to
-12-
CGII's financial condition. As evidence of the condition of CGII, attached
hereto as Exhibit "B" is an excerpt from the Capital Gaming International, Inc.
Annual Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act
of 1934. The entirety of this document is available for review in the offices of
Bronfin & Heller.
The Debtor also does not believe at this time, that it has any claims
against its officers and directors. However, no investigation has been conducted
on this issue. More importantly, the Debtor does not believe that pursuing such
claims is worthwhile, as there is no directors and officers liability insurance.
Based on this analysis of assets, each class of creditors is receiving
at least, under this Chapter 11 plan of reorganization, what they would receive
upon liquidation in a Chapter 7. In particular, the Debtor notes that in a
Chapter 7, no funds would be available to pay unsecured claims unless the
Chapter 7 Trustee was successful in accomplishing one or more of the following
(1) subordinating the claim of the Indenture Trustee or avoiding its lien; (2)
defeating the claim asserted by Mirage or (3) collecting on claims against Grand
Palais.
VIII. SUMMARY OF CLAIMS AND ASSETS
A. CLAIMS AND ASSETS
Below is the Debtor's summary of its estimate of outstanding
claims against its estate as of May 31, 1996, the estimated Effective Date.
Administrative Claims $3,600,000.00(3)
Priority and Tax Priority $1,925,000.00(4)
- - --------
(3) This amount includes the Mirage DIP Financing Claim which as
addressed elsewhere herein, Debtor disputes.
(4) A portion of this figure is attributable to sales/use tax due
to the State of Louisiana and the City of New Orleans. The
portion attributable to these taxes totals $1,200,000.00. This
sum also includes a sum allegedly due the City of New Orleans
for real estate taxes of approximately $600,000.00. All or a
portion of these taxes are disputed.
The breakdown of the amount due between Crescent City and the
Joint Venture, for Sales/Use Tax is as follows:
City of New Orleans Sales/Use Tax:
River City Joint Venture (full value) $275,000
Crescent City $400,000
State of Louisiana Sales/Use Tax:
River City Joint Venture (full value) $250,000
Crescent City $350,000
City of New Orleans Real Estate Tax $600,000
(all River City Joint Venture)
The basis of the sales/use taxes is unpaid sales tax for goods
and services purchased from vendors who remain unpaid.
Debtor's calculations of amounts owed to its unsecured vendor
creditors, in many instances, includes unpaid sales tax. Thus,
this amount is included in Debtor's estimate of claims twice,
once in priority taxes and once in the unsecured claims. The
Debtor will use the claims objection process to reduce vendor
claims by those portions which represent sales tax. The real
estate taxes are taxes due by River City and may not be claims
entitled to priority. It should be noted that there are
hundreds of other claimants who have asserted priority claims
with respect to compensation and WARN claims, and these are
discussed in more detail below. The alleged WARN claims are
not included in this figure.
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Class 1 - Bondholders Claims $142,000,000.00
Class 2 - Other Secured Claims $6,047,596.00(5)
Class 3A - Unsecured Claims, excluding convenience claims $29,195,000.00(6)
Class 3B - All convenience claims 217,481.00(7)
Class 3C - CGII and other Affiliates $5,000,000.00
Class 4 - All subordinated claims - 0 - (8)
Class 5 - Equity
The following is the Debtor's estimate of the value of the property of
the estate upon confirmation:
Vessel with Gaming Equipment $30,000,000
License & Goodwill 20,800,000
Undeposited Patron Markers & Miscellaneous Receivables $6,000
Overpayment of State Gaming Tax $20,000
Causes of Action unknown
- - --------
(5) The amount noted here is the amount of the claims asserted by
Bally Gaming and IGT. There are hundreds of other claimants
who have asserted secured claims on the vessels and these
claims are discussed in more detail below.
(6) This figure includes the Joint Venture liabilities of
$23,420,030. This may not be the percentage for which Debtor
is liable, as more fully discussed herein at page 15-16.
(7) This figure assumes that those creditors holding claims
between $5000 and $8,000 will elect to reduce their claims to
$5000 and be treated in the convenience class.
(8) At this time the Debtor has not identified any members of this
class other than possibly the WARN Act claimants. The WARN Act
claimants assert that their claims, at least in part, are
entitled to priority, however, Debtor disputes this and will
contend that if these claimants are entitled to compensation
under the WARN Act, such compensation constitutes a penalty,
and thus, is a subordinated claim.
-14-
B. ASSUMPTIONS REGARDING CLAIMS AND ASSETS
For purposes of the analysis of the claims asserted against the estate,
the Debtor has been forced to estimate the sums it believes will be the amount
of allowed claims in each class. This process has been complicated because
approximately 425 proof of claims were filed in this case on or before the bar
date of September 21, 1995(9). Debtor has begun an analysis of the claims as
filed compared to the Debtor's schedules. Although it is anticipated that
further and substantial analysis of the claims is still to be done the Debtor
is able to make certain statements about the claims at this time.
Of the approximately 425 claims which have been filed, approximately
213 claims are from claimants listed on the Debtor's schedules, however, all of
these claims do not match the amount as scheduled. Of the approximately 425
claims filed, approximately 69 of those claims are filed in an amount equal to
the amount listed in the Debtor's schedules. The total amount of these claims is
approximately $1,326,000.00.
It should be noted that in its schedules, the Debtor listed as
undisputed its virile share, or fifty percent (50%) of the Joint Venture
liabilities of $23,420,030. A substantial variance between the Debtor's
schedules and the amount of a significant number of claims is that many Joint
Venture creditors filed their claim for the full amount rather than for the
Debtor's 50% virile share. The Debtor submits that it has always been the intent
of the former joint venturers that they share pro rata as to all debts and
liabilities and that a reading of the entire Section 10.06 of the Amended and
Restated Partnership Agreement governing the sharing of liability supports such
a conclusion. The Debtor will attempt to resolve this issue through the claims
objection process, however, the Debtor does anticipate that some creditors will
assert that the liability of the former joint venturers is in solido due to the
use of the term joint and several in the Amended and Restated Partnership
Agreement of River City Joint Venture.
Additionally, the claims register includes some "duplicate" claims. By
"duplicate" claims, Debtor does not mean just those claims where a creditor has
filed the same claim twice, but this category also includes, for instance,
Grimaldi subcontractors who have filed their own claims while those amounts are
also included in Grimaldi's claim, certain individual bondholders or companies
who have filed claims while these amounts are also included in the Indenture
Trustee's proof of claim. These "duplicate" claims total approximately
$22,000,000.00. Finally, the claims register includes approximately 131 claims
under the WARN Act and other theories, filed by employees, including three
claims filed by the firm of Butler & Stern that are characterized as "group
claims" that include the claims of approximately 792
- - --------
(9) Three of these claims were filed as "Group Claims" and assert
claims of approximately 800-900 employees.
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employees. In addition, two proofs of claim purporting to be class action
claims have been filed. These claims total in excess of $21 million.(10)
C. TREATMENT OF JOINT CREDITORS OF THE JOINT VENTURE AND GRAND PALAIS
A number of creditors are also creditors of River City and/or Grand
Palais. Due to the fact that most of the assets of the River City Joint Venture
are encumbered beyond their value and because to do so would unnecessarily delay
the distributions in this case, the Debtor does not intend to plead discussion.
The Debtor does intend to assert in the claims objection process, credits for
any recovery from these other proceedings. However, under the Plan all claims,
including any rights to plead discussion, shall flow to the Liquidating Trust
and the Debtor cannot predict with any measure of certainty what the Liquidating
Trustees will do, but certainly the same consideration will govern their
position.
D. SECURED CLAIMS AGAINST THE M/V CRESCENT CITY QUEEN
As noted above, hundreds of creditors have filed and/or asserted
maritime liens against the vessel. A complaint has been filed to determine the
validity and rank of these liens. The only liens which should prime the first
preferred ship mortgage held by the Indenture Trustee in this case are the
following:
1) Claims for seaman's wages;
2) Certain tort claims;
3) Those maritime liens which accrued prior to the recordation
of the first preferred ship mortgage.
The priming maritime liens which are in category 3 would be claims
accrued sometime between the vessel becoming a "vessel" and March 24, 1995 (the
date of recordation of the mortgage). A dispute exists amongst the parties as to
whether the vessel became a vessel on October 11, 1994 when the boat was
launched, on October 17, 1994 when the engines were placed on the vessel, on
March 20, 1995 when the first sea trials were conducted or on March 30, 1995
when the vessel was documented. The WARN claimants who served aboard the M/V
CRESCENT CITY QUEEN assert that their WARN claims and their contractual
severance pay claims (both of which are described in detail at page 37 of this
Disclosure Statement) are secured by maritime liens within the highest category
- - - "Claims for seamen's wages."
E. CLAIM VARIANCES
In analyzing the filed claims compared to the schedules, Debtor has
identified those claims which vary significantly from the amount at which they
were scheduled. As a general rule of thumb, for this initial analysis, Debtor
considered a major variance to be approximately $100,000. Set forth below is
Debtor's brief description of the claims which exhibit major variances. As of
- - --------
(10) It should be noted that there is an error on the Court's claim register.
On the claims register, claim no. 377 is shown as filed in the amount of
$2,000,000.00. This, however, is a clerical error. Claim no. 377 is
actually only for $20,000.00. The claim total for employee related claims
is calculated using the correct amount of the claim, not the error amount.
-16-
this date, Debtor has not been able to fully evaluate the backup for many of
these proof of claims, in large part because the creditors provided little, or
no, backup attached to the proof of claims. Therefore, Debtor can only discuss
in broad general terms the suspected reasons for some of the major variances.
Furthermore, Debtor specifically reserves its right to assert additional and/or
different bases for objections when it actually files its claims objections.
1. Balar Associates and Morphy Makosky
Debtor's schedules reflect claims by Balar and Morphy Makosky in the
amounts of $57,066 and $8,348, respectively. Balar and Morphy Makosky
have filed proofs of claims nos. 96 and 90 in the amounts of $241,078
and $181,347, respectively. The reason for this variance is that these
two creditors included amounts in their claims which are owed to them
by another contractor, not the Debtor.
2. BTG Uniforms
Debtor's schedules reflect a claim for BTG Uniforms in the
amount of $134,552. BTG has filed proof of claim no. 132 in the amount
of $332,764. At this time, Debtor has not been able to make an absolute
determination of the reason for this variance. However, Debtor suspects
the variance is either attributable to (i) the claim including both the
Crescent City and Grand Palais components or (ii) a rejection claim.
3. Custom Bus, Limousine Livery and Taxi Ads
Custom Bus filed proof of claim no. 404 in the amount of $3,601,673.
The Debtor scheduled Custom Bus' claim at $71,220. Limousine Livery
filed proof of claim no. 38 in the amount of $1,135,708. The Debtor
scheduled Limousine Livery's claim at $4,170. Taxi Ads filed a proof of
claim no. 380 in the amount of $500,000. The Debtor scheduled Taxi Ads'
claim at $36,300. The variance in these three claims is assumedly due
to the fact that each of these entities filed their claims based on a
rejection claim. They each calculated their rejection claim by simply
adding up all remaining payments due under their respective long term
contracts. None of these claimants factored in mitigation of damages
into their claims.
4. Grimaldi
Grimaldi filed proof of claim no. 101 in the amount of $15,426,082.
The Debtor scheduled Grimaldi's claim at $11,439,083. The variance in
these amounts consists of the following, (i) Grimaldi included
approximately $400,000 of interest, and (ii) a claim for damages.
5. Gulf Gaming and IGT-North America
Gulf Gaming filed proof of claim no. 396 in the amount of
$2,312,358. The Debtor scheduled Gulf Gaming's claim at $1,869,482.
IGT-North America filed proof of claim no. 225 in the amount of
$4,219,112. The Debtor scheduled IGT-North America's claim at
-17-
$3,998,266. The variance in Gulf Gaming's claim is attributable to the
fact that Gulf Gaming did not give the Debtor credit for certain
equipment which was returned to Gulf Gaming and for which credit was to
be given. Debtor suspects that IGT-North America's variance may be
attributable to interest.
6. River Marine
River Marine filed proof of claim no. 26 in the amount of $451,912.
The Debtor scheduled River Marine's claim at $206,318. The variance is
attributable to the fact that River Maine filed a claim for rejection
of its contract, including a substantial termination fee.
7. William Broadhurst
William Broadhurst filed proof of claim no. 155 in the amount of
$500,000. The Debtor scheduled William Broadhurst's claim at $75,000.
Broadhurst had a consulting agreement with the Joint Venture. His claim
is based on the termination of that agreement.
8. WARN Act Claims And Other Employee Claims
Crescent City was named as the defendant in certain lawsuits filed
in the United States District Court for the Eastern District of
Louisiana asserting liability under the Worker Adjustment and
Retraining Act. 29 USC ss.2101 et seq. (the "WARN Act") entitled Jodie
Roberts, et al v. Crescent City Capital Development Corporation and
CGII International, Inc., Civil Action Number 95-1856, Section "E" (3)
and Diane L. Speiler, et al v. River City Joint Venture, et al, Civil
Action Number 95-1865, Section "E" (3). Both of these matters are
pending in the United States District Court for the Eastern District of
Louisiana. Proof of Claims have been filed on behalf of the employees
in connection with these cases as noted above.
These eight hundred sixty two (862) claimants have filed back
pay claims under the WARN Act with these claims totaling $5,141,805.31
including attorney fees and $3,856,353.98 net of attorneys fees. Many
of the claimants (those who worked on the M/V CRESCENT CITY QUEEN)
assert that their claims are secured and enjoy a first lien superior to
all other lien holders in the full amount of their claims. These claims
total $2,368,955.10 with attorney fees, and $1,776,746.32 net of
attorney fees. Additionally, all claimants contend that each claim is
entitled to priority status, superior to the unsecured creditors, in
the amount of up to $4,000.00 per claim. The maximum total of these
priority WARN claims amounts to $3,317,991.21 with attorney fees, and
$3,079,845.78 net of attorney fees.
The Debtor contends that the WARN claims are without merit because
the Debtor did not have enough full time employees as defined by the
Statute to trigger the WARN Act notice provisions. The claimants
contend that the numerosity requirement to trigger the WARN Act is
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fulfilled because of their position that the applicable "business
enterprise" as defined by the WARN Act would be River City as a single
site of employment, and not the Debtor. Additionally, the Debtor
alleges that it is entitled to the defenses set forth by the WARN Act
which would relieve the Debtor of its prenotification requirement.
In any event, the Debtor denies that the WARN claimants are entitled
to secured status, even if their WARN Act claims are allowed because
those claims would not constitute seamen's wages. Furthermore, Debtor
denies that these claims, if allowed, would be entitled to priority
status under Section 507 (a) (3) of the Bankruptcy Code.
In addition, these employees have filed claims for five days
contractual back pay. These claims total $326,568.17. The Debtor denies
that these claims are applicable. Similar to the WARN claims, many of
the claimants assert that their claims are secured by a preferred
maritime wage lien on the M/V CRESCENT CITY QUEEN and enjoy a first
lien superior to all other lien holders in the full amount of their
claim, totaling $148,153.39. Additionally, all of the claimants contend
that each claim is entitled to priority status up to $4,000.00 under 11
U.S.C. ss.507(a)(4) of the Bankruptcy Code. The Debtor denies the
merits of these claims and the security interests or priority status
claimed.
In addition, some of the employees have claimed their right to
collect "toke" payments that were allegedly collected by upper
management and not correctly disbursed. Both the claimant and the
Debtor are looking into this situation, and an estimate of these claims
and an analysis of their validity is not available. There would also be
issues with respect to these claimants being entitled to a preferred
maritime lien, as well as priority status.
Several of the employees have personal injury claims for physical
injuries allegedly sustained on the M/V CRESCENT CITY QUEEN. These
claimants would have secured preferred maritime liens on the CRESCENT
CITY QUEEN to the extent that their claims are valid. These claims are
thought to be insured and will be handled by the applicable insurance
company assuming coverage is verified.
Finally, each employee has submitted a claim for $20,000.00
representing damages for the alleged intentional infliction of
emotional distress. These claims if valid, may constitute maritime
liens. The Debtor strenuously denies the validity of these claims.
On March 26, 1996, a Plan of Reorganization was confirmed by the
Bankruptcy Court in the Grand Palais Riverboat, Inc. bankruptcy, Case
No. 95-12736-A. According to that Plan, the WARN claimants are to be
paid $1,000,000.00 out of the proceeds of the sale of the M/V Grand
Palais to Casino America or an affiliate thereof, $250,000.00 of this
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amount is to be paid in cash on or shortly after the date of the sale,
and the remaining $750,000.00 is to be paid pursuant to a promissory
note amortized over six years and payable in full over three years. In
addition, the WARN claimants are to receive one-half of the difference
between $1,000,000.00 and the total allowed tax claims receiving
priority under 11 U.S.C. ss.507(a)(8). Debtor, Crescent City contends
that it only has a one-half virile share liability with respect to the
WARN claimants' claims, but in the event that it is determined that the
WARN claimants' claims are a solidary liability of the Debtor, the
Debtor claims that it must be given credit for those payments made to
the WARN claimants pursuant to the Grand Palais Plan of Reorganization
and sale to Casino America.
9. Dock Board
The Dock Board has filed a proof of claim in these proceedings
claiming $1,643,199.97 as unsecured and $31,482,272.50 as secured. The
total amount of the secured claim consists of $31,475,949.56 of
principal and accrued interest through July 28, 1995 of $6,322.94. The
Dock Board asserts that it is a secured creditor by virtue of a
perfected lien on the Dock Board Escrow Account and a maritime lien on
the vessel M/V CRESCENT CITY QUEEN. The Debtor disputes this claim both
as to amount and as to the purported security for several reasons.
These objections, include but are not limited to the following: First,
the Debtor submits it is liable only for its virile share of the Joint
Venture debts. Second, the claim does not account for the limitations
placed on the allowance of the claim under 11 U.S.C. ss.502(b)(6).
Finally, the claim also appears to assert a maritime lien for wharfage
and berthing which has not been provided to the M/V CRESCENT CITY
QUEEN.
10. Grand Palais
Grand Palais filed a proof of claim in these proceedings for an
undisclosed amount asserting various causes of actions. Crescent City
asserts that the claim is false, malicious and wholly without merit.
11. Mirage Resorts, Inc.
Mirage Resorts, Inc. has filed a proof of claim in the amount of $2
million. Said claim arises out of the purchase agreement whereby
Crescent City and its parent, CGII, agreed to permit Mirage an overbid
fee of $2 million. This claim should be disallowed as the event upon
which it was contingent, i.e., an overbid, did not occur. In addition,
Mirage asserts an administrative/secured claim in connection with its
DIP financing claim. Debtor disputes this claim, as more fully
discussed under Significant Post-Filing Events.
12. Louisiana Department of Revenue & City of New Orleans
The Louisiana Department of Revenue (the "Dept. of Revenue") has
filed two claims totaling in the aggregate approximately $3.6 million.
The City of New Orleans has filed a proof of claim in the amount of
-20-
$1,125,797.00. The Debtor and the Department of Revenue have been
working together to audit the Debtor's books and records to ascertain
the actual amount owed to the Dept. of Revenue for sales and use tax.
Although Debtor cannot yet validate the number asserted in the Dept. of
Revenue's claim, it should be noted that an amount for sales tax is
incorporated in Debtor's schedules. When scheduling the Dept. of
Revenue as a priority claim, Debtor listed the amount as unknown.
However, the amount is included in the schedules by way of its
allocation amongst the vendor claims. This amount asserted by the Dept.
of Revenue reflects sales tax that was to be paid to vendors for goods
and services purchased by Debtors. As such, vendors or unsecured
creditors had included this amount in their invoices. Once a
determination of the proper amount due and owing is reached, there will
have to be some adjustment made to the unsecured claims. This same
analysis is also true with respect to the City of New Orleans' claim.
13. International Electronic Products
International Electronic Products ("IEP") filed proof of claim no.
111 in the amount of $430,517.76. Debtor has scheduled IEP's claim at
$326,774.64. IEP's proof of claim seems to segregate the claim into two
portions, a Crescent City portion and a River City Joint Venture
portion. The amount scheduled by Debtor reflects the Crescent City
portion of IEP's claim without the inclusion of interest. The
difference in the amount scheduled versus IEP's proof of claim is
therefore attributable to interest on the Crescent City claim and a
claim allegedly against River City Joint Venture equal to approximately
$98,000.00 plus interest. At this point in time, Debtor has not been
able to ascertain the propriety of IEP's alleged claim against River
City Joint Venture.
14. Catherine Monaco
Catherine Monaco filed proof of claim no. 151 in the amount of
$300,000.00. There is absolutely no back up documentation attached to
the proof of claim nor has Catherine Monaco been identified as a
creditor of the Debtor by the Debtor in its books and records. The only
indication of the basis for this claim is that checked off on the proof
of claim is personal injury/wrongful death as the basis. Furthermore,
the proof of claim indicates that the debt was incurred on May 16,
1995. Debtor has no further information regarding this claim and does
not anticipate that there is a valid $300,000.00 claim for personal
injuries by Catherine Monaco against this estate. In any event, it is
anticipated that this claim will be satisfied by insurance coverage.
15. Tomba Communications
Tomba Communications ("Tomba") has filed two proofs of claim, nos.
160 and 161. Proof of claim no. 160 is for $115,511.52. This proof of
claim wholly represents an anticipated rejection claim in connection
with a lease between Tomba and River City Joint Venture. Tomba's claim
does not provide any credit for the return of the leased property or
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taken into account any mitigation of damages by release of the leased
property. Tomba's second claim, no. 161, is filed in the amount of
$88,267.00. This claim states on it face that it is representative of
equipment that was purchased by either the Debtor or the Joint Venture
and was subject of a dation in favor of Tomba that was executed on or
about June 9, 1995, thus, transferring title to the property back to
Tomba. However, according to the proof of claim, actual redelivery of
the equipment was never made to Tomba. Thus, upon redelivery of the
equipment subject to the dation, or, if, in fact, the equipment has
been returned already. Tomba will not have a proper claim as asserted
on proof of claim no. 161. Furthermore, Debtor believes that the
equipment has actually been returned to Tomba.
16. Interior Systems Enterprises
Interior Systems Enterprises ("ISE") filed proof of claim no. 167
asserting a secured claim in the amount of $150,000.00 and an unsecured
claim in the amount of $18,466.05. Debtor has scheduled the claim of
ISE in the amount of $54,688.62. Although it is not entirely clear, it
appears that the variance in the amount scheduled and the amount of the
proof of claim may be attributable to double counting the proper claim
held by ISE as both against Crescent City, Grand Palais and the Joint
Venture. In reviewing the back up to the proof of claim, it appears
that the claim is made up of a claim of approximately $56,000.00
against Grand Palais, a $56,000.00 claim against Crescent City and a
$111,000.00 against River City Joint Venture.
17. Internal Revenue Service
The Internal Revenue Service ("IRS") has filed a proof of claim in
the amount of $632,649.25, $550,129.78 priority and $82,519.47
unsecured. The Debtor disputes this claim. The claim on its face
asserts that it is for FICA, FUTA and income taxes for the periods
ending September 30, 1995 and December 31, 1995. Considering that as of
the filing of this proof of claim the period had not concluded, there
is no basis for this claim. Further, the claim states that "no returns"
have been filed and therefore, estimates these taxes as if the Debtor
was fully operational and fully staffed during this quarter. This has
not been the case since the temporary closing of the M/V CRESCENT CITY
QUEEN. For these reasons, Debtor contends that it has no liability to
the IRS for these payroll and/or income taxes. Furthermore, as the
returns and the taxes for these periods were not yet due as of the date
of the filing, it is improbable that penalties could have already
accrued.
-22-
IX. SUMMARY OF THE PLAN
-------------------
A. SALE TO PURCHASER
The cornerstone of this Plan of Reorganization is the sale to Casino
Magic Corporation, through Jefferson Casino Corporation or another of its wholly
owned subsidiaries to which the Magic Agreement is assigned ("Purchaser") of
100% of New Common Stock of the Reorganized Crescent City. The Magic Agreement
governing the terms of this transaction is attached as Exhibit "1" to the Plan.
The purchase price will be $50.0 million, payable in Cash and notes, plus the
assumption of those liabilities due Bally Gaming, Inc. and International Game
Technology in an aggregate amount not to exceed $6.5 million. The $50.0 million
is payable at closing as follows: (i) payment of $14.5 million, in Cash, (ii)
issuance of $35 million of notes having the terms set forth on Exhibit "2" to
the Magic Agreement, and as more fully described herein, and (iii) establishment
of an escrow in the amount of $500,000. The escrow will be held for a one (1)
year period partially to secure the obligation due by CGII to the Purchaser.
When, and if, the escrow is paid to CGII, said sum will be subject to the
security interest of the Indenture Trustee. In acquiring the stock, it is
contemplated that Purchaser will acquire all essential elements of the Debtor's
gaming operations including the M/V CRESCENT CITY QUEEN, the physical assets
necessary to conduct such operations(11) and the gaming license. The Purchaser
will not acquire any causes of action which are presently owned by Crescent
City, including, but not limited to, any claims Crescent City may have against
Grand Palais or any other third party including preference claims and/or
fraudulent conveyance claims. In order to implement the sale, the plan provides
as follows:
B. MEANS OF IMPLEMENTATION OF THE PLAN
(1) Closing of Magic Agreement. On the Effective Date, Purchaser
shall pay the Magic Closing Cash and Magic Notes to the Indenture Trustee for
the benefit of the Bondholders, and Purchaser shall receive in exchange therefor
100% of the outstanding shares of New Common Stock of Reorganized Crescent City,
as of the Effective Date. Immediately upon receipt of the Magic Closing Cash and
Magic Notes, and after deducting the sum of $7,250,000.00 from the Magic Closing
Cash and $28,000,000.00 from the Magic Notes, for distribution to Bondholders in
accordance with the terms of the Indenture, the Indenture Trustee shall pay the
Settlement Amount to the Liquidating Trust. From the Settlement Amount, the
following amounts will be paid:
- - --------
(11) Purchaser, in the Magic Agreement, has acknowledged that 33 slot machines
and other coin operated gaming devices which were purchased by Crescent
City and manufactured and sold by Sigma Game, Inc. and two of which were
manufactured and sold by Universal Distributing are subject to liabilities
collateralized by security interests in favor of such vendors and that
such machines and devices may be disposed of separately by Crescent City
prior to the sale.
-23-
1. Plan Payments to the Administrative Claimants.
2. Plan Payments to the Priority and Priority Tax claimants.
3. Plan Payments to secured claimants other than those of Bally's, as
assignee of Gulf Gaming, Inc., IGT and the Bondholders.
4. Plan Payments to Class 3B Convenience claimants.
5. The initial funding of an amount not to exceed $1,000,000, for the
expenses of administering the Liquidating Trust and any additional
funding for such purposes as are necessary.
6. Establishment of reserves.
7. Plan payments to Class 3A claimants.
At Closing, Purchaser shall assume or shall otherwise cause the
Reorganized Crescent City to satisfy the Bally's & IGT Claims, without any cost
or expense to the Debtor or Liquidating Trust. In addition, all of the Residual
Property will be transferred to Liquidating Trust and liquidated or otherwise
disposed of for the benefit of the Debtor's Class 3A Creditors in accordance
with the terms of the Plan.
(2) Payment of Settlement Amount.
a. Payment of Magic Closing Cash. Upon receipt of the Magic Closing
Cash, the Indenture Trustee, on behalf of the Bondholders, shall retain the sum
of $6,750,000.00 for distribution to Bondholders pursuant to the terms of the
Indenture and shall pay the remaining balance of the Magic Closing Cash
(estimated to be $6,750,000.00 less any amount by which the total balance of
principal and interest due to pay Magic's DIP Financing Claims and/or any other
DIP Financing Claims, excluding the DIP Financing Claim of Mirage, in full,
exceeds $1,000,000.00) to Liquidating Trust to be distributed and/or reserved
for Disputed Claims in accordance with the terms of this Plan.
b. Payment of Magic Notes. Upon receipt of the Magic Notes, the
Indenture Trustee, on behalf of the Bondholders, shall retain $28,000,000.00 of
the Magic Notes, for distribution to the Bondholders in accord with the
Indenture and shall assign the remaining $7,000,000.00 of Magic Notes to the
Liquidating Trust in accordance with the terms of this Plan.
(3) Description of Magic Notes. Pursuant to the Magic Agreement, as
part of the Magic Consideration, Reorganized Crescent City will issue
$35,000,000.00 of notes (the "Magic Notes"). The Magic Notes will be guaranteed
by Jefferson Casino Corporation and C-M of Louisiana, Inc. ("CMLI"), each a
-24-
wholly owned subsidiary of Casino Magic Corporation ("Magic"). Set forth below
is a chart setting forth the principal terms of the Magic Notes(12). For more
detailed information on the Magic Notes, reference should be made to the Magic
Indenture, a copy of which, in substantially the same form as the final
document, is attached as Exhibit "2" to the Plan.
TERM: Subject to acceleration as provided in Paragraph 13, three (3)
- - ----- years from the earlier of: (a) the date on which Magic opens
the Crescent City Queen (the "Boat") or the Substitute Boat
(as hereinafter defined) for public gaming play in Bossier
City, Louisiana, and (b) the day which is 180 days after the
Closing (the "Commencement Date").
INTEREST: 11 1/2% per annum, payable quarterly. (Each day on which
- - --------- interest is payable is hereinafter referred to as a
"Payment Date").
COLLATERAL OF
ISSUER: All current and after acquired assets of Issuer, except for
- - ------- furniture, fixtures and equipment, including, but not limited
to, gaming equipment, and all proceeds from the sale or
transfer of the foregoing.
COLLATERAL OF
GUARANTORS: All current and after acquired assets of Guarantors,
- - ----------- including, but not limited to, approximately 20 acres of
unencumbered real estate in Bossier Parish and all
improvements thereon owned by CMLI, and all proceeds from the
sale or transfer of the foregoing.
MANDATORY
REDEMPTION: Until the Payment Date immediately following the Release Date,
- - ---------- Excess Cash Flow (as hereinafter defined) shall be computed
quarterly and paid quarterly in arrears and applied to
principal to redeem the Notes in accordance with the
redemption schedule set forth herein. Excess Cash Flow means
the cash flow from the operation of a casino on the Boat or
Substitute Boat in Bossier City and all ancillary facilities,
after interest and income tax expense that exceeds: (a)
permitted capital expenditures, and (b) a $5 million cash
reserve.
OPTIONAL
REDEMPTION: The Notes may be redeemed at any time, in whole or in part,
- - ----------- according to the redemption schedule set forth below:
(a) Until the one (1) year anniversary following the
Commencement Date, at 100% of the principal face
amount of the Notes to be redeemed on such redemption
date; or
(b) Following the first anniversary of the Commencement
Date and until the second anniversary of the
Commencement Date, at a rate that increases on a
ratable basis daily from 100% to 110% of the principal
face amount of the Notes to be redeemed on such
redemption date; or
(c) Following the second anniversary of the Commencement
Date and until the third anniversary of the
Commencement Date, at a rate that increases on a
ratable basis daily from 110% to 120% of the principal
face amount of the Notes to be redeemed on such
redemption date.
SUBSTITUTION OF
COLLATERAL: At its option, and without incurring additional payments or
- - ---------- expenses relative to the Notes, CCCDC shall have the
unilateral right (so long as CCCDC is not in default under the
indenture relating to the Notes) to transfer the Boat to a
third party, free and clear of all liens related to
- - --------
(12) The terms used in the chart are defined under the Magic Agreement, which is
attached to the Plan as Exhibit "1", and may differ from the defined terms
in the Plan.
-25-
the Notes, for cash and/or a substitute casino riverboat
("Substitute Boat"); provided, however, that the Substitute
Boat must qualify under the Louisiana Riverboat Economic and
Control Act as a riverboat and must be substantially similar
in quality and size to any riverboat casino used and
competitive in Bossier City or Shreveport, Louisiana; and
provided, further, that the liens related to the Notes are
transferred to the cash proceeds and the Substitute Boat, if
any, and constitute the sole lien and encumbrance thereon. To
the extent cash proceeds are received form a sale or other
disposition of the Boat, such cash proceeds shall be held in
escrow (subject to the first and only lien of the indenture
trustee). Such cash proceeds shall be released as follows:
(a) During the initial ninety (90) day period after the
closing of the transfer of the Boat (the "Waiting
Period"), cash proceeds will be released from escrow
to CCCDC solely to purchase a qualifying Substitute
Boat and thereafter, for permitted capital
expenditures;
(b) If a Substitute Boat is not purchased by CCCDC during
the Waiting Period and if CCCDC has not contracted
with a third-party by the end of the Waiting Period to
build a qualifying Substitute Boat, the escrowed cash
shall be distributed immediately upon the expiration
of the Waiting Period to the indenture trustee for
redemption of the Notes pursuant to the Paragraph 8
hereof;
(c) If Purchasers contract to build a qualifying
Substitute Boat during the Waiting Period, cash may be
released from escrow to CCCDC to fund construction of
said Substitute Boat; provided, however, that the
indenture trustee shall maintain at all relevant times
a first priority perfected lien on the Substitute Boat
under applicable law subject only to those liens which
may be permitted, from time to time, under the
indenture relating to the Notes (more particularly
described in clause (d) of Paragraph 12; and
(d) Notwithstanding any provision of subparagraphs (a),
(b) or (c) to the contrary, to the extent any cash
remains in escrow fifteen (15) months after expiration
of the Waiting Period, said cash shall be released to
the indenture trustee at the expiration of said
fifteen (15) month period.
Notwithstanding any provision of this Agreement to the
contrary, in the event CCCDC is in default under the
indenture relating to the Notes, all funds in escrow shall
be paid over immediately to the indenture trustee.
RELEASE OF
COLLATERAL: The indenture relating to the Notes shall provide that at such
- - ---------- time as the aggregate outstanding principal amount of the
Notes is reduced to $17.5 million (the "Release Balance") and
CCCDC is not in default under said indenture, all collateral
for the Notes and the guarantee thereof shall be released,
except for the liens on the Boat or Substitute Boat, which
liens will continue to secure CCCDC's obligations with respect
to the Notes. CCCDC's mandatory redemption payment obligations
shall terminate as to any quarterly period commencing after
the date on which the Release Balance is attained (the
"Release Date"). Notwithstanding the foregoing, CCCDC's
obligations with respect to mandatory redemption payments
relating to Excess Cash Flow for any quarterly period
commencing prior to the Release Date shall be paid when due.
The balance, if any, owed on the Notes as of the Release Date
shall be amortized in equal quarterly payments of principal
due on the then remaining Payment Dates (together with accrued
interest and the applicable redemption premium as provided in
the redemption schedule) over the remaining term of the Notes.
COVENANTS: The indenture relating to the Notes shall (a) permit capital
- - ---------- expenditures to be made consistent with the Site improvements
identified in the pending application of CCCDC to modify
berth, as amended by Purchasers, (b) prohibit dividends and
other payments to Magic and its affiliates, (c) contain a
negative pledge of the operating cash flow of the Issuer and
the Guarantors, (d) prohibit liens or other encumbrances on
any property of the Issuer or either of the Guarantors,
-26-
exclusive of (i) any liens on furniture or equipment incurred
in connection with the acquisition thereof, and (ii) any
statutory liens of laborers or materialmen or maritime liens,
provided that any such liens are satisfied, bonded or
otherwise removed within sixty (60) after Issuer receives
notice of the existence of such liens, and (e) contain other
customary covenants and conditions.
ALTERNATIVE
AMORTIZATION
SCHEDULE: If action is taken in the State of Louisiana which
- - -------- prohibits or substantially restricts gaming by CCCDC on
the Boat or Substitute Boat ("Adverse State Action"), the
balance, if any, then owed on the Notes then outstanding,
shall be amortized and paid in equal quarterly payments of
principal (without premium) together with accrued interest
over the period of time commencing on the Payment Date
immediately following the Adverse State Action and ending
on the Payment Date immediately following the day on which
the Adverse State Action takes effect. CCCDC's mandatory
redemption obligations shall continue after an Adverse
State Action.
MARKETABILITY
OF NOTES: The Notes shall be issued by CCCDC under the securities law
- - --------- exemption provided by ss.1145 of the Bankruptcy Code. CCCDC,
at its sole cost and expense, shall take such steps as may be
necessary to comply with the Trust Indenture Act of 1939.
RECORDING COSTS: All costs of recording a ship mortgage on the Boat and
- - ---------------- Substitute Boat, if any, and otherwise perfecting the security
interests and liens securing the Notes, shall be borne by
Guarantors or Reorganized CCCDC.
(4) Applicability of Section 1145 of the Bankruptcy Code to the Magic
Notes. The Debtor believes that the issuance of the Magic Notes under the Plan
will be exempt from the registration requirements of section 5 of the Securities
Act of 1933 (15 U.S.C. ss.77e)(the "Securities Act") and any state or local law
requiring registration for the offer or sale of a security pursuant to the
provisions of section 1145 of the Bankruptcy Code. Section 1145 of the
Bankruptcy Code exempts the original issuance of securities under a plan of
reorganization from registration under section 5 of the Securities Act or under
applicable state law. For the original issuance to be exempt, three principal
requirements must be satisfied: (i) the securities must be issued by the debtor,
its successor, or an affiliate participating in a joint plan with the debtor
under a plan of reorganization under Chapter 11 of the Bankruptcy Code; (ii) the
recipients of the securities must hold a claim against the debtor or such
affiliate, an interest in the debtor or such affiliate, or a claim for an
administrative expense against the debtor or such affiliate; and (iii) the
securities must be issued entirely in exchange for the recipient's claim against
or interest in the debtor or such affiliate, or principal in such exchange and
partly for cash or property.
Section 1145(c) of the Bankruptcy Code provides that the distribution
of the Magic Notes pursuant to the Plan in accordance with the provisions of
Section 1145(a) will be deemed to be a "public offering." Accordingly, the Magic
Notes issued under the Plan will not be subject to restrictions on resale of the
type imposed on securities issued in a nonpublic offering and will not be
required to bear legends. Therefore, the Magic Notes may be resold by any holder
-27-
thereof without registration under the Securities Act pursuant to the exemption
provided by section 4(1) of the Securities Act, unless the older is a "dealer"
under section 2(12) of the Securities Act, or an "underwriter," as defined in
section 1145(b) of the Bankruptcy Code.
GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A
PARTICULAR HOLDER MAY BE AN UNDERWRITER OR DEALER, THE DEBTOR MAKES NO
REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE THE MAGIC NOTES. THE
DEBTOR RECOMMENDS THAT RECIPIENTS OF THE MAGIC NOTES ISSUED UNDER THE PLAN
CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY WOULD BE CONSIDERED AN
"UNDERWRITER" OR "DEALER" AND WHETHER THEY MAY TRADE FREELY SUCH SECURITIES
RECEIVED.
(5) Releases. As of the Effective Date the Debtor, Debtor in
Possession, Liquidating Trust, all Creditors and equity security holders of the
Debtor shall release and waive: (i) all defenses to the Bondholder Class Claim
in regard to the allowance of such claim in the Bankruptcy Case; and (ii) all
claims and causes of action against the Bondholders based upon or related to the
Debtor's execution of its guarantee of CGII's obligations under the Indenture,
or based upon any payments made to or for the benefit of the Bondholders by the
Debtor.
Additionally, except for the obligations created by the Plan, for good
and valuable consideration, including, without limitation, the benefits of the
Plan, the promises and obligations of the Debtor, Reorganized Crescent City, the
Bondholders, CGII and the Purchaser and the efforts and contributions of the
officers and directors of the Debtor in bringing about the confirmation and
consummation of the Plan, and to permit the effective and expeditious
reorganization of the Debtor, on the Effective Date, the Debtor, shall be deemed
to have unconditionally waived and released any and all rights, Claims,
liabilities and causes of action with respect to those matters directly relating
to Crescent City, against Reorganized Crescent City, the Bondholders, the
Indenture Trustee, CGII, the Institutional Note Holders' Steering Committee, the
Creditors' Committee, the Purchaser, and except with respect to CGII, their
respective members, officers, directors, agents and attorneys, as well as the
Debtor's officers, directors, agents and attorneys who served in such capacities
at any time during the Bankruptcy Case (collectively the "Releasees"); provided
however, the releases granted in favor of the Committees shall release Committee
members only in their capacity as such and not in their capacity as individual
creditors. Any claim or cause of action a Creditor or Bondholder has against any
Releasee which is personal to such Releasee, and which is not derivative of the
rights of the Debtor, shall not be affected by the releases granted hereunder.
Except with respect to the Debtor, nothing in this Plan shall impair or
otherwise affect any rights, liens, claims, or interests of the Indenture
Trustee or any Bondholder under the Notes, the Indenture, or any related
documents, including, but not limited to, any rights, liens, claims or interests
against CGII or any guarantor of CGII's obligations.
-28-
(6) Establishment and Management of Liquidating Trust.
a. Upon confirmation hereof, and effective upon the Effective Date,
the three (3) persons identified by the Creditors' Committee prior to the
conclusion of the Confirmation Hearing, shall be appointed to act as
Co-Liquidating Trustees (the "Liquidating Trustees") of and to administer the
Liquidating Trust hereinafter created and to liquidate assets for the benefit of
the creditors of the Debtor's estate. The selections of the persons to serve as
Liquidating Trustees shall be subject to approval of the Bankruptcy Court.
Vacancies occurring after the original appointments shall be governed by the
Liquidating Trust documents. The Liquidating Trustees shall be deemed to be the
authorized representatives of the Estate for the purpose of and consummation of
the Plan pursuant to Sections 1103 and 1123(b)(3)(B) and other applicable
sections of the Bankruptcy Code.
b. The Liquidating Trustees shall manage and govern the Liquidating
Trust by majority rule.
c. The Debtor will establish a Liquidating Trust, as defined by
Treas. Reg. ss. 301.7701-4(d), (the "Liquidating Trust") for the benefit of the
creditors of the Debtor. The Liquidating Trust is organized for the primary
purpose of receiving, liquidating, and distributing the cash, claims, and
property transferred to the Liquidating Trust (the "Liquidating Trust Property")
in accordance with the provisions of this Plan as promptly as is reasonably
possible, with no objective to carry on or conduct a for-profit trade or
business. Upon transfer of the Liquidating Trust Property to the Liquidating
Trust, the Debtor shall retain no interest in the Liquidating Trust Property.
d. The Liquidating Trust Property will be transferred to the
Liquidating Trust for the benefit of the creditors. The transfer shall be
treated as a transfer to creditors to the extent that the creditors are
beneficiaries of the Liquidating Trust. The transfer will be treated as a deemed
transfer by the beneficiary-creditors to the Liquidating Trust. The
beneficiaries-creditors of the Liquidating Trust will be treated as the grantors
and deemed owners of the Liquidating Trust.
e. The Liquidating Trust Property must be consistently valued by
the Liquidating Trustees and the beneficiary-creditors and said valuation must
be used for all federal income tax purposes.
f. The Liquidating Trustees must file returns for the Liquidating
Trust as a grantor trust pursuant to ss. 1.671-4(a) of the Income Tax
Regulations.
g. The Liquidating Trustees' powers shall be limited to recovering,
preserving and protecting the Liquidating Trust Property, liquidating the
Liquidating Trust Property as promptly as is reasonably possible and
distributing all income and proceeds from the liquidation of Liquidating Trust
Property in accordance with the terms of the Plan as promptly as is reasonably
-29-
possible. Except as otherwise inconsistent with the provisions of this Plan, in
the exercise of such powers, the Liquidating Trustees, on behalf of the
Liquidating Trust, shall be authorized to (i) avoid or recover transfers
(including fraudulent conveyances or preferential transfers) of the Debtor's
property as may be permitted by Sections 542 through 553 of the Bankruptcy Code
or applicable state law, (ii) pursue all claims and causes of action arising
from the prepetition activities of the Debtor, whether arising by statute or
common law and whether arising under the laws of the United States of America,
Louisiana, or any other state having jurisdiction over any claim or controversy
pertaining to the Debtor, and whether maintainable against third parties,
Affiliates or Insiders of the Debtor,(iii) defend claims, causes of action and
other litigation that may adversely affect or impact the Liquidating Trust
Property,(iv) contest Claims, (v) file, litigate to final judgment, settle, or
withdraw objections to Claims, and (vi) exercise offsets against Claims. All
activities of the Liquidating Trustees shall be reasonably necessary to, and
consistent with, the accomplishment of the purpose of the Liquidating Trust as
set forth in the Plan. The Liquidating Trustees shall make continuing efforts to
liquidate and distribute proceeds from the liquidation of Liquidating Trust
Property, shall make timely distributions pursuant to the provisions hereof, and
shall not unduly prolong the duration of the Liquidating Trust.
h. The Liquidating Trustees shall have full and complete authority
to do and perform all acts, to execute all documents and to make all payments
and disbursements of funds necessary to carry out the purpose of the Liquidating
Trust as set forth in the Plan. The Liquidating Trustees shall make
distributions of proceeds from the liquidation of Liquidating Trust Property and
income from investments in accordance with the Plan.
I. Any party dealing with the Liquidating Trustees in relation to
the Liquidating Trust Property or any part thereof, including, but not limited
to, any party to whom Liquidating Trust Property or any part thereof shall be
conveyed or contracted to be sold by the Liquidating Trustees, shall not be
obligated in any way (i) to see to the application of any purchase money, (ii)
to see that the provisions of the Plan or the terms of the Liquidating Trust
have been complied with, or (iii) to inquire into any limitation or restriction
on the power or authority of the Liquidating Trustees. The power of the
Liquidating Trustees to act or otherwise deal with the Liquidating Trust
Property shall be absolute as to any party dealing with the Liquidating Trustees
in any manner whatsoever in relation to the Liquidating Trust Property.
j. All costs, expenses, and obligations incurred by the Liquidating
Trustees in administering this Liquidating Trust or in any manner reasonably
connected, incidental or related thereto shall be a charge against the
Liquidating Trust Property. The Liquidating Trustees may approve and direct the
payment thereof or the retention by the Liquidating Trustees of adequate
reserves for such payment prior to making distributions to creditors pursuant to
the Plan.
-30-
k. The Liquidating Trustees shall keep or cause to be kept books
containing a description of all property constituting Liquidating Trust Property
and an accounting of receipts and disbursements, which shall be open to
inspection by creditor-beneficiaries at reasonable times upon written request to
the Liquidating Trustees or their counsel. The Liquidating Trustees shall file
with the Bankruptcy Court semi-annually (or more often if deemed appropriate by
the Liquidating Trustees) a statement of receipts and disbursements for the
Liquidating Trust. The Liquidating Trustees shall establish and maintain
separate accounts (including bank accounts) for the receipt and expenditure of
funds derived from the Settlement Amount, the Administrative, Priority and
Disputed Claims Reserve and the Residual Property. The Liquidating Trustees, in
their discretion, may advance funds from the Settlement Amount Account for the
purpose of investigating, commencing litigation, or otherwise enhancing the
value of the claims and property to be deposited in the other accounts but such
advance(s) shall be considered loans and shall promptly be repaid from the first
available funds in such other accounts.
l. No recourse shall ever be had, directly or indirectly, against
the Liquidating Trustees or any Representatives of the Liquidating Trustees
(including without limitation, the employers of the Liquidating Trustees), or
against any employee of the Liquidating Trustees, whether by legal or equitable
proceedings, by virtue of any statute or otherwise, or by reason of the creation
of any indebtedness by the Liquidating Trustees under this Liquidating Trust for
any purpose authorized by this Liquidating Trust, it being expressly understood
and agreed that all liabilities, contracts and agreements of the Liquidating
Trustees, whether in writing or otherwise, under this Liquidating Trust shall be
enforceable only against and be satisfied only out of the Liquidating Trust
Property or shall be evidence only of a right of payment out of the Liquidating
Trust Property, as the case may be. Nothing herein shall constitute a waiver of
claims for intentional torts, embezzlement or other fraudulent activity. Every
undertaking, contract, covenant or agreement entered into in writing by the
Liquidating Trustees, their Representatives, shall provide expressly against the
personal liability of the Liquidating Trustees, their Representatives and
employees.
m. The Liquidating Trustees shall receive no compensation for their
services but shall be entitled to reimbursement for all expenses incurred by
them in the performance of their duties as trustees, which expenses shall be a
charge against and paid out of the Liquidating Trust Property, in accordance
with the terms of the Plan. The reimbursement of expenses to the Liquidating
-31-
Trustees and reimbursement of expenses and compensation of professionals
employed by the Liquidating Trustees shall constitute a first priority expense
of the Liquidating Trust.
n. The Liquidating Trustees shall be relieved of any and all
duties, restrictions or liabilities imposed upon Liquidating Trustees by
applicable laws of the governing state, including the provisions of the trust
laws of the governing state as in effect, in the governing state, on the
Effective Date and as it may thereafter be amended, so that the Liquidating
Trustees shall be liable only for acts of self-dealing or bad faith, or
intentionally adverse acts or reckless indifference to the interests of the
creditors of the Debtor. The fact that any act or failure to act of the
Liquidating Trustees was advised by an attorney acting as attorney for the
Liquidating Trust or the Liquidating Trustees shall be conclusive evidence of
the Liquidating Trustees' good faith in performing or failing to perform such
act.
o. The Liquidating Trust shall be effective as of the Effective
Date and shall remain and continue in full force and effect until the
Liquidating Trust Property has been wholly converted to cash, all costs,
expenses and obligations incurred in administering this Liquidating Trust have
been fully paid and discharged and all remaining income, proceeds and assets of
the Liquidating Trust Property have been distributed as herein set forth.
Notwithstanding the above, the Liquidating Trust created herein shall terminate
within(3) years from the Effective Date or within such further time as is
reasonably necessary to accomplish full liquidation and disbursement; provided,
however, in no event shall this Liquidating Trust extend beyond five (5) years
from the Effective Date.
p. Subject to approval of the Bankruptcy Court, the Liquidating
Trustees may engage attorneys, accountants and agents to advise or assist the
Liquidating Trustees in the administration of the Liquidating Trust and to
represent the Liquidating Trustees in all matters relating to the Liquidating
Trust. The Liquidating Trustees shall pay the reasonable fees, charges and
expenses of such attorneys and accountants who provide services after the
Effective Date as a priority expense of the Liquidating Trust, in accordance
with the terms this Plan. Subject to the availability of sufficient funds in the
Administrative Reserve, the fees and expenses of such professionals and agents
shall be paid upon the monthly submission of bills to Liquidating Trust. If no
written objection to payment is received within five (5) Business Days following
delivery of any bill, the bill shall be paid by Liquidating Trust. If there is a
dispute as to the amount of any bill, such dispute shall be submitted to the
Bankruptcy Court for a determination of the reasonableness of such bill. Subject
to the availability of sufficient funds in the Administrative Reserve, the
uncontested portion of each bill shall be paid within ten (10) Business Days
after its delivery. As provided infra, to the extent funds are or become
-32-
available, fees and expenses of professionals and others involved in
investigating, recovering, or liquidating Residual Property shall be paid from
such recoveries. To the extent that contingent fee litigation is desirable or
necessary, the Liquidating Trustees are authorized to hire counsel to pursue
such litigation at a reasonable contingent fee. The Liquidating Trust, which
shall succeed to the Debtor's interest in the property transferred to it
pursuant to this Plan, shall constitute a successor in interest to the Debtor.
Accordingly, upon the Effective Date, the Liquidating Trustees, on behalf of the
Liquidating Trust, shall become the owner and holder, of all privileges
(including the attorney-client privilege) owned or held by the Debtor, whether
owned or held by the Debtor individually or jointly and whether concerning
pre-petition Date or post-petition Date matters.
q. This Liquidating Trust shall be administered and governed by the
laws of the State of New Jersey or such other state (the "governing state") as
the Debtor and the Creditors' Committee shall select, which shall be established
as of the Effective Date, and any questions arising hereunder shall be resolved
and determined in accordance with the laws of the governing state, without
regard to principles of conflicts of law.
r. On the Effective Date, (a) the filing by Liquidating Trust of
its Trust Articles which shall be a Plan Document shall be deemed authorized and
approved in all respects, and (b) the appointment of the Liquidating Trustees by
the Bankruptcy Court in the Confirmation Order, and the other matters provided
under the Plan concerning the structure of Liquidating Trust or action by
Liquidating Trust, shall be deemed to have occurred and shall be in effect
without any requirement of further action or order of the Bankruptcy Court. On
the Effective Date, (a) the filing by Reorganized Crescent City of the Amended
Certificate of Incorporation and the adoption of the Amended By-laws shall be
deemed authorized and approved in all respects, and (b) to the extent identified
by the Purchaser on such date, the appointment of the directors and officers of
Reorganized Crescent City, and the other matters provided under the Plan
concerning the corporate structure of Reorganized Crescent City, or corporate
action by Reorganized Crescent City or corporate action by Reorganized Crescent
City, shall be deemed to have occurred and shall be in effect from and after the
such time without any requirement of further action or order of the Bankruptcy
Court. The Directors and officers of the Debtors will be deemed to have resigned
as of the Effective Date.
(7) Tax Ramifications of Liquidating Trust
It is anticipated that certain assets of the Debtor (the "Trust
Assets") will be contributed to a liquidating trust (the "Liquidating Trust").
The Class 3A and 3B Creditors will be the beneficiaries of the Liquidating
Trust. As with a liquidating corporation, the formation of the Liquidating Trust
and the contribution of the Trust Assets will be a taxable transaction. The
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Debtor will recognize gain or loss equal to the difference between its basis in
each of the Trust Assets and the fair market value of each such Trust Asset at
the time of contribution. Similarly, creditors will generally recognize gain or
loss equal to the difference between such creditor's basis in its claim and the
fair market value of its share of the Trust Assets at the time of contribution.
Creditors should consult their own tax advisors to determine if all or a portion
of any gain recognized should be treated as ordinary income either as accrued
but unpaid interest or accrued market discount.
It is anticipated that the Liquidating Trust will be treated as a
"grantor" trust for federal income tax purposes, and the creditors will be
treated as if the Liquidating Trust did not exist. Each creditor will have its
own cost basis in the underlying Trust Assets as if the Liquidating Trust did
not exist.
C. CLASSIFICATION AND TREATMENT OF CLAIMS
The Plan of Reorganization establishes various categories and classes
of creditors and provides for the treatment of each of those creditor bodies.
As to Administrative Claims, the Plan provides that these creditors
shall receive on account of such claim, in full, in Cash, from the Liquidating
Trust, on the later of: (a) the Effective Date (or as soon thereafter as
practicable), or (b) the first Cash Distribution Date immediately following the
date on which such Administrative Claim becomes an Allowed Claim, except to the
extent that the holder of an Allowed Administrative Claim agrees to a different
treatment; provided, however, that Administrative Claims that are Allowed Claims
representing obligations incurred in the ordinary course of business by the
Debtor will be paid by Liquidating Trust when due in the ordinary course of
business. The Plan further provides that Administrative Claims for the payment
of compensation and reimbursement of expenses pursuant to ss.330, 331 and 503(b)
of the Bankruptcy Code, will be paid within three (3) business days of the entry
of an order of the Bankruptcy Court authorizing the payment. The Debtor has
estimated Administrative Claims to be $3,500,000.00, which includes the
estimated sums due on any DIP Financing Claims, including the disputed Mirage
DIP Financing Claim, all professional fees and ordinary operating expenses
estimated to be due on the Confirmation Date.
As to Priority Claims and Priority Tax Claims, the Plan provides that
such creditors will be paid in full on the Effective Date or on the First Cash
Distribution Date immediately following the date on which the claim has become
an allowed claim. The Debtor estimates the Priority Claims and Priority Tax
Claims, might be as high as $1,925,000.00 on the Effective Date, which amount is
subject to substantial disputes. The disputes are more fully addressed herein at
Section VIII.
Eight hundred sixty two (862) former employees have filed WARN claims
and other claims for compensation, as set forth in more detail on page 18 of
this Disclosure Statement. These claimants contend that their claims are
entitled to priority under 11 U.S.C. ss.507(a)(3), and they contend that these
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claims must be paid in full up to $4,000.00 per claimant under the Plan of
Reorganization. The Debtor denies that these claims are entitled to priority
status. Prior to or concurrent with confirmation, the Bankruptcy Judge will be
asked to estimate the maximum amount of these contingent and/or unliquidated
claims, and sufficient amounts will be set aside to pay these claims upon final
adjudication, not to exceed the maximum amount estimated by the Bankruptcy Judge
prior to confirmation. Should the Bankruptcy Judge estimate these claims to be
in a maximum amount inconsistent with the Conditions to Confirmation and
Effectiveness of the Plan, as set forth in Article XI of the Plan of
Reorganization, the Plan shall not be confirmed.
As to the remaining creditors, they have been classified as follows
under the Plan and have been given the treatment outlined below:
Class 1: Bondholder Class Claim
1. Classification: Class 1 consists of the Bondholder Class Claim. The
Bondholder Class Claim is represented by the proof of claim filed by First Trust
National Association as the Indenture Trustee. The claim as filed is for the
amount of $142,676,250. The Indenture Trustee, on behalf of the Bondholders, has
asserted a security interest in any interest the Debtor may have in its license
and goodwill. The Debtor has disputed, in part, the extent of the security
interest asserted by the Indenture Trustee. In large part, the Plan of
Reorganization constitutes a settlement of this dispute. The Plan provides that
the Bondholders claims will be allowed. Additionally, the Bondholder's Claim
will not be subject to, after the Effective Date, any objection, claim, counter
claim, set off defense, action or proceeding by the Debtor, Reorganized Crescent
City, any statutory committee or any other parties in interest.
2. Allowance of Bondholder Claim: On the Effective Date, the Bondholder
Claim shall be deemed an Allowed Class 1 Claim in the amount of $142 million.
The Bondholder Claim shall not, after the Effective Date, be subject to, or the
subject of, any objection, claim, counterclaim, set off, defense, action or
proceeding by the Debtor, Reorganized Crescent City, any statutory committee, or
any other party in interest, whether in law or equity. To the extent any such
objection, action or proceeding is pending on or after the Effective Date, such
action, objection or proceeding shall be deemed withdrawn and the Bondholders
may take such steps as they deem appropriate to cause the Bankruptcy Court's
records to reflect such withdrawal (including, without limitation, seeking ex
parte relief).
3. Treatment: As provided in Article II(B) of the Plan, upon receipt of
the Magic Closing Cash and the Magic Notes, the Indenture Trustee, on behalf of
the Bondholders, shall retain (i) Cash, in the amount of $6,750,000.00 and (ii)
$28,000,000.00 of Magic Notes, all, and both, free and clear of any and all
liens, claims, privileges and encumbrances held or asserted by any person other
than the Indenture Trustee, for distribution to the Bondholders pursuant to the
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terms of the Indenture, and the Indenture Trustee shall immediately (i) pay the
remaining balance of the Magic Closing Cash (estimated to be $6,750,000.00, less
any amount by which the total balance of principal and interest due to pay
Magic's DIP Financing Claims in full exceeds $1,000,000.00) and (ii) assign the
remaining Magic Notes, in the amount of $7,000,000 to Liquidating Trust for
distribution and/or application in accordance with this Plan. The Indenture
Trustee shall retain the sum of $6,750,000.00 in Magic Closing Cash and
$28,000,000.00 in Magic Notes, to be paid to Class 1 Claimants, in accordance
with the terms of the Indenture.
Additionally, any amounts to be paid to CGII from the Magic Deferred
Cash, as provided in this Plan, shall be subject to the security interest of the
Indenture Trustee. Any amounts to be paid to CGII from the Magic Deferred Cash,
shall be deposited by Purchaser in a segregated interest bearing account
designated by the Indenture Trustee at First Bank National Association, subject
in all respects to all of the first priority liens and security interests of the
Indenture Trustee, without any further action, and shall not be disbursed absent
the mutual consent of CGII and the Indenture Trustee, or by an order of a court
of competent jurisdiction.
Other than as set forth herein, the Class 1 claimants (including the
Indenture Trustee, the Bondholders, and anyone deriving or claiming rights under
the Secured Notes, the Indenture, or any security therefore), shall not be
entitled to participate as a Class 2, 3A or 3B Claimant under this Plan on
account of such claim.
4. Release of Defenses: As of the Effective Date the Debtor, Debtor in
Possession, Liquidating Trust, all Creditors and equity security holders of the
Debtor shall release and waive: (i) all defenses to allowance of the Bondholder
Claim in the Bankruptcy Case, and (ii) all claims and causes of action, if any,
against the Bondholders or the Indenture Trustee based upon or related to the
Debtor's execution of its guarantee of CGII's obligations under the Indenture,
or based upon any payments made to the Indenture Trustee by the Debtor.
Nothing herein shall constitute a waiver of any defenses to the
allowance of the claim of the Bondholders or the Indenture Trustee against CGII
in any other bankruptcy proceeding. Except with respect to the Debtor, nothing
in this Plan shall impair or otherwise affect any rights, liens, claims, or
interests of the Indenture Trustee or any Bondholder under the Notes, the
Indenture, or any related documents, including, but not limited to, any rights,
liens, claims or interests against CGII or any guarantor of CGII's obligations.
5. Voting: Class 1 is Impaired by the Plan and the holder of Claims in
Class 1 are entitled to vote to accept or reject the Plan.
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Class 2: Secured Claims
1. Classification: Class 2 consists of secured claims.
A substantial number of the creditors of this estate have filed proofs
of claims indicating a secured status. The Debtor has compiled a list of those
claims, the date incurred, the amount and a brief description of the security
interest asserted, a copy of which can be obtained by contacting counsel for the
Debtor. The Debtor believes that a vast portion of these claims are, in fact,
unsecured for the reason that pursuant to 11 U.S.C. ss.506 a creditor has a
secured claim only to the extent he has an interest in collateral sufficient to
pay that claim. The vast portion of all claims asserted against the vessel, the
Debtor believes, are inferior to the First Preferred Ship Mortgage held by the
Indenture Trustee. The Debtor has filed a complaint with the United States
Bankruptcy Court seeking to rank and determine the extent of any maritime liens
against the vessel. Additionally, it should be noted that a number of creditors
have filed secured claims based on liens asserted against the terminal facility.
As discussed above, the terminal facility is property owned by River City, a
joint venture of Crescent City and Grand Palais. Therefore, these creditors do
not hold a secured claim as to this estate. Finally, a number of creditors,
including Bally and IGT, have asserted a security interest in certain equipment.
The Debtor believes that these liens are in fact valid and will be treated in
accordance with the terms and conditions set forth in the Plan.
Many of the employees earlier described as having WARN Act claims and
other claims contend that their WARN claims, their alleged contractual five (5)
day back pay claims, their toke claims, and their personal injury claims, enjoy
maritime liens. Those employees assert that their liens would be superior to all
other liens, including those held by the Indenture Trustee, under Federal
Maritime Law. For those employees who provided necessaries to vessels, they
would enjoy maritime liens, but those liens would be inferior to the lien of the
Indenture Trustee, and thus valueless.
The WARN claims for those employees who were assigned to the Crescent
City Queen are alleged to amount to $2,368,995.10 including attorney fees and
$1,776,746.32 net of attorney fees. The five (5) day back pay claims for those
working on the Crescent City Queen total $148,153.39. The toke claims for those
working on the Crescent City Queen are not known at this time. Their personal
injury claims for bodily injuries sustained by employees working on the Crescent
City Queen are estimated at $150,000.00, and are thought to be insured.
The $20,000.00 per person claim for damages resulting from the alleged
intentional infliction of emotional distress, if valid, would constitute a
preferred maritime tort lien for those who were assigned to vessels.
As noted above the Debtor strenuously denies the validity of all of the
claims asserted by the employees as well as the assertions that such claims are
entitled to priority or secured status.
2. Determination of Allowed Secured Claim: Prior to the Effective Date,
the Debtor may seek and obtain a determination of the Allowed Secured Claim of
any Creditor asserting a Secured Claim pursuant to the Bankruptcy Code and the
Bankruptcy Rules.
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3. Treatment: Except as provided in Article V(A) of the Plan, as to
each Allowed Secured Claim and in complete satisfaction of such Claim, at the
Debtor's option, either:
(i) (A) any default, other than of the kind specified in Section
365(b)(2) of the Bankruptcy Code, shall be cured, provided that any accrued and
unpaid interest, if any, which the Debtor may be obligated to pay with respect
to such default shall be simple interest at the contract rate and not at any
default rate of interest;
(B) the maturity of such Claim shall be reinstated as the maturity
existed before any default;
(C) the holder of such Claim shall be compensated for any damage
incurred as a result of any reasonable reliance by the holder on any
provision that entitled the holder to accelerate maturity of such
Claim; and
(D) the other legal, equitable, or contractual rights to which the
Claim entitles the holder shall not otherwise be altered; provided,
however, that as to any Allowed Secured Claim which is a nonrecourse
claim and exceeds the value of the collateral securing the Claim, the
collateral may be sold at a sale at which the holder of such Claim has
an opportunity to bid;
(ii) on the Effective Date or such other date as may be agreed upon
by the Debtor or Liquidating Trust, as the case may be, and the holder
of such Allowed Secured Claim, the Debtor or Liquidating Trust, as the
case may be, shall abandon the collateral securing such Claim to the
holder thereof in full satisfaction and release of such Claim. The
Claim held by Jones Casino Supplies, Inc. ("Jones") shall be partially
satisfied, based upon and in consideration of the sale free and clear
of all liens and other interests pursuant to 11 U.S.C. 363(f), to Jones
Casino Supplies, Inc., of the slot machines and other gaming equipment
manufactured by Sigma Games, Inc. ("Sigma"), and Advance Cart
Technology, Inc. ("ACT") for a total credit of $204,754.67 ($156,
387.20 for Sigma equipment and $48,367.47 for ACT equipment), to be
applied in reduction of the total Secured Claim of Jones Casino
Supplies, Inc. In the alternative, a partial credit shall be granted
following the abandonment of the slot machines and other equipment and
supplies manufactured by Sigma and ACT to Jones to allow it to
foreclose its security interest, and based upon the Court's
determination as to the amount of the secured portion of the Jones
Claims, and the security interest and liens held by Jones shall be
preserved and retained by Jones pending the Court's determination and
the foreclosure; or
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(iii) the holder of such Claim shall be paid, on account of such
Allowed Secured Claim: (a) in full, in cash, after the later of (i) the
Effective Date or (ii) the first Cash Distribution Date after the date
such Secured Claim becomes an Allowed Claim; or, if applicable, (b)
upon such other terms as may be agreed to between the Debtor or
Liquidating Trust, as the case may be, and the holder of such Allowed
Secured Claim; provided, however, that as to the Bally & IGT claims,
upon such other terms as may be agreed to between Reorganized Crescent
City or the Purchaser, as the case may be, and the respective holders
of the Bally & IGT Claims. The security interest of Bally and IGT shall
survive confirmation until such claims are paid. The security interests
of any other secured claimant, shall be preserved and retained, to
survive confirmation, in either the specific collateral itself,
provided said collateral is not part of the Riverboat Assets, or
preserved and attaching to the proceeds that constitute the Settlement
Amount and/or the Residual Property, if the collateral is sold free and
clear of liens and interests, until paid.
(iv) Any Allowed Class 2 Claim found by Final Order to be secured
by a lien against any of the Riverboat Assets to be transferred to
Purchaser and to be senior to the lien securing the Class 1 Claims
affecting the Riverboat Property shall be paid in cash on the Effective
Date or at such later date as such determination is made by Final
Order. Payments to the holders of any such Class 2 Claims shall be made
from the Net Cash Proceeds of one or more of the following sources, in
the following order of priority; the Settlement Amount and the Residual
Property. Any creditor determined by final order to have an allowed
Class 2 Secured Claim shall be paid to the extent of the value of its
collateral, with the creditor retaining its security interest and lien,
either as to the specific collateral, provided said collateral is not
part of the Riverboat Assets, or preserved and attaching to the
proceeds only that constitute the Settlement Amount and the Residual
Property, until the court's determination and payment, and shall have
an unsecured claim for any deficiency which shall then be recognized,
and the creditor paid its pro-rata distribution or share of the
Settlement Amount as set forth below, for the Class 3 Allowed General
Unsecured Claims.
It is anticipated that most of the claims which fall in this class will
be paid in cash out of the Settlement Amount. To the extent a Claimant having
filed a Claim designated as secured, is determined to have a partially secured
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and partially unsecured claim, based on the fact that the claim exceeds the
value of the collateral securing such Claim, the remaining deficiency Claim, or
unsecured claim, shall be treated as a General Unsecured Claim in Class 3A.
4. Voting: Class 2 is impaired by the Plan and each holder of a Claim
in Class 2 shall be entitled to vote to accept or reject the Plan.
Class 3A: General Unsecured Claims
1. Classification: Class 3A consists of Allowed General Unsecured
Claims. As noted above, in the summary of claims against the estate, there are
substantial variances between the Debtor's records and the proof of claims filed
in these proceedings.
2. Treatment: Each holder of an Allowed General Unsecured Claim shall
receive its Pro Rata share of the remainder of the Net Cash Proceeds Settlement
Amount, on account of their beneficial interests in the Liquidating Trust, after
payment or reserve for all (i) Administrative Claims, (ii) Priority Claims,
(iii) Priority Tax Claims (iv) Allowed Class 3B Claims, (v) Allowed Class 2
Claims found to be secured by a lien on any of the Riverboat Assets and superior
to the lien of the Class 1 Claimant, and (vi) establishment of a reserve for
payment of operating expenses of Liquidating Trust (which initial reserve is not
to exceed $1,000,000.00). In addition to distributions from the Settlement
Amount, Class 3A Claimants shall receive Pro Rata distributions from all Net
Cash Proceeds generated from the Residual Property. However, there will be no
distribution of the Net Cash Proceeds generated from the Residual Property
unless and until all payments and/or reserves required under this paragraph have
been made.
3. Voting: Class 3A is impaired and the holders of Claims in Class 3A
are entitled to vote to accept or reject the Plan.
4. Election To Be Treated As Holder Of Convenience Claim: On or before
the Voting Deadline, any holder of an Allowed General Unsecured Claim may elect
(by election on the ballot to be sent to all holders of Allowed General
Unsecured Claims, or thereafter until the Effective Date, by other written
election in form and substance satisfactory to the Debtor) to voluntarily reduce
its Claim to $5,000, and receive the same treatment as holders of Claims in
Class 3B.
5. Claims With Recourse to Insurance Coverage: To the extent the holder
of any General Unsecured Claim has recourse to any liability insurance policy
covering tort claims issued to or for the benefit of the Debtor, the holder of
such Claim must first, to the satisfaction of the Liquidating Trustees, use its
best efforts to collect its Allowed Claims from the insurance carrier. Such
collection will reduce the amount of such holder's Allowed Claim by the amount
of any payment received from such insurance carrier. Any remaining unpaid
portion of such Allowed General Unsecured Claim will be treated under the other
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provisions applicable to Allowed General Unsecured Claims. In the event the
Liquidating Trustees determine that the holder of any such Claim has not used
its best efforts to collect the proceeds of such insurance coverage, such Claim
shall be treated as a Disputed Claim until the Liquidating Trustees determine
that such best efforts have been made.
6. Estimation of Distribution to Holders of Class 3A Claims: The
Distribution to Class 3A claimants will be affected by (i) the total amount of
Administrative Expenses, Priority Tax Claims, Priority Claims, Class 2 Claims
and Class 3B claims, and (ii) the amount of allowed claims in Class 3A. In an
attempt to give Class 3A creditors some estimate of what their distribution
might be, Debtor has prepared a chart showing estimated distribution under
various scenarios. This chart is attached as Exhibit "C".
Class 3B: Convenience Claims
1. Classification: Class 3B consists of Convenience Claims.
2. Treatment: Each holder of an Allowed Convenience Claim shall be
paid forty (40%) percent of the Allowed amount of such Claim, in Cash, on the
later of (a) the Effective Date (or as soon thereafter as is practicable), or
(b) the first Cash Distribution Date immediately following the date on which
such Convenience Claim becomes an Allowed Convenience Claim. This distribution
will be funded out of the Settlement Amount. It should be noted that if these
claims have been acquired by a third party purchaser, then the third party
purchaser shall retain the right to receive treatment as a convenience claimant.
3. Voting: Class 3B is impaired and the holders of Claims in Class
3B are entitled to vote to accept or reject the Plan.
Class 3C: CGII
1. Classification: Class 3C consists of the CGII Claim.
2. Treatment: On the Effective Date, the Class 3C Claim shall be
allowed in the amount of $5,000,000 and the holder of the Class 3C Claim shall
receive on account of such Claim, the Magic Deferred Cash pursuant to the Magic
Agreement. The payment of the Magic Deferred Cash shall be subject to the
security interest of the Indenture Trustee. Any amounts of the Magic Deferred
Cash to be paid to CGII, pursuant to this Plan and the Magic Agreement, shall be
deposited by Purchaser in a segregated interest bearing account at First Bank
National Association, subject in all respects to all of the first priority liens
and interests of the Indenture Trustee, without any further action, and shall
not be disbursed absent the mutual consent of CGII and the Indenture Trustee, or
by an order of a court of competent jurisdiction.
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3. Voting: Class 3C is impaired and the Holder of Claims in Class 3C
is entitled to vote to accept or reject the Plan.
Class 4: Subordinated Unsecured Claims
1. Classification: Class 4 consists of Subordinated Unsecured
Claims.
2. Treatment: Holders of Subordinated Unsecured Claims shall receive
no distribution under the Plan. There shall be a presumption that excusable
neglect does not exist in respect of those Claims.
3. Voting: Class 4 is impaired and is deemed to reject the Plan.
Class 5: Equity Interests
1. Classification: Class 5 consists of all Equity Interests.
2. Treatment: Holders of Equity Interests shall receive no
distribution under the Plan. All Equity Interests will be canceled and rendered
void and of no further force or effect on the Effective Date.
3. Voting: Class 5 is impaired and is deemed to reject the Plan.
Class 6: Mirage Administrative/Secured Claim
1. Classification: Class 6 consists of the Mirage
Administrative/Secured Claim.
2. Treatment: Pending resolution of Debtor's objection to the
Mirage's DIP Financing Claim, the entire sum of $2,000,000.00, plus the
estimated amount of accrued and/or accruing interest for a period of one (1)
year after Closing shall be reserved by the Liquidating Trust for the benefit of
Mirage. Upon entry of a Final Order allowing the claim of Mirage, a sum equal to
the Allowed Claim shall be distributed to Mirage. The balance, if any, shall
then be available for distribution to members of other classes of creditors,
other than Class 1. Upon entry of a Final Order disallowing the claim of Mirage
the entire sum reserved shall be available for distribution to member of other
classes of creditors, other than Class 1.
3. Voting: Class 6 is unimpaired and is deemed to have accept the
Plan.
X. RETENTION OF JURISDICTION
-------------------------
Until all payments required to be made under this Plan have
been made, the Bankruptcy Court shall retain jurisdiction of these proceedings
for the following purposes:
1. To hear and determine objections to Administrative Claims or Proofs
of Claims whenever filed both before and after the Confirmation Date, including
any objections to the classification of any Claim and to allow or disallow any
Disputed Claim, in whole or in part;
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2. To hear and determine any and all motions to estimate Claims
regardless of whether the Claim is the subject of a pending objection, a pending
appeal or otherwise;
3. To hear and determine any and all pending applications for the
rejection or assumption of executory contracts or unexpired leases to which a
Debtor is a party or with respect to which a Debtor may be liable and to hear
and determine, and, if need be, to liquidate, any and all Claims arising
therefrom;
4. To enforce the provisions of the Plan and to enforce any proposed
amendments thereto;
5. To ensure that distributions, if any, to holders of Allowed Claims
are accomplished as provided herein;
6. To determine any and all applications, adversary proceedings and
contested or litigated matters that may be pending on the Effective Date or
commenced thereafter;
7. To consider any modifications of the Plan, to cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
8. To hear and determine all controversies, suits and disputes that may
arise in connection with the interpretation, implementation or enforcement of
the Plan, the Estate's obligations, releases under the Plan, or any Claim
asserted against any representative of the Estate or its agents;
9. To hear and determine all controversies concerning the Magic
Agreement;
10. To hear and determine all controversies concerning the Mirage
Agreement, the Mirage DIP Financing Claims and any other claims and/or dispute
asserted by or against Mirage;
11. To enter such orders in aid of execution of the Plan to the extent
authorized by Section 1142 of the Bankruptcy Code, including such orders aiding
or promoting the transfer of the economic or ownership interest of the Debtor,
but not to the extent that such orders are in regard to matters within the sole
jurisdiction of police or regulatory authorities;
12. To determine such other matters as may be set forth in the
Confirmation Order or as may arise in connection with the Plan (including,
without limitation, Article XIII thereof) or the Confirmation Order or their
implementation;
13. To hear and determine all controversies, suits and disputes that
may arise with respect to the Residual Property;
14. To enforce all orders, judgments, injunctions and rulings entered
in connection with the Reorganization Case;
15. To determine any and all applications for allowance of compensation
and reimbursement of expenses and any other fees and expenses authorized to be
paid or reimbursed under the Bankruptcy Code or the Plan;
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16. To hear and determine all proceedings to recover all assets of the
Debtor and property of the estate, wherever located, including any causes of
action under Sections 544 through 551 and 553(b) of the Bankruptcy Code, and any
other causes of action or rights to payment of Claims, that belong to the
Debtor, that may be pending on the Confirmation Date or that may be instituted
at any time by Liquidating Trust thereafter;
17. To hear and determine any disputes between the Liquidating Trustees
and Liquidating Trust or with respect to either of them;
18. To hear and determine matters concerning state, local and federal
taxes in accordance with Sections 346, 505 and 1146 of the Bankruptcy Code;
19. To approve the retention of professionals by Liquidating Trust and
to approve all requests for payment of fees and expenses by such professionals;
20. To hear any other matter as to which jurisdiction is not
inconsistent with the Bankruptcy Code; and
21. To enter a final decree or decrees closing the Reorganization Case.
XI. CONCLUSION
----------
This Disclosure Statement is intended to assist each creditor in making
an informed decision regarding the acceptance of Debtor's Plan. If the Plan is
accepted, all creditors will be bound by its terms. You are, therefore, urged to
carefully review the statement and the enclosed copy of the Plan. If questions
remain after such review, you are urged to make further inquiries as you may
deem appropriate to counsel or other creditors.
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Dated: New Orleans, Louisiana
April 10, 1996
CRESCENT CITY CAPITAL CRESCENT CITY CAPITAL
DEVELOPMENT CORPORATION DEVELOPMENT CORPORATION
By: /s/ EDWARD M. TRACY By:
------------------------------- -----------------------------
Edward M. Tracy Edward M. Tracy
President and CEO President and CEO
BRONFIN & HELLER, L.L.C. BRONFIN & HELLER, L.L.C.
Counsel for Debtor Counsel for Debtor
By: By: /s/ ROBYN J. SPALTER
-------------------------------- ----------------------------------
Jan M. Hayden (La. Bar #6672) Jan M. Hayden (La. Bar #6672)
Robyn J. Spalter (La. Bar #21116) Robyn J. Spalter (La. Bar #21116)
650 Poydras Street, Suite 2500 650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130-6101 New Orleans, Louisiana 70130-6101
Tele: (504) 568-1888 Tele: (504) 568-1888
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EXHIBIT A
CRESCENT CITY CAPITAL DEVMNT Check Register 9/06/95 Pag
Operator: DML System Date: 9/06
System Time: 4:12
Check Check Date
Check Date Amount Payee Cleared
1105 49740 CASH - FNBC - CCCD OPERATING
2196 4/07/95 370,773.50 RIVER MARINE SERVICES 4/30/95
2199 4/13/95 82.61 KRIS K. W. LEWIS 5/31/95
2201 4/19/95 15,248.95 CASH REGISTER SALES 4/30/95
2202 4/20/95 156.95 RADIOFONE 5/31/95
2203 4/20/95 272.32 SOUTH CENTRAL BELL 5/31/95
2204 4/22/95 5,262.18 MERRIL LYNCH 5/31/95
2243 5/15/95 611.32 TODD HEIER 5/31/95
2244 5/15/95 38.84 WILLIAM SCHWERTZ 5/31/95
2257 5/01/95 600.00 CORPORATES BY O'BRIEN 5/31/95
2258 5/01/95 750.82 JOAN MCLAUGHIN 5/31/95
2259 5/01/95 519.00 PORT OF NEW ORLEANS 5/31/95
2260 5/01/95 156.59 TODD HEIER 5/31/95
2261 5/01/95 117.18 THOMAS MEEKINS 5/31/95
2289 5/18/95 15,081.00 GEMACO PLAYING CARD CO. 5/31/95
2297 5/24/95 2,105.38 RICHARD'S RESTAURANT SUPPLY 5/31/95
411,777.14*
Report Totals 411,777.14*
V - Voided
Note: Contruction accounting system checks clearing bank prior to June 1995.
CRESCENT CITY CAPITAL DEVMNT Check Register 9/06/95 Pag
Operator: DML System Date: 9/06
System Time: 4:12
Check Check Date
Check Date Amount Payee Cleared
1105 49740 CASH - FNBC - CCCD OPERATING
2197 4/12/95 40.80 LUTRE' MARIE PICHON 6/30/95
2198 4/12/95 1,285.20 SUSAN CIBOLDI 6/30/95
2245 5/17/95 963.02 AUTOMATIC DATA PROCESSING 6/30/95
V 2246 5/17/95 .00 JONES CASINO SUPPLIES
2315 6/15/95 45,000.00 CARVER, DARDEN, KORETZKY 6/30/95
2335 6/27/95 7,500.00 CARVER, DARDEN, KORETZKY 7/31/95
V 2338 7/05/95 .00 LANIER & ASSOCIATES
2339 7/05/95 2,795.42 CARVER, DARDEN, KORETZKY 7/30/95
54411 5/04/95 274.05 THE HOOVER COMPANY
54412 5/04/95 505.91 LEMLE & KELLEHER, LLP
54413 5/04/95 99.38 SUMMERS ELECTRIC
54414 5/04/95 1,547.57 STANDARD REGISTER
54415 5/04/95 1,346.11 TAB PRODUCTS COMPANY
54416 5/04/95 664.14 W.W. GRAINGER, INC.
62,011.80*
Report Totals 62,011.80*
V - Voided
Note: Contruction accounting system checks clearing bank after May 1995.
Crescent City Capital Operating Account
Summary Of Wire Transfers to Vendors
April 3, 1995 TO July 26, 1995
Type of
Date Vendor Expenditure Amount
---- ------ ----------- ------
Daily Louisiana State Police Gaming Taxes $759,599.09
4/26/95 Casino Airlinks Marketing Expense 17,800.00
7/6/95 River Marine Fuel/Payroll 17,250.00
-----------
Total $794,649.09
===========
EXHIBIT B
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30,
----------------------------
1995 1994
---- ----
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,187,241 $ 18,007,556
Restricted Cash - Interest Reserve (Note 10) -- 14,851,135
Interest Receivable 587,489 436,611
Income Tax Receivable (Note 17) -- 486,720
Native American Management Fees and Expenses
Receivable 1,996,096 461,855
Current Portion - Native American Loan
Receivable (Note 14) 11,029,694 394,697
Prepaid Expenses and Other Current Assets 212,883 19,132
----------- ------------
TOTAL CURRRENT ASSETS 15,013,403 34,657,706
----------- ------------
ASSETS HELD FOR SALE, net (Note 12) 40,660,974 7,693,915
FURNITURE, FIXTURES AND EQUIPMENT, net (Note 12) 140,667 134,549
OTHER ASSETS:
Restricted Cash (Note 10) 4,063,558 78,610,897
Acquired Gaming Assets, net (Note 3) -- 25,490,472
Native American Loan Receivable (Note 14) 11,323,830 887,036
Native American Casino Development Advances -- 1,874,408
Investments in Native American Management
Agreements, net (Note 13) 3,294,550 1,202,163
Deferred Financing Costs, net (Note 9) 7,643,608 9,589,537
Cash Held in Escrow - Port of New Orleans
(Note 3) -- 4,534,939
Deposits and Other Assets (Note 3) 370,654 3,455,442
Goodwill, net (Note 8) 466,059 755,326
----------- ------------
TOTAL OTHER ASSETS 27,162,259 126,420,220
----------- ------------
TOTAL ASSETS $82,977,303 $168,906,390
=========== ============
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements.
F-3
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
June 30,
----------------------------
1995 1994
---- ----
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 12,275,745 $ 828,284
Accrued Professional Fees 1,920,610 1,110,864
Accrued Interest 6,505,172 6,173,264
Equipment Notes Payable - Current Maturity 1,683,007 --
Bank Note Payable (Note 3 and 4) 2,000,000 --
Bondholder Consent Fee Note (Note 3 and 4) 1,350,000 --
Proportionate Share of Losses in Joint Venture
in Excess of Investment and Advances
(Note 5 and 6) 9,794,726 --
11.5% Senior Secured Notes Payable - (net of
unamortized Original Issue Discount of
$3,622,821 (Notes 4, 7 and 9) 123,377,179 --
------------ ------------
TOTAL CURRENT LIABILITIES 158,906,439 8,112,412
LONG-TERM DEBT
11.5% Senior Secured Note Payable - (net of
unamortized Original Issue Discount of
$4,534,562 (Notes 4, 7 and 9) -- 130,465,438
Unsecured 11.5% Term Note Payable (Note 3) 19,000,000 19,000,000
Equipment Notes Payable - Native American 1,292,743 1,350,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT) EQUITY (Notes 11 and 15)
Preferred Stock, No Par Value, Authorized
5,000,000 Shares:
None issued -- --
Common Stock, No Par Value, Authorized
75,000,000 Shares: Issued and Outstanding
19,329,574 and 16,519,373 Shares,
respectively 37,617,099 26,108,500
Additional Paid in Capital 7,877,002 7,877,002
Accumulated deficit (141,715,980) (24,006,962)
------------ ------------
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (96,221,879) 9,978,540
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIT) EQUITY $ 82,977,303 $168,906,390
============ ============
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements.
F-4
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended June 30,
------------------------------------------------
1995 1994 1993
---- ---- ----
REVENUE
Native American Casino Management Fees (Note 8) $ 6,440,962 $ 1,723,819 $ --
COSTS AND EXPENSES
Salaries, Wages and Related Costs 4,564,614 3,955,786 467,574
Gaming Development Costs 1,454,905 1,885,988 292,220
Native American Gaming Development Costs 2,146,481 1,605,425 77,228
Professional Fees 6,244,656 3,292,877 1,442,036
General and Administrative 3,654,110 2,597,908 724,069
Write-off of Native American Assets 1,017,766 -- --
Depreciation and Amortization 398,067 395,344 --
Bondholder Consent Fee and Related Costs (Note 3) -- 2,847,000 --
------------- ------------ -----------
Total Costs and Expenses 19,480,599 16,580,327 3,003,127
------------- ------------ -----------
Loss From Operations (13,039,637) (14,856,508) (3,003,127)
Other Income (Expense):
Interest Income 2,619,646 1,712,272 254,709
Interest Expense, net of Capitalized Interest (18,225,375) (11,023,794) --
------------- ------------ -----------
Total Other Income (Expense), net (15,605,729) (9,311,522) 254,709
------------- ------------ -----------
Loss From Continuing Operations Before
Income Taxes and Extraordinary Item (28,645,366) (24,168,030) (2,748,418)
Extraordinary Item - Loss on Early
Extinguishment of Debt (Note 7) (832,846) -- --
Income Tax Benefit (Note 7) -- 483,738 1,096,006
------------- ------------ -----------
Loss From Continuing Operations (29,478,212) (23,684,292) (1,652,412)
Discontinued Operations:
Loss From Discontinued Operations
(Net of Income Tax) (Note 5) (18,953,923) -- (111,963)
(Loss)/gain on Disposal of Discontinued Operations (69,276,883) -- 2,422,282
------------- ------------ -----------
Total Discontinued Operations (88,230,806) -- 2,310,319
------------- ------------ -----------
Net (Loss) Income $(117,709,018) $(23,684,292) $ 657,907
============= ============ ===========
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements.
F-5
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended June 30,
------------------------------------------------
1995 1994 1993
---- ---- ----
EARNINGS PER SHARE
Loss From Continuing Operations before Extraordinary Item $ (1.66) $ (1.68) $ (.12)
Extraordinry Item (.05) -- --
----------- ----------- -----------
Loss from Continuing Operations $ (1.71) $ (1.68) $ (.12)
Loss from Discontinued Operations (1.10) -- (.01)
Loss/Gain on Sale of Discontinued Operations (4.01) -- 18
----------- ----------- -----------
Net (Loss) Income $ (6.82) $ (1.68) $ .05
=========== =========== ===========
Weighted Average Number of Shares Outstanding 17,256,591 14,135,625 13,860,099
=========== =========== ===========
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements.
F-6
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Additional Accumulated
----------------------- ---------- -----------
Shares Amount Capital (Deficit)
------ ------ ------- ---------
Balance June 30, 1992 12,045,868 $ 8,003,022 $ 2,564 $ (980,577)
Exercise of Warrants 249,458 595,226 -- --
Exercise of Unit Purchase Options 256,000 384,000 -- --
Exercise of Common Stock Option 195,000 242,000 -- --
Net Income Year Ended June 30, 1993 -- -- -- 657,907
---------- ----------- ---------- -------------
Balance - June 30, 1993 12,746,326 $ 9,224,448 $ 22,564 $ (322,670)
========== =========== ========== =============
Exercise of Warrants 860,756 2,025,049 -- --
Repurchase of Common Stock (2,000,000) (8,000,000) -- --
Issuance of Common Stock 4,912,291 24,711,455 -- --
Issuance of Common Stock Purchases Warrants -- (474,987) 7,854,438 --
Equity Issuance Costs -- (1,377,465) -- --
Net Loss Year Ended June 30, 1994 -- -- -- (23,684,292)
---------- ----------- ---------- -------------
Balance - June 30, 1994 16,519,373 $26,108,500 $7,877,002 $ (24,006,962)
========== =========== ========== =============
Exercise of Common Stock Options 60,000 80,000 -- --
Issuance of Common Stock 750,000 3,187,500 -- --
Issuance of Common Stock in Exchange for Debt 2,000,201 8,241,099 -- --
Net Loss Year Ended June 30, 1995 (117,709,018)
---------- ----------- ---------- -------------
Balance - June 30, 1995 19,329,574 $37,617,099 $7,877,002 $(141,715,980)
========== =========== ========== =============
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements.
F-7
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30,
------------------------------------------------
1995 1994 1993
---- ---- ----
OPERATING ACTIVITIES:
Net Loss from Continuing Operations $(29,478,212) $23,684,292) $(1,652,412)
Adjustments to Reconcile Net Loss to
Net Cash Provided by Continuing Operations:
Loss on Early Extinguishment of Debt 832,846 -- --
Write-off of Native American Assets 1,017,766 -- --
Depreciation and Amortization 398,067 395,344 1,019
Amortization of Original Issue Discount 673,392 249,501 --
Amortization of Advances and Deferred Financing Costs 1,441,753 827,787 --
Interest Charge in Connection with Termination of Warrant -- 4,000,000 --
Other Non-Cash Charges -- 1,625,000 --
Changes in Assets and Liabilities -
Net of Assets and Liabilities Accrued (Increase) Decrease in:
Interest Receivable (150,878) (436,611) --
Income Taxes Receivable 486,720 (84,266) (373,964)
Prepaid Expenses and Other Current Assets (193,751) 46,284 158,585
Management Fees and Expenses Receivable (1,630,974) (90,141) --
Deposits and Other Assets (44,273) (226,381) --
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 12,407,884 1,096,331 279,088
Accrued Interest Expense 331,908 6,173,264 --
Due to Related Parties -- -- (85,048)
Income Taxes Payable -- -- (153,800)
------------ ------------ -----------
Total Adjustments 15,570,460 13,576,112 (174,030)
------------ ------------ -----------
Net Cash - Continuing Operations (13,907,752) (10,108,180) (1,826,442)
Loss from Discontinued Operations (18,953,923) -- (111,963)
(Loss)/Gain on Sale of Discontinued Operations (69,276,883) -- 2,422,282
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements.
F-8
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30,
-----------------------------------------------
1995 1994 1993
---- ---- ----
Adjustments to Reconcile (loss) Gain from
Discontinued Operations to Net Cash
Provided by Discontinued Operations:
Equity in Losses of Unconsolidated Affiliate $48,388,511 $ -- $ --
Reserve for Port of New Orleans Assets 7,051,500 -- --
Write-off of Impaired Gaming Assets 23,725,380 -- --
Depreciation and Amortization 2,807,326 -- --
Note Receivable Issued in Exchange for Assets
of Discontinued Operations -- (3,000,000)
Change in Net Assets of Discontinued Operations -- -- 51,393
------------ ------------ ------------
Net Cash -- Discontinued Operations (6,258,089) -- (638,288)
------------ ------------ ------------
Net Cash -- Operating Activities (20,165,841) (10,108,180) (2,464,730)
INVESTING ACTIVITIES:
Investment in Property and Equipment (35,083,517) (7,773,489) (15,516)
Berth Infrastructure Reimbursement (Payments) 500,000 (3,016,561) --
Proceeds from Sale of Assets 112,500 -- --
Repurchase Agreement Activity -- -- 4,905,833
Cash Held in Escrow -- (2,534,939) (193,420)
Issuance of Notes Receivable -- (5,000,000) (2,750,000)
Proceeds from Repayment of Notes Receivable -- 5,000,000 5,300,000
CMDI Acquisition Payment -- (112,500) (2,500,000)
Cash Acquired with CMDI -- 196,725 --
Advances to Affiliates (37,590,605) (1,045,025) --
Gaming Asset Purchase -- (6,540,000) --
Net Transfers (to) from Restricted Cash 89,398,474 (93,462,032) --
Investments in Management Agreements (3,037,193) (138,307) --
Native American Casino Development Advances -- (1,505,988) --
Repayment of Native American Casino Development
Advances/Loans 1,419,958 765,439 --
Loans to Tribes (17,261,596) (1,281,733) --
------------ ------------ ------------
Net Cash -- Investing Activities $ (1,541,979) $(116,448,410) $ 4,746,947
The Accompanying Notes are an integral Part of these
Consolidated Financial Statements.
F-9
CAPITAL GAMING INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30,
---------------------------------------------
1995 1994 1993
---- ---- ----
FINANCING ACTIVITIES:
Proceeds from Issuance of Notes $ 2,000,000 $135,000,000 $ --
Repayment of Equipment/Other Notes (379,995) (16,200,000) --
Proceeds from Exercise of Warrants and Options 80,000 2,025,049 1,221,426
Proceeds from Common Stock Issuance 3,187,500 24,711,455 --
Cash for Debt Issuance Costs -- (8,899,402) --
Proceeds from Bridge Financing -- 4,000,000 --
----------- ------------ ----------
Net Cash -- Financing Activites 4,887,505 140,637,102 1,221,426
----------- ------------ ----------
Net Increase in Cash and Cash Equivalents (16,820,315) 14,080,512 3,503,643
Cash and Cash Equivalents -- Beginning of Periods 18,007,556 3,927,044 423,401
----------- ------------ ----------
Cash and Cash Equivalents -- End of Periods $ 1,187,241 $ 18,007,556 $3,927,044
=========== ============ ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest $17,251,844 $ 4,322,743 $ 942
Income Taxes -- $ -- $1,016,115
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
F-10
Exhibit C
ESTIMATED DISTRIBUTION PERCENTAGES TO UNSECURED CREDITORS
BASED ON SETTLEMENT AMOUNT ONLY UNDER MULTIPLE SCENARIOS\1\
- - --------------------------------------------------------------------------------------------------------------------------
Best Case (w/o Best Case (w/ Middle Case Middle Case Worst Case Worst Case (w/
WARN Act WARN Act (w/o WARN Act (w/ WARN Act (W/o WARN Act WARN Act
Claims)\2\ Claims)\3\ Claims)\4\ Claims)\5\ Claims)\6\ Claims\7\
$8,382,000.00 $5,082,000.00 $7,732,000.00 $4,432,000.00 $5,232,000.00 $1,932,000.00
- - ---------------------------------------------------------------------------------------------------------------------------
Best Case\8\ -
$16,450,000.00 51% 31% 47% 27% 32% 12%
- - ---------------------------------------------------------------------------------------------------------------------------
Middle Case\9\ -
$27,400,000.00 31% 19% 28% 16% 19% 7%
- - ---------------------------------------------------------------------------------------------------------------------------
Worst Case\10\
$31,400,000.00 27% 16% 25% 14% 17% 6%
- - ---------------------------------------------------------------------------------------------------------------------------
1. This chart is based on the assumption that the Settlement Amount is
$13,750,000.00. Although $7,000,000.00 of the Settlement Amount is payable in
the form of Magic Notes, this chart does not take into account any discount on
the Magic Notes. Additionally, this chart assumes that the only source of
recovery for distribution to the Unsecured Creditors is the Settlement Amount.
This may not be entirely true, as the Liquidating Trust also receives 100% of
the Residual Property. However, at this time it is not possible to make any
reasonable assumptions as to the potential recovery, if any, for the Residual
Property. The numbers used for Administrative Claims, Priority Tax Claims,
Priority Claims (excluding WARN Act Claims, Other Secured Claims and Convenience
in calculating the various distribution scenarios may include certain claims
which are disputed (as more fully set forth in this Disclosure Statement), and
shall not in any way form the basis of a waiver of the right to object to the
amount and/or classification of said claims.
2. This number is based on the following estimates:
Settlement Amount 13,750,000.00
Administrative Expenses (other than Magic DIP) 2,500,000.00
Priority Tax Claims 1,800,000.00
Priority Claims (excluding WARN Act claims) 100,000.00
Other Secured Claims 750,000.00
Conveience Claims 218,000.00
------------
Total Claims 5,368,000.00
-------------
TOTAL FOR DISTRIBUTION TO UNSECUREDS 8,382,000.00
3. This number is based on the following estimates, beginning with the
assumption that $3,300,000 is the amount for WARN Act Claims if such claims
are allowed only as priority claims:
Settlement Amount 13,750,000.00
WARN Act Priority Claims 3,300,000.00
-------------
14,450,000.00
Administrative Expenses (other than Magic DIP) 2,500,000.00
Priority Tax Claims 1,800,000.00
Priority Claims (excluding WARN Act claims) 100,000.00
Other Secured Claims 750,000.00
Conveience Claims 218,000.00
------------
Total Claims 5,368,000.00
-------------
TOTAL FOR DISTRIBUTION TO UNSECUREDS 5,082,000.00
4. This number is based on the following estimates:
Settlement Amount 13,750,000.00
Administrative Expenses (other than Magic DIP) 2,700,000.00
Priority Tax Claims 1,400,000.00
Priority Claims (excluding WARN Act claims) 200,000.00
Other Secured Claims 1,500,000.00
Conveience Claims 218,000.00
------------
Total Claims 6,018,000.00
-------------
TOTAL FOR DISTRIBUTION TO UNSECUREDS 7,732,000.00
5. This number is based on the following estimates, beginning with the
assumption that $3,300,000 is the amount for WARN Act Claims if such claims
are allowed only as priority claims.
Settlement Amount 13,750,000.00
WARN Act Priority Claims 3,300,000.00
-------------
14,450,000.00
Administrative Expenses (other than Magic DIP) 2,500,000.00
Priority Tax Claims 1,400,000.00
Priority Claims (excluding WARN Act claims) 200,000.00
Other Secured Claims 1,500,000.00
Conveience Claims 218,000.00
------------
Total Claims 6,018,000.00
-------------
TOTAL FOR DISTRIBUTION TO UNSECUREDS 4,432,000.00
6. This number is based on the following estimates:
Settlement Amount 13,750,000.00
Administrative Expenses (other than Magic DIP) 2,700,000.00
Priority Tax Claims 1,400,000.00
Priority Claims (excluding WARN Act claims) 200,000.00
Other Secured Claims 4,000,000.00
Conveience Claims 218,000.00
------------
Total Claims 8,518,000.00
-------------
TOTAL FOR DISTRIBUTION TO UNSECUREDS 5,232,000.00
7. This number is based on the following estimates, beginning with the
assumption that $3,300,000 is the amount for WARN Act Claims if such claims
are allowed only as priority claims.
Settlement Amount 13,750,000.00
WARN Act Priority Claims 3,300,000.00
-------------
10,450,000.00
Administrative Expenses (other than Magic DIP) 2,700,000.00
Priority Tax Claims 1,400,000.00
Priority Claims (excluding WARN Act claims) 200,000.00
Other Secured Claims 4,000,000.00
Conveience Claims 218,000.00
------------
Total Claims 8,518,000.00
-------------
TOTAL FOR DISTRIBUTION TO UNSECUREDS 1,932,000.00
8. The Best Case scenario for allowed unsecured claims is calculated by
taking the Debtor's payable records and including Crescent City claims at 100%
and RCJV claims at 50%, as follows:
Crescent City Claims 5,000,000.00
RCJV claims (at 50%) 11,450,000.00
-------------
16,450,000.00
It should be noted that this calculation does not take into account any
potential rejection claims.
9. The middle case scenario for allowed unsecured claims is calculate by
taking the Debtor's payable records and including Crescent City claims at
100% and RCJV claims at 100%, as follows:
Crescent City Claims 5,000,000.00
RCJV claims (at 50%) 22,400,000.00
-------------
27,400,000.00
It should be noted that not all RCJV creditors filed proofs of claim for
100% of their claim, therefore, those who did not would still only get paid
on their 50% claim. Additionally, it should be noted that this calculation does
not take into account any potential rejection claims.
10. The worst case scenario for allowed unsecured claims is based on the
assumption that RCJV claims will be allowed at 100%, to the extent they were
so filed. The number is estimated based on a review of all claims filed in this
case. It considers that not all RCJV creditors actually filed claims for 100%
of their claims. It also takes into account that there will be some legitimate
rejection claims.