Filed by: GB Property Funding Corp., GB Holdings, Inc. and Greate Bay Hotel and
Casino, Inc. Pursuant to Rule 425 under the Securities Act of 1933
Subject Companies: GB Property Funding Corp., GB Holdings, Inc. and Greate Bay
Hotel and Casino, Inc.
Commission File No.: 33-69716
The Following joint press release was issued by GB Property Funding Corp., GB
Holdings, Inc. and Greate Bay Hotel and Casino, Inc.
July 14, 2003
CONTACT: Tom Davis, President
The Sands Hotel and Casino
Atlantic City, NJ
609-441-4751
Sands To Seek Debt Exchange
Atlantic City, New Jersey - GB Holdings Inc. (Amex: GBH) (the
"Company") which through its wholly-owned subsidiary Greate Bay Hotel & Casino,
Inc. ("GBHC"), owns and operates The Sands Hotel and Casino in Atlantic City,
today announced that its Board of Directors, acting through a special committee,
has approved a transaction involving an exchange offer for GB Property Funding
Corp.'s debt, subject to receipt of applicable opinions and government approvals
and the completion of applicable documents and filings.
Brown Enthusiastic About The Deal
Richard P. Brown, The Sands CEO said "This transaction will relieve The
Sands of a substantial portion of its indebtedness that would otherwise come due
in 2005 and extend that debt until at least 2008. Assuming the transaction
closes this year and all of the debt is exchanged, after deducting the cost of
the payment to the holders of the Existing Notes (as defined below), the
transaction will free up an aggregate of $13.2 Million of cash flow representing
the interest payment for years 2004 and 2005. Therefore, the transaction will
strengthen our balance sheet, thereby allowing The Sands Management Team to
focus its attention on providing an enhanced gaming entertainment experience for
our players. The execution of this exchange will create a tremendous win for The
Sands. The Sands is currently considering the construction of added hotel rooms
and this transaction will provide us with the necessary financial flexibility if
we determine to implement the initiative.
Since emerging from bankruptcy, we have invested in excess of $44
Million in improvements to The Sands, with more than 50% of that on
back-of-the-house investment which is not very visible to the gaming public. We
are continuing to make improvements that will drive
business and entice customers such as our recently added Swingers Bar,
renovating the Copa Showroom and the Plaza and Platinum Clubs, and adding newer
gaming equipment and related technology. In addition, in keeping with the
tradition of The Sands as a center of high roller action, we have instituted
gaming with extremely high limits, so that our customers can play at levels that
they determine will enhance their gaming experience.
As new entrants emerge in the market we will possess a distinct
advantage over our competitors if we are not under the pressure of servicing
long-term debt. As a result, while other Atlantic City casinos may experience
operating pressures from significant debt, The Sands will have the flexibility
to invest in its business, improve its facilities and offer our patrons the
personalized, high quality value-oriented experience that they expect to receive
at a casino called "The Sands" - - truly one of the legendary names in our
industry."
Icahn Supports Exchange
Carl C. Icahn and his affiliated companies hold in excess of 77% of the
stock of the Company and 58% of the debt and Mr. Icahn has indicated that he
will support the transaction. "This transaction will allow The Sands to continue
to add to its facilities and will maintain The Sands as a financially stable
participant in the Atlantic City market place. The Sands has recently added Mr.
Brown as CEO and Mr. Tom Davis as President and they are moving aggressively to
improve and optimize The Sands. This exchange will enhance their freedom to
continue to improve the facility and the overall gaming experience of its
patrons," Mr. Icahn said.
The Transaction
The Company's wholly owned subsidiary, GB Property Funding Corp.,
currently has outstanding $110 million in secured notes (the "Existing Notes")
due in September 2005 which bear interest at the rate of 11% per annum. The
Existing Notes were issued under an Indenture (the "Existing Indenture"), are
guaranteed by the Company and GBHC and are secured by liens on certain of assets
of GBHC.
The proposed transaction would involve the following:
o The amendment of the Existing Indenture to remove certain
provisions and covenants and the release of the liens on The Sands
assets, which is the collateral for the Existing Notes, thereby
allowing the transfer of these assets and those now held at GBH to
a newly formed wholly-owned subsidiary of the Company ("Newco"),
free and clear of all liens and all obligations under the Existing
Indenture. Newco will undertake to provide the funds to Parent to
meet scheduled interest payments on the Existing Notes through
their scheduled maturity.
o The solicitation of the exchange (the "Notes Exchange") of the
Existing Notes, dollar for dollar, for up to $110 million of notes
(the "New Notes") due September 2008 (the "New Maturity Date")
which will bear interest at 3% per annum, payable at maturity. The
New Notes will be secured by a first lien on the assets of Newco.
o The payment of $100 by the Company to the holders of the Existing
Notes for each $1,000 in principal amount exchanged together with
all interest accrued on such Existing Notes through the date of
such exchange.
o The holders of a majority of the principal amount of the New Notes
have the option at any time prior to the New Maturity Date to
cause the entire class of New Notes to simultaneously convert into
shares of Newco Stock. Shares of Newco Stock issued upon such
conversion of the New Notes will represent 72.5% of the Newco
Stock if all of the Existing Notes participate in the Note
Exchange. If less than all of the Existing Notes participate in
the Note Exchange, then, in the event of the conversion of the New
Notes into shares of Newco Stock, such shares would equal on a
fully diluted basis (after giving effect to the exercise of the
Newco Warrants and the conversion of the New Notes) the product of
(a) 72.5% and (b) a fraction, the numerator of which is the
principal amount of the New Notes and the denominator of which is
the total principal amount of the Existing Notes immediately prior
to the Exchange Offer.
o At the election of the holders of a majority of the principal
amount of the New Notes, the holders of the New Notes may be given
the ability to convert the New Notes at their option.
o The distribution to the Company's common stockholders of warrants
exercisable (following the occurrence of certain events) for 27.5%
of the common stock of Newco (on a fully diluted basis).
o If all of the Existing Notes do not participate in the Note
Exchange, the proposed transaction will result in the Company
owning shares of Newco Stock which would represent on a fully
diluted basis (after giving effect to the exercise of the Newco
Warrants and conversion of the New Notes) a percentage of the
Newco Stock equal to the product of (a) 72.5% and (b) a fraction,
the numerator of which is the principal amount of the Existing
Notes that are not exchanged for New Notes and the denominator of
which is the total principal amount of the Existing Notes
immediately prior to the Exchange Offer.
The proposed transaction is subject to the consent of the holders of a
majority of the Existing Notes, the exchange of a majority in principal amount
of the Existing Notes, the approval of stockholders owning a majority of the
common stock of the Company, the effectiveness of all required filings under
applicable securities laws, and the receipt of all required governmental and
third party approvals.
This news release is for informational purposes only. It does not
constitute an offer to purchase shares of the Company or a
solicitation/recommendation statement under the rules and regulations of the
United States Securities and Exchange Commission (the "SEC"). At the time the
Company commences the transaction contemplated herein, the Company will file the
necessary documents with the SEC. Following the filing of the documents relating
to the transaction with the SEC, the Company will distribute, free of charge, to
the holders of the Company's common stock and the holders of the Existing Notes,
all documents such stockholder or Existing Note holder should review in order to
approve or participate in the transaction. Those
documents will contain important information and security holders of the Company
are advised to carefully read those documents (when they become available)
before making any decision with respect to the transaction contemplated herein.
Additionally, after filing the documents with the SEC, each document and filing
will be available for free on the SEC's web site (www.sec.gov).
Certain information included in this press release contains statements
that are forward-looking. Such forward-looking information involves important
risks and uncertainties that could significantly affect anticipated results in
the future and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. For more
information regarding the Company and risks applicable to its business, please
review the filings of the Company and its affiliates, GB Property Funding Corp.
and Greate Bay Hotel and Casino, Inc. with the SEC, including the Company's
reports on Forms 10-K and 10-Q.