As filed with the Securities and Exchange Commission on July 18, 2002
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM F-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
KERZNER INTERNATIONAL LIMITED
KERZNER INTERNATIONAL NORTH AMERICA, INC.
(Exact name of Registrant as specified in its charter)
Commonwealth of The Bahamas 7011 98-0136554
Delaware 7011 59-0763055
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
---------------------------
Kerzner International Limited Kerzner International North America, Inc.
Coral Towers 1415 E. Sunrise Blvd.
Paradise Island, The Bahamas Ft. Lauderdale, FL 33304
(242) 363-6000 (954) 713-2500
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------------
Corporation Service Company
2711 Centerville Rd. Suite 400
Wilmington, DE 19808
(800) 927-9801
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copies of all communications to:
D. Collier Kirkham, Esq. Charles D. Adamo, Esq.
Cravath, Swaine & Moore Kerzner International Limited
825 Eighth Avenue Coral Towers
New York, New York 10019 Paradise Island, The Bahamas
(212) 474-1000 (242) 363-6000
(212) 474-3700 (facsimile) (242) 363-4581 (facsimile)
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
---------------------------
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Price Amount of
Securities to be Registered(1) Registered Unit(1) (1) Registration Fee(2)
- -----------------------------------------------------------------------------------------------------------------------------
8-7/8% Senior Subordinated Notes due 2011 $200,000,000 100% $200,000,000 $18,400
- -----------------------------------------------------------------------------------------------------------------------------
Guarantees of Notes (3) (4) (4) (4) (5)
=============================================================================================================================
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933.
(2) Calculated by multiplying the aggregate offering amount by .00025
(3) See inside facing page for table of registrant guarantors.
(4) No separate consideration will be received for the guarantees.
(5) No further fee is payable pursuant to Rule 457(n).
---------------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Registrant Guarantors
Primary Standard
Industrial I.R.S. Employer
Exact Name of Registrant as Specified in its Jurisdiction of Classification Identification
Charter Organization Code Number Number
--------------------------------------------- --------------- ---------------- ---------------
Kerzner International Bahamas Limited+.............. Commonwealth of The 7011 Not Applicable
Bahamas
Paradise Acquisitions Limited+...................... Commonwealth of The 7011 Not Applicable
Bahamas
Paradise Island Limited+............................ Commonwealth of The 7011 Not Applicable
Bahamas
Paradise Enterprises Limited+....................... Commonwealth of The 7011 Not Applicable
Bahamas
Island Hotel Company Limited+....................... Commonwealth of The 7011 Not Applicable
Bahamas
Paradise Beach Inn Limited+......................... Commonwealth of The 7011 Not Applicable
Bahamas
Kerzner International Management Limited+........... British Virgin Islands 7011 Not Applicable
Kerzner Investments Connecticut, Inc.*.............. Connecticut 7011 36-4041616
Kerzner International Nevada, Inc.*................. Nevada 7011 65-0922984
Kerzner International Resorts, Inc.*................ Florida 7011 65-0483525
PIV, Inc.*.......................................... Florida 7011 65-0483531
ISS, Inc.*.......................................... Florida 7011 65-0483536
Kerzner International Marketing, Inc.*.............. Florida 7011 65-0880994
Kerzner Investments California, Inc.*............... Delaware 7011 65-0932228
Kerzner Investments New York, Inc.*................. Delaware 7011 65-1069728
Kerzner International New York, Inc.*............... New York 7011 13-4027976
Kerzner International Development Group, New Jersey 7011 65-0746089
Inc.*...............................................
Kerzner International Timeshare Limited+............ Commonwealth of The 7011 Not Applicable
Bahamas
Paradise Island Futures Limited+.................... Commonwealth of The 7011 Not Applicable
Bahamas
Kerzner International Development Limited+.......... Commonwealth of The 7011 Not Applicable
Bahamas
Paradise Security Services Limited+................. Commonwealth of The 7011 Not Applicable
Bahamas
Kerzner Interactive Limited+........................ Commonwealth of The 7011 Not Applicable
Bahamas
Bahamas e-Trading Limited+.......................... Commonwealth of The 7011 Not Applicable
Bahamas
Primary Standard
Industrial I.R.S. Employer
Exact Name of Registrant as Specified in its Jurisdiction of Classification Identification
Charter Organization Code Number Number
--------------------------------------------- --------------- ---------------- ---------------
Kerzner Interactive Network Data Limited+........... Commonwealth of The 7011 Not Applicable
Bahamas
Kerzner Interactive (IOM) Limited+.................. Isle of Man 7011 Not Applicable
Kerzner International Development Commonwealth of The 7011 Not Applicable
(Timeshare) Limited+............................... Bahamas
Kerzner Hotels International (Bermuda), Bermuda 7011 Not Applicable
Limited+............................................
Kerzner International Finance (BVI) Limited+........ British Virgin Islands 7011 Not Applicable
Aberdeen Management Limited+........................ Channel Islands 7011 Not Applicable
Kerzner International Vacances SA+.................. France 7011 Not Applicable
Birbo NV+........................................... Netherlands Antilles 7011 Not Applicable
Kerzner Hotels International Management Netherlands Antilles 7011 Not Applicable
NV+.................................................
Purposeful BV+...................................... Netherlands 7011 Not Applicable
Kerzner International Marketing (UK) United Kingdom 7011 Not Applicable
Limited+............................................
Kerzner Interactive Services Ltd.+.................. United Kingdom 7011 Not Applicable
+ The address, including zip code, and telephone number, including area code,
of the registrant guarantor is as follows:
Coral Towers
Paradise Island, The Bahamas
(242) 363-6000
* The address, including zip code, and telephone number, including area code, of
the registrant guarantor is as follows:
10th Floor, 1415 E. Sunrise Blvd.
Ft. Lauderdale, FL 33304
(954) 713-2500
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission relating to these securities is effective.
This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED JULY 18, 2002
PROSPECTUS
[LOGO]
KERZNER INTERNATIONAL LIMITED
KERZNER INTERNATIONAL NORTH AMERICA, INC.
Offer to Exchange
all outstanding 8-7/8% Senior Subordinated Notes due 2011
($200,000,000 aggregate principal amount)
(the "Old Notes")
for
8-7/8% Senior Subordinated Notes due 2011
($200,000,000 aggregate principal amount)
which have been registered under the Securities Act of 1933
(the "New Notes")
---------------------------
The exchange offer will expire at 5:00 p.m., New York City time, on
, 2002, unless we extend the exchange offer in our sole and
absolute discretion.
We do not intend to list the New Notes on any national securities
exchange, and no established trading market for the New Notes is anticipated.
---------------------------
See the section entitled "Risk Factors" beginning on page for a
discussion of factors that you should consider before tendering your
Old Notes in the exchange offer.
None of the Securities and Exchange Commission, any state securities
commission, any state gaming commission or any other gaming authority or other
regulatory agency has approved or disapproved of these securities or passed
upon the adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
---------------------------
The date of this prospectus is , 2002
TABLE OF CONTENTS
Page
Summary.......................................................................1
Risk Factors.................................................................13
Organizational Structure.....................................................22
Use of Proceeds..............................................................23
Capitalization...............................................................23
Selected Historical Consolidated Financial Data..............................25
Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................28
Business.....................................................................40
Management...................................................................50
Major Shareholders and Related Party Transactions............................52
The Exchange Offer...........................................................55
Description of New Notes.....................................................62
Description of Other Indebtedness............................................90
Certain Tax Considerations...................................................92
Plan of Distribution.........................................................93
Legal Matters................................................................94
Experts......................................................................94
Index to Financial Statements...............................................F-1
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-4
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the exchange offer that incorporates important business and financial
information about us that is not included in or delivered with this
prospectus. This prospectus does not contain all of the information included
in the registration statement. The information is available from us without
charge to holders of the Old Notes as specified below. If we have made
references in this prospectus to any contracts, agreements or other documents
and also filed any of those contracts, agreements or documents as exhibits to
the registration statement, you should read the relevant exhibit for a more
complete understanding of the document or matter involved.
Kerzner International Limited ("Kerzner International"), formerly
known as Sun International Hotels Limited, is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), applicable to foreign issuers, and in accordance therewith files
reports, including annual reports on Form 20-F, and other information with the
SEC. Kerzner International makes available to its shareholders annual reports
containing audited financial statements within 180 days of the end of each
fiscal year and publishes quarterly reports containing selected financial data
for the first three quarters of the fiscal year within 60 days from the end of
such fiscal quarter (in each case, prepared in accordance with generally
accepted accounting principles in the United States). Kerzner International is
exempt from the rules under the Exchange Act prescribing the furnishing and
content of proxy statements to shareholders. However, Kerzner International
furnishes shareholders with statements with respect to annual or extraordinary
meetings of shareholders, as well as such other reports as may from time to
time be authorized by the board of directors or be required by law. Kerzner
International North America, Inc. ("KINA"), formerly known as Sun
International North America, Inc., is subject to the informational
requirements of the Exchange Act and in accordance therewith files reports and
other information with the SEC.
You may read and copy this information at the SEC's public reference
facilities, Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, D.C.
20549.
You may also obtain copies of such information by mail from the
Public Reference Section of the SEC, 450 Fifth Street, NW, Washington, D.C.
20549, at prescribed rates.
i
The SEC also maintains a website at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC.
You can inspect copies of such materials filed by Kerzner
International at the offices of The New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005, on which Kerzner International's ordinary
shares are listed.
In addition, for so long as any of the Notes remain outstanding and
during any period in which Kerzner International is not subject to Section 13
or 15(d) of the Exchange Act, Kerzner International will make available to any
prospective purchaser or beneficial owner of the Notes in connection with any
sale thereof the information required by Rule 144A(d)(4) under the Securities
Act.
Information with respect to us also may be obtained from us at
Kerzner International Limited, Coral Towers, The Bahamas or by telephone at
(242) 363-6017.
To obtain timely delivery of any of our filings, agreements or other
documents, you must make your request to us no later than five business days
before the expiration date of the exchange offer. The exchange offer will
expire at 5:00 p.m., New York City time on , 2002. The exchange offer may be
extended by us in our sole discretion. See the section entitled "The Exchange
Offer" for more detailed information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Kerzner International has filed the following documents with the SEC
and they are incorporated by reference in this prospectus:
o Annual Report on Form 20-F for the fiscal year ended December 31,
2001, filed with the SEC on May 30, 2002; and
o Current Reports on Form 6-K filed with the SEC on June 6, 2002;
June 25, 2002; June 27, 2002; and July 1, 2002.
KINA has filed the following document with the SEC and it is
incorporated by reference in this prospectus:
o Annual Report on Form 10-K for the fiscal year ended December 31,
2001, filed with the SEC on April 1, 2002;
o Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2002, filed with the SEC on May 15, 2002; and
o Current Reports on Form 8-K filed with the SEC on May 21, 2002;
June 25, 2002; and July 16, 2002.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus is modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded does not, except as so
modified or superseded, constitute a part of this prospectus. In addition, all
other documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this prospectus and prior to the
consummation of the exchange offer for the New Notes shall be deemed
incorporated by reference into this prospectus and to be a part hereof from
the date of filing of such documents or reports, to the extent not superseded
by documents or reports subsequently filed.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon the request of such person, a copy of any or all
of the documents that are incorporated by reference herein, other than exhibits
to such documents, unless such exhibits are specifically incorporated by
reference into such documents. Written requests should be directed to the
Secretary, Kerzner International Limited, Coral Towers, The Bahamas. Telephone
requests for such copies should be directed to the general counsel at (242)
363-6017.
ii
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus include forward-looking statements. We have based these
forward-looking statements on our current expectations, estimates,
projections, management's beliefs and assumptions made by management. We use
"expects," "anticipates," "intends," "plans," "believes," "estimates," and
similar expressions to identify forward-looking statements. Forward-looking
statements include statements relating to our plans for future expansion and
other business activities as well as other capital spending, financing sources
and the effects of regulation (including gaming and tax regulation) and
competition. These forward-looking statements involve important risks and
uncertainties that could significantly affect anticipated results in the
future. Accordingly, our results may differ from those expressed in such
forward-looking statements made in this prospectus and our public filings.
These risks and uncertainties include, but are not limited to, the risk
factors discussed under the heading "Risk Factors" in this prospectus and in
our filings with the SEC.
You should not place undue reliance on any forward-looking
statements. Other than as required by applicable law or the applicable rules
of any exchange on which our securities may be listed, we have no intention or
obligation to update forward-looking statements.
MARKET DATA
Market data used in this prospectus, including the information
relating to our relative position in the resort and gaming markets, is based
upon our good faith estimates, which are based upon our review of internal
surveys, independent industry publications and other publicly available
information. Although we believe that these sources are reliable, we have not
independently verified the information and cannot guarantee its accuracy and
completeness.
iii
SUMMARY
The following summary contains basic information about this
offering. It does not contain all of the information that is important to you.
You should read this entire prospectus and the documents we have referred you
to, especially the risks of investing in the Notes discussed under "Risk
Factors," before investing in the Notes. Unless the context otherwise
indicates and except with respect to any description of the Notes, references
to "we," "us," and "our" are to Kerzner International Limited, or Kerzner
International, and its subsidiaries (including KINA), taken as a whole.
When we use the term "Notes" in this prospectus, the term includes
the Old Notes and the New Notes.
The Company
We are a leading developer and operator of premier casinos, resorts
and luxury hotels. We focus our operations on two distinct businesses:
destination casino resorts and luxury resort hotels.
In our destination casino resort business, we own and operate the
Atlantis resort located on Paradise Island, The Bahamas. We believe that the
ocean-themed Atlantis, which features the world's largest open-air aquarium
and the largest hotel and casino in the Caribbean market, is a "one of a kind"
destination resort. We also developed and receive certain revenue from Mohegan
Sun in Uncasville, Connecticut, which we believe is one of the most profitable
casinos in the United States.
In our luxury resort hotel business, we operate eight beach resorts
in Mauritius, Dubai, the Maldives and The Bahamas.
Businesses
Destination Casino Resorts
Our destination casino resort business consists of large-scale,
premier destination resorts that we believe are "must see" properties. The
existing properties in this business are Atlantis and Mohegan Sun. These
properties feature distinctive themes, unique architectural designs and
decors, and offer a wide range of gaming, entertainment and other amenities.
We believe these properties maintain competitive advantages due to their
scale, location, design, variety of amenities and significant barriers to
entry in the markets in which they operate.
Atlantis
Our flagship destination casino resort is Atlantis, a 2,317-room,
ocean-themed resort located on Paradise Island, The Bahamas. Since we acquired
the property in 1994, we have spent approximately $1.0 billion to create a
unique destination casino resort that caters to multiple segments of the
resort and casino gaming markets. Atlantis features three interconnected hotel
towers built around a 7-acre lagoon and a 34-acre marine environment that
includes the world's largest open-air aquarium. Atlantis also features a
100,000 square foot entertainment complex which includes the largest casino in
the Caribbean market, containing approximately 1,000 slot machines and 80
table games, 16 restaurants, approximately 100,000 square feet of convention
space, a sports center and over 30,000 square feet of high-end retail space.
The 63-slip, full service Marina at Atlantis generates among the highest
average docking rates in the Caribbean market and can accommodate yachts up to
200 feet in length. We also developed Harborside at Atlantis, a timeshare
project located adjacent to Atlantis, through a joint venture with Starwood
Hotels and Resorts Worldwide, Inc.
Atlantis is master-planned for expansion, and we believe the
approximate 100 acres of undeveloped land we own on Paradise Island gives us
the capacity to add more than 2,000 new hotel rooms as well as condominiums
and additional timeshare units, restaurants, retail space and other
facilities. We are evaluating plans for a 1,000-room hotel expansion at
Atlantis that will cater primarily to the middle- market customer segment.
This expansion is contingent upon a number of factors, including demand for
rooms at Atlantis.
1
Mohegan Sun
We believe that the Native American-themed Mohegan Sun is one of the
premier casino gaming properties in the Northeast and one of the most
profitable casinos in the United States. The property features the 176,500
square foot Casino of the Earth with 3,655 slot machines, 158 table games, 42
poker tables and various other amenities. For the quarter ended March 31,
2002, Mohegan Sun reported gross revenue of $249.1 million and a gross win per
slot per day of $295. We believe that Mohegan Sun benefits from a superior
location and strong demographics. It is located approximately one mile from
the interchange of Interstate 395 and Connecticut Route 2A in Uncasville,
Connecticut, and is within 150 miles of approximately 22 million adults.
Mohegan Sun has spent approximately $40.0 million for infrastructure
improvements providing direct highway access to the property from Boston,
Providence and New York.
We developed Mohegan Sun and managed the property from its opening
in 1996 until January 2000 through Trading Cove Associates, or TCA, a
partnership in which we own a 50% interest. On January 1, 2000, TCA turned
over management of the property to the Mohegan Tribe and TCA now receives
payments equal to 5% of gross revenues generated by the property from January
2000 through December 2014, including the expansion described below.
We are also overseeing the completion of an approximate $1.0 billion
expansion of the property through TCA. This expansion includes the Casino of
the Sky, with 119,000 square feet of additional gaming space containing 2,564
slot machines and 82 table games, a 34-story, 1,200-room luxury hotel, 100,000
square feet of convention space, a 10,000-seat arena, 4,600 additional parking
spaces, 130,000 square feet of retail space, specialty retail shops and
additional restaurants. The expanded casino, retail space and 10,000-seat
arena opened in September 2001, and the convention space and 734 hotel rooms
opened in April 2002, and the remainder of the expansion opened in phases and
was completed in June 2002. As a result of the Mohegan Sun expansion, we
believe that the gross revenues of the property will increase.
Luxury Resort Hotels
Our luxury resort hotel business consists of a collection of premier
beach resort hotels that operate primarily in the five-star, deluxe-end of the
resort market. The properties in our luxury resort hotel business are as
follows:
o In Mauritius, we manage and own interests in five beach resorts:
the renovated 175-room Le Saint Geran Hotel; the 200-room Le
Touessrok Hotel & Ile Aux Cerfs; the 248-room La Pirogue Hotel;
the 333-room Le CoCo Beach; and the 238-room Sugar Beach Resort
Hotel.
o In the Maldives, located off the southern tip of India, we manage
and own an interest in the Kanuhura Resort & Spa, a 110-room
luxury resort located on Kanuhura Island.
o In the Middle East, we manage the Royal Mirage Hotel in Dubai, a
luxury 258-room hotel which opened in August 1999, and we are
overseeing the development of, and we will manage, a new 225-room
luxury hotel that currently is being constructed adjacent to the
Royal Mirage Hotel.
o In The Bahamas, we own and operate the Ocean Club, a high-end
luxury resort hotel with 106 rooms and suites located on Paradise
Island, including a 50-room addition completed in October 2000.
In January 2001, we completed the Tom Weiskopf-designed
championship Ocean Club Golf Course and Clubhouse. We created
Ocean Club Estates during 2000, with 121 luxury homesites set
around the golf course.
Recent Developments
Revolving Credit Facility
We reached agreement with the lenders under our revolving credit
facility to increase the amount available under that facility by $100.0 million
pursuant to the terms of such facility effective as of May 31, 2002. The total
amount now available under the revolving credit facility is $300.0 million. An
additional $50.0 million of borrowings may be available under certain
conditions.
2
Majority Shareholder Reorganization
On July 3, 2001, we announced the restructuring of our former
majority shareholder, Sun International Investments Limited, or SIIL, and the
resolution of certain matters with SIIL and certain of its shareholders. SIIL
and its shareholders beneficially owned approximately 59% of our issued and
outstanding shares. SIIL was itself owned in equal thirds by Kersaf
Investments Limited ("Kersaf"), Caledonia Investments plc and World Leisure
Group Limited, a company controlled by Sol Kerzner, our Chairman and Chief
Executive Officer. Kersaf operates a number of hotel, casino and resort
properties in southern Africa under the "Sun International" name and there has
been some confusion regarding the use of the "Sun International" name by both
Kersaf and us.
As part of the restructuring and settlement, among other things, (i)
the shareholders agreement governing SIIL was terminated and SIIL was
dissolved, (ii) SIIL's former shareholders agreed to certain standstill
provisions in effect through June 2006, pursuant to which each of them will
refrain from proposing or consummating certain extraordinary corporate
transactions involving us, including any merger or the sale of substantially
all of our assets, (iii) Kersaf agreed to sell 2.0 million of our shares (as
to which we granted Kersaf certain registration rights) in a registered public
offering before June 30, 2002 (which date was subsequently amended to October
30, 2002), subject to certain extensions, (iv) we agreed that after a
transition period not to exceed one year from July 3, 2001, we would cease
using the names "Sun" and "Sun International" and as between the two parties
Kersaf would have exclusive rights to use such names, (v) Kersaf agreed to
make a one-time payment of $3.5 million to us and issued a secured note to us
bearing 9% interest per annum in a principal amount of $12.0 million and a
maturity date of June 30, 2003 and (vi) until the earlier of June 30, 2002 or
the date that Kersaf sells its 2.0 million shares, Kersaf agreed to operate
exclusively inside the continent of Africa and we agreed to operate
exclusively outside the continent of Africa (after such period, we and Kersaf
will be free to operate anywhere in the world). In December 2001, Kersaf
repaid in full the principal amount of the note and accrued interest. In
October 2001, we commenced a lawsuit against Kersaf and certain of its
subsidiaries relating to the settlement agreements described above. See
"Business--Legal Proceedings."
Sale of 50% of Internet Gaming Subsidiary
On February 15, 2002, Kerzner International and Station Casinos,
Inc. ("Station") entered into an agreement pursuant to which Station will
purchase a 50% interest in SunOnline Limited (now Kerzner Interactive Limited,
or Kerzner Interactive), our internet gaming subsidiary. Each company will
have equal board representation and Kerzner Interactive will be the exclusive
vehicle for both Kerzner International and Station to pursue the internet
gaming business in certain jurisdictions. The purchase price will be
approximately $5.0 million and we expect the transaction to close by the third
quarter of 2002. The transaction is subject to a number of conditions,
including regulatory approvals.
Offering of Old Notes and Tender Offer, Consent Solicitation and Redemption
On May 8, 2002, we commenced a cash tender offer to purchase any and
all of our outstanding 9% senior subordinated notes. The tender offer was made
pursuant to an Offer to Purchase and Consent Solicitation Statement (the
"Statement") and a related Letter of Transmittal and Consent, dated May 8,
2002. The tender offer expired at midnight, New York City time, on June 5,
2002. In conjunction with the tender offer, we solicited consents to proposed
amendments to the indenture governing the 9% senior subordinated notes. The
proposed amendments eliminated substantially all of the restrictive covenants
and certain events of default from the indenture governing the notes. We and
the trustee executed a supplemental indenture on May 21, 2002 effectuating the
proposed amendments. At the expiration time, a total of $177,493,000 of the
outstanding $200,000,000 aggregate principal amount of the Notes were tendered
and accepted for purchase in the tender offer.
On June 21, 2002 we redeemed, in accordance with the terms of the
indenture governing the notes, all notes that remained outstanding at the
time, at the applicable redemption price of $1,045 per $1,000 of principal
amount thereof, plus interest accrued to the redemption date.
On May 20, 2002 we issued $200.0 million aggregate principal amount of
8-7/8% senior subordinated notes due 2011 (which are referred to as the Old
Notes). We used the proceeds from that issuance to consummate the tender offer
and redemption.
First Quarter Results
Our net income for the quarter ended March 31, 2002, before losses
of $2.2 million attributable to the launch of Kerzner Interactive, was $31.8
million compared to recurring earnings of $32.9 million in the same period
last year. Non-recurring items in the first quarter of 2001 included
pre-opening expenses related to the opening of the Ocean Club golf course and
clubhouse of $3.3 million and a net gain of $3.6 million from the sale of real
estate at our Paradise Island operations.
3
EBITDA for the quarter ended March 31, 2002 was $54.2 million as
compared to $55.5 million in the same period last year, excluding the
non-recurring items described above. Business at Atlantis was stronger than
expected in the aftermath of the September 11 terrorist attacks. After a
somewhat slower January, the property returned to 2001 levels for February and
March. Consistent with our strategy not to engage in price discounting, but
rather to focus on maintaining rate integrity supported by stronger marketing
efforts, we were able to maintain Atlantis' average daily room rate for the
quarter ended March 31, 2002, as compared to the same quarter for last year. In
March 2002, Atlantis recorded the highest monthly revenues in its history.
Including the net loss from Kerzner Interactive and the
non-recurring items in 2001, our net income in the first quarter was $29.6
million, compared to net income of $33.2 million for the same period last
year.
Paradise Island
During the quarter ended March 31, 2002, our Paradise Island
operations achieved a record EBITDA of $51.2 million compared to $50.8 million
achieved during the same period last year. The growth in EBITDA was achieved
despite a decline in net revenues of $6.2 million. The Paradise Island
operations benefitted from the cost controls that were instituted during the
last quarter of 2001, resulting in EBITDA margins increasing from 35.5% for the
quarter ended March 31, 2001 to 37.5% for the quarter ended March 31, 2002.
Atlantis revenue per available room for the quarter was $240, a 6%
decline from the same period last year. Revenue per available room trends
experienced sequential improvement by month, as comparative revenue per
available room declined by 17% and 8% in January and February, respectively, but
increased in March by 2%. For the first quarter of 2002, Atlantis achieved 85%
occupancy at a $284 average daily room rate, the same rate as the first quarter
of last year.
Call levels for the quarter into our wholly owned tour operator
increased by 11% as compared to the same period last year. Despite lower
occupancy, slot handle in the first quarter of 2002 was comparable to the first
quarter of 2001. Table drop declined by 17% in the quarter as compared to the
same period last year, which was almost entirely attributable to the timing of
the Michael Jordan Celebrity Invitational that occurred in January of last year.
The tournament has been rescheduled for September 2002.
The Ocean Club also performed well and we believe it has established
itself as one of the premier hotels in the Caribbean. Revenue per available room
in the first quarter of 2002 increased by 13% to $612 from $542 in the same
period last year. Ocean Club's average daily room rate in the first quarter of
2002 was $865 compared to $739 for the same period last year, which we believe
is one of the highest average daily room rates for any resort property in the
Caribbean. The resort has recently enhanced its amenities through the opening of
the Ocean Club Spa, which is a new concept in spa design that is designed to
provide a uniquely private and exclusive spa experience.
Connecticut
Gross revenues for the quarter ended March 31, 2002 at Mohegan Sun
were $249.1 million, which was 22% above the comparable quarter last year. This
is primarily attributable to the expansion of the casino at Mohegan Sun that
opened in September 2001 and the additional slot machines added in April 2001.
Income from our agreements with Trading Cove Associates was $6.3
million in the quarter ended March 31, 2002, compared to $7.0 million in the
same quarter last year, which had been favorably impacted by certain priority
payments due to us.
Other Resort Operations
Our management fees from the seven luxury resort hotels in Mauritius,
Dubai and the Maldives were $2.2 million during the quarter ended March 31,
2002, compared to $2.6 million in the same quarter last year. The decrease in
management fees was due primarily to the temporary closure of Le Touessrok in
Mauritius, which currently is undergoing a significant refurbishment and is
expected to re-open at the end of 2002.
Our managed resorts in Mauritius continue to perform well with the
five-star deluxe Le Saint Geran achieving a 15% increase in revenue per
available room compared to the first quarter of 2001. Le Saint Geran was voted
"Hotel of the Year 2002" by Tatler magazine in the United Kingdom. In Dubai, the
4
Royal Mirage has been returning to its pre-September 11 business levels with
March 2002 revenue per available room down only 11% as compared to March 2001.
The following table contains unaudited condensed, consolidated
statements of operations data for the quarters ended March 31, 2001 and 2002.
For the Three Months Ended
March 31,
----------------------------
2001 2002
--------- -----
(unaudited)
(in thousands)
Consolidated Statements of Operations:
Revenues:
Gaming......................................... $42,374 $37,164
Rooms.......................................... 57,943 55,338
Food and beverage.............................. 36,066 35,730
Tour operations................................ 10,626 10,053
Management and other fees...................... 10,116 8,900
Real estate related............................ 4,864 --
Other revenues................................. 16,181 16,860
----------- -----------
Gross revenues................................. 178,170 164,045
Less: promotional allowances.................. (8,801) (7,001)
------------- ------------
Net revenues................................... 169,369 157,044
---------- ----------
Expenses:
Gaming......................................... 20,349 17,215
Rooms.......................................... 7,971 8,176
Food and beverage.............................. 22,941 22,322
Other operating expenses....................... 20,675 19,246
Tour operations................................ 9,398 8,536
Selling, general and administrative............ 21,727 22,575
Real estate related............................ 1,266 --
Corporate expenses............................. 5,992 6,805
Depreciation and amortization.................. 11,505 13,654
Pre-opening expenses........................... 3,257 --
------------ -----------
Costs and expenses............................. 125,081 118,529
---------- ----------
Income from operations............................ 44,288 38,515
Other income and expenses:
Interest income................................ 2,749 908
Interest expense, net of capitalization........ (14,210) (10,654)
Equity in earnings of associated companies, net 1,823 1,263
Other, net..................................... -- (130)
----------- -----------
Income before provision........................... 34,650 29,902
Provision for income taxes........................ (1,427) (292)
----------- -----------
Net income........................................ $ 33,223 $ 29,610
======== ========
5
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table contains summary financial and other data that has been derived as of and for each of the
years in the three-year period ended December 31, 2001, from our audited consolidated financial statements prepared in
accordance with U.S. GAAP included in this prospectus.
The information set forth below is not necessarily indicative of future operations and should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and other
financial information included elsewhere in this prospectus. Amounts are reported in U.S. dollars.
Year Ended December 31,
-----------------------------------------------
1999(a) 2000(a)(b) 2000(a)
------------- ------------- ---------
(in thousands)
Consolidated Statements of Operations Data:
Revenues:
Gaming....................................................... $351,545 $367,935 $116,490
Rooms........................................................ 164,831 194,008 176,573
Food and beverage............................................ 137,100 147,718 121,415
Tour operations.............................................. 28,714 33,192 36,348
Real estate related.......................................... -- 108,650 9,771
Management and other fees.................................... 46,898 35,763 36,806
Other revenues............................................... 45,910 49,208 56,416
Insurance recovery........................................... 14,209 -- 2,000
------------ ----------- -----------
Gross revenues............................................... 789,207 936,474 555,819
Net revenues.................................................... 738,967 884,695 533,041
Write-down of net assets held for sale.......................... -- (229,208) --
Income (loss) from operations................................... 114,432 (74,844) 75,678
Equity in earnings of associated companies...................... 2,628 4,225 3,059
Net income (loss)............................................... $69,822 $(119,104) $31,656
As of December 31, 2001
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents, including restricted cash............ $34,989
Total assets.................................................... 1,357,031
Long-term debt, including current portion....................... 518,492
Shareholders' equity ........................................... 678,403
Year Ended December 31,
-----------------------------------------------
1999(a) 2000(a)(b) 2000(a)
------------- ------------- ---------
(in thousands, except operating data)
Other Financial Data:
EBITDA (c)................................................... $176,360 $164,041 $132,898
Depreciation and amortization................................ 57,230 60,223 51,490
Capital expenditures......................................... 205,046 155,892 67,590
Cash interest expense (d).................................... 49,784 48,439 42,128
Atlantis Operating Data:
Average number of rooms...................................... 2,325 2,319 2,316
Average occupancy............................................ 81.4% 83.2% 77.1%
Average daily room rate...................................... $211 $242 $252
6
Average number of slot machines.............................. 979 975 959
Average win per slot machine per day......................... $136 $144 $138
Average number of table games................................ 77 79 79
Average win per table game per day........................... $2,934 $2,813 $2,367
- ----------
(a) The results of operations for the year ended December 31, 1999 include
pre-opening expenses of $5.4 million related to a renovation completed at
Resorts Atlantic City in July 1999. The results of operations for the
year ended December 31, 2000 include pre-opening expenses of $7.6 million
related to the expansion of the Ocean Club Resort and the new Ocean Club
Golf Course. The results of operations for the year ended December 31,
2001 include pre-opening expenses of $6.9 million related to internet
gaming and the Ocean Club Golf Course.
(b) The results of operations for the year ended December 31, 2000 include a
$229.2 million write-down of the carrying value of Resorts Atlantic City
in connection with the sale of the property and the related option to
their realizable value.
(c) EBITDA is defined as income from operations before interest, taxes,
depreciation and amortization, real estate related gains and
non-recurring items. The real estate related gains and non-recurring
items excluded in the calculation of EBITDA for the periods presented are
set forth below:
Year Ended December 31,
-----------------------------------
1999 2000 2001
------ ---- -----
(in thousands)
Gain on real estate related sales............................ $-- $(76,378) $(6,906)
Pre-opening expenses......................................... 5,398 7,616 6,904
Write-down of net assets held for sale....................... -- 229,208 --
Gain on sale of airplane..................................... (700) -- --
Purchase termination costs................................... -- 11,202 --
Transaction costs............................................ -- 7,014 --
Restructuring costs.......................................... -- -- 5,732
--------- ----------- ---------
Total........................................................ $4,698 $178,662 $5,730
Purchase termination costs relate to the termination of our
agreement to acquire the Desert Inn. Transaction costs represent costs in
connection with our self-tender offer in June 2000 and the termination of
the proposal by SIIL to acquire all our ordinary shares it did not
already own. Restructuring costs were comprised of severance costs
related to the termination of employees as a result of reduced occupancy
levels at Atlantis following the September 11 terrorist attacks.
We believe that EBITDA provides useful information regarding our
ability to service our indebtedness but should not be considered in
isolation from or as a substitute for operating income or cash flow data
prepared in accordance with U.S. GAAP as an indicator of our operating
performance or as a measure of our liquidity.
(d) Cash interest expense includes capitalized interest and excludes
amortization of deferred financing costs and interest income.
7
THE OFFERING
Summary of Terms of the Exchange Offer
Background........................ On May 20, 2002, we completed a private
placement of the Old Notes (as defined
below). In connection with that private
placement, we entered into a registration
rights agreement in which we agreed, among
other things, to complete an exchange
offer.
Exchange Offer................... We are offering to exchange our New Notes
(as defined below) which have been
registered under the Securities Act for a
like principal amount of our outstanding,
unregistered Old Notes. Old Notes may only
be tendered in integral multiples of $1,000
principal amount.
Resale of New Notes............... We believe that New Notes issued pursuant
to the exchange offer in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by you without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that:
o you are acquiring the New Notes in the
ordinary course of your business;
o you have not engaged in, do not intend
to engage in, and have no arrangement
or understanding with any person to
participate in the distribution of the
New Notes; and
o you are not our affiliate as defined
under Rule 405 of the Securities Act.
Each participating broker-dealer that
receives New Notes for its own account
pursuant to the exchange offer in exchange
for Old Notes that were acquired as a
result of market-making or other trading
activity must acknowledge that it will
deliver a prospectus in connection with any
resale of New Notes. See "Plan of
Distribution."
Consequences if You Do Not
Exchange Your Old Notes........... Old Notes that are not tendered in the
exchange offer or are not accepted for
exchange will continue to bear legends
restricting their transfer. You will not
be able to offer or sell the Old Notes
unless:
o each offer or sale is made pursuant to
an exemption from the requirements of
the Securities Act of 1933; or
o the Old Notes are registered under the
Securities Act of 1933.
After the exchange offer is closed, we will
no longer have an obligation to register the
Old Notes, except for some limited
exceptions. See "Risk Factors--Holders who
fail to exchange their Old Notes will
continue to be subject to restrictions on
transfer."
Expiration Date................... 5:00 p.m., New York City time, on ,
2002, unless extended in our sole and
absolute discretion.
8
Withdrawal; Non-Acceptance........ You may withdraw any Old Notes tendered in
the exchange offer at any time prior to
5:00 p.m., New York City time, on ,
2002.
Conditions to the Exchange Offer.. The exchange offer is subject to customary
conditions, which we may waive. See the
discussion below under the caption "The
Exchange Offer--Conditions to the Exchange
Offer" for more information regarding the
conditions to the exchange offer.
Special Procedures for Beneficial
Holders........................... If you beneficially own Old Notes which are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and you wish to tender in the
exchange offer, you should contact such
registered holder promptly and instruct such
person to tender on your behalf. If you wish
to tender in the exchange offer on your own
behalf, you must, prior to completing and
executing the letter of transmittal and
delivering your Old Notes, either arrange to
have the Old Notes registered in your name or
obtain a properly completed bond power from
the registered holder. The transfer of
registered ownership may take a considerable
period of time.
Accounting Treatment.............. We will not recognize any gain or loss for
accounting purposes upon the completion of
the exchange offer. The expenses of the
exchange offer that we pay will increase our
deferred financing costs in accordance with
generally accepted accounting principles. See
"The Exchange Offer--Accounting Treatment."
Certain Federal Income Tax
Considerations.................... The exchange of the Old Notes for New Notes
in the exchange offer generally should not
be a taxable transaction for United States
Federal income tax purposes.
Use of Proceeds................... We will not receive any cash proceeds from
theexchange offer. See "Use of Proceeds."
Exchange Agent.................... The Bank of New York is the exchange agent
for the exchange offer. You can find the
address and telephone number of the exchange
agent below under the caption "The Exchange
Offer--Exchange Agent."
9
Summary Description of the Securities to be Registered
The New Notes have the same financial terms and covenants
as the Old Notes, which are as follows:
Issuers........................... Kerzner International Limited and Kerzner
International North America, Inc.
Securities Offered................ $200.0 million aggregate principal amount
of 8-7/8% senior subordinated notes due
2011 which have been registered under the
Securities Act (the "New Notes") in
exchange for all outstanding 8-7/8% senior
subordinated notes due 2011 which are not
registered (the "Old Notes").
Maturity.......................... August 15, 2011.
Interest Payment Dates............ Interest will be payable semiannually in
arrears on February 15 and August 15.
Interest on the notes will accrue from
February 15, 2002.
Ranking........................... The New Notes will:
o be our unsecured senior subordinated
obligations;
o rank junior to all of our existing and
future senior debt, including debt under
our revolving credit facility; and
o rank equal to our existing and future
senior subordinated debt.
The guarantees of the New Notes by
substantially all of our subsidiaries will:
o be unsecured senior subordinated
obligations of such subsidiaries;
o rank junior to all of the existing and
future senior debt of such subsidiaries,
including guarantees of borrowings under
our revolving credit facility; and
o rank equal to all of the existing and
future senior subordinated debt of such
subsidiaries.
Guarantees........................ Substantially all of our subsidiaries will
unconditionally guarantee the New Notes. If
we cannot make payments required by the New
Notes, our guarantor subsidiaries must make
them, subject to the ranking limitations.
The guarantees may be released under
certain circumstances.
Optional Redemption............... On or after August 15, 2006, we may redeem
some or all of the notes at the redemption
prices listed in the "Description of New
Notes" section under the heading "Optional
Redemption," plus accrued and unpaid
interest to the date of redemption.
10
Optional Redemption After Equity
Offerings......................... At any time (which may be more than once)
before August 15, 2004, we can choose to
redeem up to 35% of the New Notes with the
net proceeds that we raise in one or more
specified equity offerings, as long as:
o we pay 108.875% of the principal amount
of the notes, plus accrued and unpaid
interest to the date of redemption;
o we redeem the notes within 60 days of
completing the equity offering; and
o at least 65% of the aggregate principal
amount of notes issued remain outstanding
afterwards.
Redemption Based upon Gaming '
Laws.............................. The New Notes are subject to redemption
requirements imposed by gaming laws and
regulations of gaming authorities in
jurisdictions in which we conduct gaming
operations. See "Description of New
Notes--Required Regulatory Redemption."
Change of Control Offer........... If a change of control of our company
occurs and there is a ratings decline of
the notes within 90 days of such change in
control, we must give holders of the New
Notes the opportunity to sell us their
notes at 101% of their principal amount,
plus accrued and unpaid interest.
Asset Sale Proceeds............... If we or any of the Guarantors engage in
asset sales, we generally must either
invest the net cash proceeds from such
sales in our business within a specified
period of time, prepay senior debt or make
an offer to purchase a principal amount of
the New Notes equal to the excess net cash
proceeds. The purchase price of the notes
would be 100% of their principal amount,
plus accrued and unpaid interest to the
date of purchase.
Certain Indenture Provisions...... The indenture governing the New Notes
contains covenants limiting our (and
substantially all of our subsidiaries')
ability to:
o incur additional debt;
o pay dividends or distributions on our
capital stock or repurchase our capital
stock;
o make certain investments;
o create liens on our assets to secure
subordinated debt;
o enter into transactions with affiliates;
o merge or consolidate with another
company; and
11
o transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
Use of Proceeds................... We will not receive any proceeds from the
exchange offer.
Risk Factors...................... See "Risk Factors" for a description of
certain of the risks you should consider
before tendering your Old Notes in the
exchange offer.
12
RISK FACTORS
You should consider carefully the following factors, as well as the other
information set forth or incorporated by reference in this prospectus, before
tendering your Old Notes in the exchange offer.
RISKS RELATED TO THE EXCHANGE OFFER AND HOLDING THE NEW NOTES
Holders who fail to exchange their Old Notes will continue to be subject to
restrictions on transfer.
If you do not exchange your Old Notes for New Notes in the exchange
offer, you will continue to be subject to the restrictions on transfer of your
Old Notes described in the legend on the certificates for your Old Notes. The
restrictions on transfer of your Old Notes arise because we issued the Old
Notes under exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, you may only offer or sell the Old Notes if they
are registered under the Securities Act and applicable state securities laws,
or offered and sold under an exemption from these requirements. We do not plan
to register the Old Notes under the Securities Act.
Because we anticipate that most holders of Old Notes will elect to
exchange such Old Notes, we expect that the liquidity of the market for any
Old Notes remaining after the completion of the exchange offer may be
substantially limited. Any Old Notes tendered and exchanged in the exchange
offer will reduce the aggregate principal amount at maturity of the Old Notes
outstanding. Following the exchange offer, if you did not tender your Old
Notes you generally will not have any further registration rights (subject to
limited exceptions), and such Old Notes will continue to be subject to certain
transfer restrictions, as described above. Accordingly, the liquidity of the
market for such Old Notes could be adversely affected. The Old Notes are
currently eligible for sale pursuant to Rule 144A and Regulation S through the
Private Offerings, Resale and Trading through Automated Linkages market of the
National Association of Securities Dealers, Inc.
You must comply with the exchange offer procedures in order to receive new,
freely tradable Notes.
Delivery of New Notes in exchange for Old Notes tendered and accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of the following:
o certificates for Old Notes or a book-entry confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at
DTC, New York, New York as depository, including an Agent's Message
(as defined) if the tendering holder does not deliver a letter of
transmittal,
o a completed and signed letter of transmittal (or facsimile thereof),
with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message in lieu of the letter of
transmittal, and
o any other documents required by the letter of transmittal.
Therefore, holders of Old Notes who would like to tender Old Notes in
exchange for New Notes should be sure to allow enough time for the Old Notes
to be delivered on time. We are not required to notify you of defects or
irregularities in tenders of Old Notes for exchange. Old Notes that are not
tendered or that are tendered but we do not accept for exchange will,
following consummation of the exchange offer, continue to be subject to the
existing transfer restrictions under the Securities Act and, upon consummation
of the exchange offer, certain registration and other rights under the
registration rights agreement will terminate. See "The Exchange
Offer--Procedures for Tendering Old Notes" and "The Exchange
Offer--Consequences of Exchanging or Failing to Exchange Old Notes."
Some holders who exchange their Old Notes may be deemed to be underwriters.
If you exchange your Old Notes in the exchange offer for the purpose of
participating in a distribution of the New Notes, you may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
13
Holders of the Old Notes participating in the exchange offer will not recognize
gain or loss in the exchange.
The exchange of Old Notes for New Notes in the exchange offer will not be
a taxable transaction to holders for U.S. federal income tax purposes. See
"Certain Federal Income Tax Considerations."
RISKS RELATED TO THE NOTES
Our substantial indebtedness could adversely affect our operations and financial
results and prevent us from fulfilling our obligations under the Notes.
We have now, and after the offering will continue to have, a significant
amount of indebtedness. As of December 31, 2001, after giving effect to the
offering of the Old Notes and the application of the proceeds therefrom, we
would have had approximately $524.6 million of indebtedness and shareholders'
equity of approximately $664.9 million.
Our substantial indebtedness could have important consequences for you.
For example, it could:
o make it more difficult for us to satisfy our obligations with respect
to the Notes;
o increase our vulnerability to general adverse economic and industry
conditions;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, which would reduce the
availability of our cash flow to fund working capital, capital
expenditures, expansion efforts and other general corporate
requirements;
o limit our flexibility in planning for, or reacting to, changes in our
business and industry;
o place us at a competitive disadvantage to competitors with less
indebtedness; and
o limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional
funds.
Failure to comply with the covenants in the agreements governing our
indebtedness could result in an event of default which, if not cured or
waived, could have a significant adverse effect on us.
Servicing our indebtedness will require a significant amount of cash. Our
ability to generate cash depends on many factors, some of which are beyond our
control.
Our ability to make payments on and to refinance our indebtedness,
including the Notes, and to fund planned capital expenditures and expansion
efforts depends on our ability to generate cash in the future. To some extent,
this is subject to general economic, financial, competitive, legislative and
regulatory factors and other factors that are beyond our control. In addition,
our ability to borrow funds under our revolving credit facility in the future
will depend on our continued compliance with certain financial covenants in
the revolving credit facility and any amendments thereto.
We cannot assure you that our business will generate cash flow from
operations or that future borrowings will be available to us in an amount
sufficient to enable us to pay our indebtedness, including the Notes,
indebtedness under our revolving credit facility, our 8-5/8% senior
subordinated notes or our 2001 Notes, or to fund our other liquidity needs. As
a result, we may need to refinance all or a portion of such indebtedness on or
before maturity. We cannot assure you that we will be able to refinance or
amend the terms of any of our indebtedness on commercially reasonable terms or
at all. Our inability to generate sufficient cash flow or refinance our
indebtedness on commercially reasonable terms would have a material adverse
effect on our financial condition, results of operations and ability to
satisfy our obligations under the Notes.
Your right to receive payment on the Notes and the guarantees is junior to all
of our and the Guarantors' senior indebtedness.
The Notes are general unsecured obligations, junior in right of payment
to all existing and future senior indebtedness of the issuers and each
Guarantor, including obligations under our revolving credit facility. The
Notes will not be secured by any of our or the Guarantors' assets, and as such
will be
14
effectively subordinated to any secured indebtedness that we or the Guarantors
may have now or may incur in the future to the extent of the value of the
assets securing that indebtedness. Our revolving credit facility is secured by
a pledge of substantially all of our assets.
If one of the issuers or a Guarantor is declared bankrupt, becomes
insolvent or is liquidated or reorganized, any indebtedness that ranks ahead
of the Notes and the guarantees will be entitled to be paid in full from our
assets or the assets of the Guarantors before any payment may be made with
respect to the Notes or the guarantees. In any such case, we cannot assure you
that we would have sufficient assets to pay amounts due on the Notes. As a
result, holders of the Notes may receive less, proportionally, than the
holders of indebtedness senior to the Notes and the guarantees. The
subordination provisions of the indenture also provide that we can make no
payment to you during the continuance of payment defaults on our senior
indebtedness, and payments to you may be suspended for a period of up to 180
days if a non-payment default exists under our senior indebtedness. See
"Description of New Notes--Subordination."
At April 30, 2002, after giving effect to the offering of the Old Notes
(and the application of the proceeds therefrom), the Notes and the guarantees
would have ranked junior to approximately $0.6 million of senior debt,
consisting entirely of capital leases, and $200.0 million of unused
availability under our revolving credit facility, availability under which
could increase under certain conditions to $350.0 million. In addition, the
indenture and our revolving credit facility permit, subject to the terms and
conditions of such agreements, the incurrence of additional indebtedness, some
or all of which may be senior indebtedness. See "Description of New Notes--
Certain Covenants" and "Description of Other Indebtedness."
We and our subsidiaries may still be able to incur substantially more
indebtedness. This could further exacerbate the risks described above.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future, including additional notes under the indenture
under which the Notes were issued. The terms of the indenture do not fully
prohibit us or our subsidiaries from doing so. After giving effect to the
offering (and the application of the proceeds therefrom), as of April 30,
2002, we would have had $500.0 million of senior subordinated indebtedness and
$200.0 million of unused availability under our revolving credit facility,
availability under which could increase under certain conditions to $350.0
million. We reached agreement with the lenders under our revolving credit
facility to increase the amount available under that facility by $100.0
million pursuant to the terms of such facility effective as of May 31, 2002.
The total amount now available under the revolving credit facility is $300.0
million. An additional $50.0 million of borrowings may be available under
certain conditions.
All of the indebtedness outstanding under our revolving credit facility
is secured and is senior to the Notes. If new indebtedness is added to our and
our subsidiaries' current debt levels, the related risks that we and they now
face could intensify.
The issuers are holding companies and depend on the business of their
subsidiaries to satisfy their obligations under the Notes.
The issuers are holding companies. The issuers' subsidiaries conduct
substantially all of our consolidated operations and own substantially all of
our consolidated assets. Consequently, our cash flow and our ability to pay
our indebtedness depends on our subsidiaries' cash flow and their payment of
funds to us. Our non-guarantor subsidiaries, if any, may not be obligated to
make funds available to us for payment on the Notes or otherwise. In addition,
our subsidiaries' ability to make any payments to us will depend on their
earnings, the terms of their indebtedness, business and tax considerations,
legal and regulatory restrictions and economic conditions. The ability of our
subsidiaries to make payments to us is also governed by the gaming laws of
certain jurisdictions, which may place limits on the amount of funds that may
be transferred to us and may require prior or subsequent approval for any
payments to us. Payments to us are also subject to legal and contractual
restrictions.
We may require you to dispose of your Notes or redeem your Notes if required
by applicable gaming regulations.
Gaming authorities to whom we or any of our subsidiaries are or may
become subject have the power to investigate any of our debt security holders,
including holders of the Notes. Generally, these gaming authorities may, in
their discretion, require a holder of any of our debt securities to file
applications, be investigated and be found suitable to own our debt
securities, and the costs of the investigation of such finding of suitability
generally will be the responsibility of such holder. Any person who fails or
refuses to apply for a finding of suitability or a license within a specified
time after being ordered to do so by such
15
gaming authorities may be found unsuitable. In addition, under certain
circumstances, we have the right, at our option, to cause a holder to dispose
of our Notes or to redeem our Notes in order to comply with gaming laws to
which we are subject. See "Description of New Notes--Required Regulatory
Redemption."
An active trading market may not develop for the New Notes.
The New Notes are new issues of securities for which there is currently
no trading market. We do not intend to apply for listing of the New Notes on
any securities exchange or to seek approval for quotation through an automated
quotation system. Accordingly, there can be no assurance that an active market
will develop upon completion of the exchange offer or, if developed, that such
market will be sustained or as to the liquidity of any market. In addition,
the liquidity of the trading market in the New Notes, if developed, and the
market price quoted for the New Notes, may be adversely affected by changes in
the overall market for high yield securities and by changes in our financial
performance or prospects or in the financial performance or prospects of
companies in our industry generally.
We may not have the ability to raise the funds necessary to finance a change of
control offer required by the indenture.
Upon the occurrence of certain specific kinds of change of control events
and a credit rating downgrade on the Notes within 90 days of any such change
of control event, we will be required to offer to repurchase all outstanding
Notes (including the 2001 Notes, of which an aggregate principal amount of
$200.0 million was outstanding as of April 30, 2002, and any additional notes
issued under the indenture). We will also be required to settle any
outstanding obligations on related swap agreements at that time. However, it
is possible that we will not have sufficient funds at such time to make such
required repurchases of the Notes or settlements of the swaps, or that
restrictions in our revolving credit facility, or other agreements related to
our indebtedness, will not allow such payments. See "Description of New
Notes--Repurchase of Notes at the Option of the Holder upon a Change of
Control."
Our failure to repurchase the Notes would be a default under the
indenture. The occurrence of certain of the events that would require us to
repurchase the Notes may constitute a default under our revolving credit
facility. If we are required to make a change of control offer for the Notes,
we also likely will need to offer to repurchase our 8-5/8% senior subordinated
notes, of which an aggregate principal amount of $100.0 million was
outstanding as of March 31, 2002. Future indebtedness we incur may have
similar provisions. We cannot assure you that sufficient funds will be
available when necessary to make any required purchases.
The guarantees may not be enforceable because of fraudulent conveyance laws.
The obligation of each of the Guarantors of the Notes may be subject to
review under state, federal or foreign fraudulent transfer laws. Under state
and federal laws, if a court, in a lawsuit by an unpaid creditor or
representative of creditors of a Guarantor, such as a trustee in bankruptcy or
such Guarantor as debtor-in possession, were to find that at the time such
obligation was incurred, such Guarantor, among other things:
o did not receive fair consideration or reasonably equivalent
value therefore; and
o either
o was insolvent,
o was rendered insolvent,
o was engaged in a business or transaction for which its
assets constituted unreasonably small capital, or
o intended to incur, or believed that it would incur, debts
beyond its ability to pay as such debts matured,
such court could avoid such Guarantor's obligation under its guarantee, and
direct the return of any payments made under the guarantee to such Guarantor
or to a fund for the benefit of its creditors.
16
Moreover, regardless of the factors identified above, such court could
avoid such obligation, and direct such repayment, if it found that the
obligation was incurred with the intent to hinder, delay, or defraud such
Guarantor's creditors. In that event, the holder of the Notes would have to
look for repayment to other Guarantors whose guarantee obligations had not
been avoided.
The measure of insolvency for purposes of the above will vary depending
upon the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent:
o if the sum of its debts is greater than the fair value of all of its
property;
o if the present fair salable value of its assets is less than the
amount that will be required to pay its probable liability on its
existing debts as they become absolute and mature; or
o it could not pay its debts as they become due.
RISKS RELATED TO OUR BUSINESS
The resort and casino industries are highly competitive, and increases in
competition could adversely affect our financial performance.
The resort and casino industries are highly competitive. Our destination
casino resorts compete with other resorts and casinos, including land-based
casinos, riverboat, dockside and cruise ship casinos and other forms of
gaming, as well as other forms of entertainment. Our luxury resort hotels
compete with other resorts and hotels located in markets where we conduct
business. If other properties operate more successfully, if existing
properties are enhanced or expanded, or if additional hotels or casinos are
established in and around the markets where we conduct business, we may lose
market share. In particular, the expansion, upgrading or construction of
competing resort or casino properties in or near any market from which we
attract or expect to attract a significant number of customers could have a
significant adverse effect on our business, financial condition and results of
operations.
A number of our competitors are larger and have greater financial and
other resources than we do. In addition, a number of jurisdictions have
recently legalized gaming and other jurisdictions are considering the
legalization of gaming. This could open markets in which we currently compete
to new entrants, and could create new markets which may compete as tourist
destinations. Our gaming operations compete, and will in the future compete,
with all forms of existing legalized gaming and with new forms of gaming that
may be legalized in the future. Our competitive position could be materially
adversely affected by larger competing companies, new entrants, new markets
and new forms of gaming, and our revenues could decline, harming our financial
condition.
New projects and expansion and renovation efforts are inherently subject to
significant development and construction risks.
We regularly evaluate potential development opportunities and engage in
expansion, development and renovation projects at properties that we develop
or operate, including expansions and upgrades at Atlantis. Each of these
projects will be subject to the many risks in expanding or renovating an
existing enterprise or developing new projects, including unanticipated
design, construction, regulatory, environmental and operating problems, and
the significant risks commonly associated with implementing an expansion
strategy in new markets. In particular, any such projects are subject to the
risks associated with the following:
o the availability of financing and the terms and covenants in our
credit facilities and other debt, including the Notes;
o shortages in materials;
o shortages of skilled labor or work stoppages;
o unforeseen construction, scheduling, engineering, environmental or
geological problems;
o weather interference, floods, fires or other casualty losses;
o the failure to obtain required licenses, permits or approvals; and
17
o unanticipated cost increases.
The anticipated costs and construction period for projects are based upon
budgets, conceptual design documents and construction schedule estimates
prepared by us in consultation with architects and contractors. The cost of
any project may vary from initial expectations, and we, or the owners of the
property, may have a limited amount of capital resources to fund cost overruns
on any project. If cost overruns cannot be financed on a timely basis, the
completion of one or more projects may be delayed until adequate funding is
available. The completion dates of development projects could also differ
significantly from expectations for construction-related or other reasons. We
cannot assure you that any project will be completed, if at all, on time or
within established budgets. Significant delays or cost overruns on projects
could have a material adverse effect on our business, financial condition or
results of operations.
In addition, although we design our projects for existing facilities to
minimize disruption of business operations, expansion and renovation projects
require, from time to time, portions of the existing operations to be closed
or disrupted. Any extended disruptions in our operations could have a material
adverse effect on our business, financial condition or results of operations.
If we are unable to finance our expansion, development and renovation projects
as well as capital expenditures through cash flow and borrowings, our
expansion, development and renovation efforts could be jeopardized.
If we are unable to finance existing or future projects with cash flow
from operations or borrowings, we will have to adopt one or more alternatives,
such as reducing or delaying planned expansion, development and renovation
projects and other capital expenditures, selling assets, restructuring
indebtedness, obtaining additional equity financing or joint venture partners,
or modifying our revolving credit facility. These sources of additional funds
may not be sufficient to finance existing or future projects, and other
financing may not be available on acceptable terms, in a timely manner or at
all. In addition, our existing indebtedness contains certain restrictions on
our ability to incur additional indebtedness. If we are unable to secure
additional financing, we could be forced to limit or cancel expansion,
development or renovation projects, which may adversely affect our business,
financial condition and results of operations.
We are subject to extensive governmental gaming regulation, which may harm our
business.
Our operation of gaming facilities is subject to extensive governmental
regulations. Regulatory authorities typically require various registrations,
licenses, findings of suitability and approvals to be held by operators of
gaming facilities. The regulatory authorities in these jurisdictions generally
have broad discretion in the granting, renewal, suspension and revocation of
licenses and require that such registrations, licenses, findings and approvals
be renewed or updated periodically. We and our necessary key personnel are
currently qualified to do business in all the jurisdictions in which we
operate. We cannot assure you that any new or permanent licenses, permits or
approvals that may be required by us, our key employees and our partners, if
applicable, in the future will be granted or that our existing licenses,
permits and approvals will be renewed or will not be suspended or revoked in
the future. The failure to receive or renew licenses or the suspension or
revocation of licenses could harm our reputation and result in a loss of
revenue, which could materially adversely affect our financial condition and
results of operations.
Our gaming operations are subject to significant taxation and fees that
increase our costs.
Our gaming operations are subject to significant taxation and fees. Such
taxes and fees are subject to increase at any time. We pay substantial taxes
and fees with respect to our gaming operations in The Bahamas and will likely
incur significant taxes and fees in any other jurisdictions in which we
conduct gaming operations in the future. Any material increase in existing
taxes and fees, the adoption of new taxes or fees, or the loss or reduction of
any existing or future tax incentives, could have a material adverse effect on
our profitability.
Our business is seasonal and severe weather conditions can adversely affect
our business, results of operations or financial condition, or further
increase our insurance premiums.
Historically, our revenues and operating profits in The Bahamas have been
higher during the first calendar quarter, the prime tourist season, than in
successive quarters. Higher revenues and earnings are typically realized from
the Mauritius properties during the fourth quarter of the year and from
Mohegan Sun during the middle third of the year. If any of these properties
were unable to accommodate guests during such periods for any reason,
including disruptions caused by weather, our revenues and profits could be
adversely affected.
18
The Bahamas and Mauritius are subject to tropical weather and storms,
which, if severe, could adversely affect our operations and tourism.
Similarly, inclement weather can adversely affect the revenues that we derive
from Mohegan Sun, as the principal means of transportation to this property is
by automobile or bus. In September 1999, our Paradise Island properties were
hit by Hurricane Floyd, a hurricane rated by the United States National
Weather Service as a category five, its highest rating. These properties
suffered approximately $45.0 million of property damage that took three months
to repair. Although this property damage was covered by our insurance
policies, we incurred significant increases in our property and windstorm
insurance costs as a result. We cannot assure you that our insurance costs
will not further increase in the future or that appropriate coverage will be
available on acceptable terms or at all. In addition, we cannot assure you
that our business will not be adversely affected by severe weather conditions
in the future, which could cause significant damage and suspension in service
provided to our patrons and could harm our business, results of operations or
financial condition.
Work stoppages and other labor disputes could harm our financial condition and
results of operations.
In The Bahamas, a union represents approximately 3,800 of our
approximately 5,800 employees. We participate in an employer association whose
existing contract with the union expires January 1, 2003. Labor relations in
The Bahamas have been unstable at times over the last few years, and there
have been occasional work stoppages. As the country's largest private
employer, we are sometimes the target of labor disputes. Any protracted labor
disputes or work stoppages affecting any of the properties that we own or
operate could reduce our revenues. In addition, many of the public sector
industries in The Bahamas, such as electricity, telecommunication and airport
facilities, are unionized. The Bahamian government's labor relations with
these unions have been unstable at times and there have been work stoppages on
occasion that have been disruptive to our business.
Lack of sufficient air service could adversely affect our revenues and
profits.
Most patrons of our resorts and hotels arrive by air. Although we
consider the current level of air service to The Bahamas, Mauritius, Dubai and
the Maldives to be adequate, any interruption or reduction of air service to
any such locations could restrict the growth of our businesses, negatively
affect our competitive position and adversely affect our revenues and profits.
We are subject to environmental, health and safety laws and regulations and
our noncompliance or a significant regulatory change could adversely affect
our business, results of operations or financial condition.
Our operations are regulated under a number of federal, provincial, state
and local laws and regulations that govern, among other things, the handling
of waste materials, some of which are classified as hazardous materials, and
the discharge of hazardous materials into the environment. Our operations are
subject to stringent regulations relating to protection of the environment and
waste handling. In addition to liability for our own noncompliance, these laws
and regulations may expose us to liability for the noncompliance of other
parties, without regard to whether we were negligent. Sanctions for
noncompliance with applicable environmental laws and regulations may include
administrative, civil and criminal penalties, revocation of permits and
corrective action orders. Furthermore, we may be liable for costs for
environmental cleanup at currently or previously owned or operated properties
or off-site locations. Our failure to comply with existing laws or
regulations, the adoption of new laws or regulations with additional or more
rigorous compliance standards, or the more vigorous enforcement of
environmental laws or regulations could significantly harm our business by
increasing our expenses and limiting our future opportunities.
A small number of our shareholders control a significant percentage of our
ordinary shares and are able to control decisions affecting our company.
On July 3, 2001, we announced the restructuring of our former majority
shareholder, SIIL, which was beneficially owned by World Leisure Group
Limited, or WLG, Caledonia Investments plc, or Caledonia, and Kersaf
Investments Limited, or Kersaf. As a result of certain proxy arrangements
granted in the restructuring, WLG and Caledonia currently have the right to
vote approximately 26.5% and 31.2%, respectively, of our issued and
outstanding ordinary shares. Consequently, if WLG and Caledonia
19
act together they will be able to effectively control the outcome of
substantially all matters requiring shareholder approval, including the
election of our directors, thereby controlling our management, policies and
business operations. For example, WLG and Caledonia could use this voting
power to block our ability to obtain certain types of financing for
development plans, renovations or expansions, which could materially adversely
affect our ability to develop our business and pursue our strategies. See
"Major Shareholders and Related Party Transactions."
You may have difficulty enforcing judgments against us or our directors or
management outside the United States.
Kerzner International is a Bahamian international business company
incorporated under the laws of the Commonwealth of The Bahamas. Certain of our
directors and executive officers reside outside the United States. In
addition, a substantial portion of the assets of our directors and officers
and of our assets is located outside the United States. As a result, it may be
difficult or impossible to:
o effect service of process within the United States upon us or these
persons; or
o enforce, against us or these persons, in the United States, court
judgments obtained in the United States courts, including judgments
relating to U.S. federal securities laws.
It is unlikely that Bahamian courts would entertain original actions
against Bahamian companies, their directors or officers predicated solely upon
U.S. federal securities laws. Furthermore, judgments based upon any civil
liability provisions of the U.S. federal securities laws are not directly
enforceable in The Bahamas. Rather, a lawsuit must be brought in The Bahamas
on any such judgment. Subject to consideration of private international law,
in general, a judgment obtained after due trial by a court of competent
jurisdiction, which is final and conclusive as to the issues in connection, is
actionable in Bahamian courts and is impeachable only upon the grounds of
fraud, public policy and natural justice.
We may have difficulty enforcing gaming debts in certain foreign jurisdictions
or in certain jurisdictions within the United States, which could negatively
affect our revenues.
Gaming debts may not be legally enforced in certain foreign jurisdictions
or in certain jurisdictions within the United States. A substantial portion of
the customers at Atlantis and Mohegan Sun reside in the United States. As a
result, we and the Mohegan Tribe may be unable to collect gaming debts from
patrons of those casinos who reside in such jurisdictions, which could reduce
our revenues.
Reassessments of and changes to our business plans could hinder our
development and result in charges or fees that could harm our financial
condition and results of operations.
We are regularly reviewing our development plans in light of a variety of
factors, including the availability of financing, regulatory and political
considerations, competition and other business and strategic concerns. As a
result of such assessments, our management may choose to change such plans,
which could result in failure to expand and could also cause us to incur fees
or charges. We cannot assure you that we will carry forward and complete any
proposed business plans.
Energy price increases may adversely affect our cost of operations and our
revenues.
Our destination casino resorts use significant amounts of electricity,
natural gas and other forms of energy. Although we have not experienced
shortages of energy, substantial increases in the cost of electricity or
natural gas may negatively affect our operating results. The extent of any
impact is subject to the magnitude and duration of the energy price increases,
but this impact could be material. In addition, energy price increases in
locations that constitute a significant source of customers for our properties
could result in a decline in disposable income of potential customers and a
decrease in visitation and spending at our properties, which could negatively
impact revenues.
We may pay higher insurance premiums for our properties.
Due to changes in the insurance market arising prior to the September 11
terrorist attacks and the effects of the September 11 terrorist attacks, it is
becoming more difficult and more expensive to obtain insurance. We may
encounter difficulty in obtaining or renewing property or casualty insurance
on our properties. In addition, such insurance may be more limited and for
some catastrophic risks may not be generally available at levels existing
prior to the September 11 terrorist attacks. Even if we are able to renew our
policies or to obtain new policies at levels and with limitations consistent
with our current
20
policies, we cannot be sure that we will be able to obtain such insurance at
premium rates that are commercially reasonable.
Deterioration in general economic and market conditions, including those
related to any future terrorist actions, could adversely affect our business.
Our business is affected by general economic and market conditions,
particularly in the United States and Europe. A large portion of our business
at Atlantis is generated by group convention sales and individual tour and
travel. A recession or economic slowdown could cause a reduction in group
sales bookings or the willingness or ability of tourists to book vacations at
Atlantis, which could adversely affect our operating results.
As a result of the events of September 11, 2001, significantly reduced
discretionary spending, disruptions in airline travel and cancelation of
business conventions had a material adverse impact on our results of
operations during September and the fourth quarter of 2001. In addition, the
September 11 terrorist attacks, the potential for future terrorist attacks,
the national and international responses to terrorist attacks and other acts
of war or hostility have created many economic and political uncertainties
which could adversely affect our business and results of operations in ways
that cannot presently be predicted. We will be predominantly uninsured for
losses and interruptions caused by terrorist acts and acts of war.
Our former use of Arthur Andersen LLP as our independent auditor may pose
risks to us and will limit your ability to seek potential recoveries from them
related to their work.
On June 15, 2002, Arthur Andersen LLP ("Andersen"), our former
independent auditor, was convicted on a federal obstruction of justice charge.
Some investors, including institutional investors, may choose not to invest in
or hold securities of a company whose financial statements were audited by
Andersen. On June 24, 2002, we appointed Deloitte & Touche LLP to succeed
Arthur Andersen LLP.
SEC rules require us to present our audited financial statements in
various SEC filings, along with Andersen's consent to our inclusion of its
audit report in those filings. The SEC recently has provided regulatory relief
designed to allow companies that file reports with the SEC to dispense with
the requirement to file a consent of Andersen in certain circumstances. We
have been unable to obtain, after reasonable efforts, the written consent of
Andersen to our naming it as an expert and as having audited the consolidated
financial statements contained in this prospectus. Andersen is also unable to
provide us with assurance services, such as advice customarily given to
underwriters of our securities offerings and other similar market
participants. Notwithstanding the SEC's regulatory relief, the inability of
Andersen to provide its consent or to provide assurance services to us could
negatively affect our ability to, among other things, access the public
capital markets. Any delay or inability to access the public markets as a
result of this situation could have a material adverse impact on our business.
Also, an investor's ability to seek potential recoveries from Andersen related
to any claims that an investor may assert as a result of the work performed by
Andersen will be limited significantly in the absence of a consent and may be
further limited by the diminished amount of assets of Andersen that are or may
in the future be available for claims.
21
ORGANIZATIONAL STRUCTURE
The following chart summarizes our organizational structure:
[GRAPHIC OMITTED]
- -------------------------
(1) Owns the Mauritius properties.
(2) Owns and operates our Paradise Island operations, including Atlantis
and the Ocean Club.
(3) Owns and operates our United States operations and interests, including
our 50% interest in TCA.
(4) Manages our luxury resort hotels, excluding the Ocean Club.
22
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the New Notes
in the exchange offer. In consideration for issuing the New Notes as
contemplated by this prospectus, we will receive the Old Notes in like
principal amount. The Old Notes surrendered in exchange for the New Notes will
be retired and canceled. Accordingly, the issuance of the New Notes will not
result in any increase in our indebtedness or capital stock.
We used the net proceeds from the issuance of the Old Notes to repurchase
our outstanding 9% senior subordinated notes in the tender offer and to redeem
the remaining 9% senior subordinated notes on June 21, 2002, as described
under "Summary--Recent Developments--Offering of Old Notes and Tender Offer,
Consent Solicitation and Redemption."
CAPITALIZATION
The following table sets forth our cash position and our historical
consolidated capitalization:
o as of December 31, 2001; and
o as adjusted to give effect to the offering of the Old Notes and
the use of the net proceeds from the offering of the Old Notes,
in each case as if the offering of the Old Notes had occurred
on December 31, 2001 (unaudited).
As of December 31, 2001
----------------------------
Actual As Adjusted
---------- -------------
(unaudited)
(in thousands)
Cash and cash equivalents..................................... $ 30,471 $ 22,971
Restricted cash equivalents................................... 4,518 4,518
--------- ---------
Total cash and cash equivalents............................ $ 34,989 $ 27,489
======== ========
Long-term debt (including current maturities):
Revolving credit facility (a).............................. $24,000 $24,000
9% senior subordinated notes due 2007 (b).................. 200,000 --
8-5/8% senior subordinated notes due 2007.................. 100,000 100,000
8-7/8% senior subordinated notes due 2011 (c).............. 200,000 200,000
8-7/8% senior subordinated notes due 2011 (d).............. -- 200,000
Capitalized leases and other debt.......................... 576 576
---------- -----------
Total long-term debt....................................... 524,576 524,576
Shareholders' equity (e)...................................... 678,403 664,878
Total capitalization.......................................... $1,202,979 $1,189,454
========== ==========
- ---------------
(a) As of April 30, 2002, we had no borrowings outstanding under the revolving
credit facility. The revolving credit facility currently permits aggregate
borrowings of $300.0 million. An additional $50.0 million of borrowings
may be available under certain conditions. See "Summary--Recent
Developments--Revolving Credit Facility."
(b) Excludes $581,000 unamortized discount.
(c) These refer to the 2001 Notes that were issued on August 14, 2001.
Amounts exclude the fair value effect of the interest rate swap
agreements related to these notes.
23
(d) These refer to the "Old Notes" that were issued on May 20, 2002. Amounts
exclude $6.0 million unamortized premium.
(e) The decrease in shareholders' equity, as adjusted, represents an
extraordinary loss resulting from the early extinguishment of the 9%
senior subordinated notes.
24
SELECTED HISTORICAL FINANCIAL DATA
The following table contains selected financial and other data as of and for each of the years in the five-year period
ended December 31, 2001, that was derived from our audited consolidated financial statements prepared in accordance with U.S.
GAAP, certain of which are included in this prospectus.
The information set forth below is not necessarily indicative of future operations and should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of Operations and other financial information included
elsewhere in this prospectus. Amounts are reported in U.S. dollars and presented in accordance with U.S. GAAP.
Year Ended December 31,
-------------------------------------------------------------------
1997 1998 1999 2000 2001
------ ------ ------ ------ ------
(a) (b)(c) (c) (c)(d) (c)
(in thousands, except ratios and operating data)
Consolidated Statements of
Operations Data:
Revenues:
Gaming ................................................ $329,610 $319,342 $351,545 $367,935 $116,490
Rooms...................................................... 96,846 94,942 164,831 194,008 176,573
Food and beverage.......................................... 91,329 86,593 137,100 147,718 121,415
Tour operations............................................ 15,403 14,757 28,714 33,192 36,348
Real estate related........................................ -- -- -- 108,650 9,771
Management and other fees.................................. 22,979 40,645 46,898 35,763 36,806
Other revenues............................................. 44,503 35,391 45,910 49,208 56,416
Insurance recovery......................................... -- -- 14,209 -- 2,000
------------- ------------ ---------- ------------- ----------
Gross revenues............................................. 600,670 591,670 789,207 936,474 555,819
Net revenues............................................... 558,912 550,878 738,967 884,695 533,041
Write-down of net assets held for sale..................... -- -- -- (229,208) --
Income (loss) from operations.............................. 84,624 52,206 114,432 (74,844) 75,678
Equity in earnings from associated companies............... 2,214 2,730 2,628 4,225 3,059
Net income (loss).......................................... $83,008 $57,746 $69,822 $(119,104) $31,656
Consolidated Balance Sheet
Data at End of Period:
Cash and cash equivalents, including restricted cash....... $153,161 $63,123 $40,210 $24,148 $34,989
Total assets............................................... 1,374,740 1,625,733 1,671,471 1,460,791 1,357,031
Long-term debt, including current portion.................. 412,615 568,134 579,133 669,138 518,492
Shareholders' equity....................................... 790,283 850,621 899,831 641,827 678,403
25
Year Ended December 31,
-----------------------------------------------------------------
1997 1998 1999 2000 2001
------ ------ ------ ------ ------
Other Financial Data:
EBITDA (e).................................................. $113,263 $110,248 $176,360 $164,041 $132,898
Depreciation and amortization............................... 28,639 32,081 57,230 60,223 51,490
Capital expenditures........................................ 219,700 443,996 205,046 155,892 67,590
Cash interest expense, net (f).............................. 21,781 30,703 49,784 48,439 42,128
Ratio of earnings to fixed charges (g)...................... 3.73x 1.75x 2.34x -- 1.66x
Atlantis Operating Data:
Average number of rooms available........................... 1,147 1,196 2,325 2,319 2,316
Average occupancy........................................... 87.7% 87.0% 81.4% 83.2% 77.1%
Average daily room rate..................................... $173 $187 $211 $242 $252
Average number of slot machines............................. 801 823 979 975 959
Average win per slot machine per day........................ $128 $115 $136 $144 $138
Average number of table games............................... 64 69 77 79 79
Average win per table game per day.......................... $2,062 $1,987 $2,934 $2,813 $2,367
- -----------
(a) The results of operations for the year ended December 31, 1997 included a
gain of $13.4 million on the sale of our casino interest in France.
(b) The results of operations for the year ended December 31, 1998 include
only two weeks of operations of the Royal Towers on Paradise Island after
its opening in mid-December.
(c) The results of operations for the year ended December 31, 1998 include
pre-opening expenses of $26.0 million in connection with the opening of
the Royal Towers. The results of operations for the year ended December
31, 1999 include pre-opening expenses of $5.4 million related to a
renovation completed at Resorts Atlantic City in July 1999. The results of
operations for the year ended December 31, 2000 include pre-opening
expenses of $7.6 million related to the expansion of the Ocean Club Resort
and the new Ocean Club Golf Course. The results of operations for the year
ended December 31, 2001 include pre-opening expenses of $6.9 million
related to internet gaming and the Ocean Club Golf Course.
(d) The results of operations for the year ended December 31, 2000 include a
$229.2 million write-down of the carrying value of Resorts Atlantic City
in connection with the sale of the property and the related option to
their realizable value.
(e) EBITDA is defined as income from operations before interest, taxes,
depreciation and amortization, real estate related gains and non-recurring
items. The real estate related gains and non-recurring items excluded in
the calculation of EBITDA for the periods presented are set forth below:
Year Ended December 31,
--------------------------------------------------------------
1997 1998 1999 2000 2001
------ ------ ------ ------ ------
(in thousands)
Gain on real estate related sales....................... $-- $-- $-- $(76,378) $(6,906)
Pre-opening expenses.................................... -- 25,961 5,398 7,616 6,904
Write-down of net assets held for sale.................. -- -- -- 229,208 --
Gain on sale of airplane................................ -- -- (700) -- --
Purchase termination costs.............................. -- -- -- 11,202 --
Transaction costs....................................... -- -- -- 7,014 --
Restructuring costs..................................... -- -- -- -- 5,732
Total $-- $25,961 $4,698 $178,662 $ 5,730
26
Purchase termination costs relate to the termination of our
agreement to acquire the Desert Inn. Transaction costs represent costs in
connection with our self-tender offer in June 2000 and the termination of
the proposal by SIIL to acquire all our ordinary shares it did not
already own. Restructuring costs were comprised of severance costs
related to the termination of employees as a result of reduced occupancy
levels at Atlantis following the September 11 terrorist attacks.
We believe that EBITDA provides useful information regarding our
ability to service our indebtedness but should not be considered in
isolation from or as a substitute for operating income or cash flow data
prepared in accordance with U.S. GAAP as an indicator of our operating
performance or as a measure of our liquidity.
(f) Cash interest expense includes capitalized interest and excludes
amortization of deferred financing costs and interest income.
(g) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income from continuing operations before income taxes plus fixed
charges exclusive of capitalized interest, and fixed charges consist of
interest, whether expensed or capitalized, and amortization of deferred
financing fees. For the year ended December 31, 2000, fixed charges
exceeded earnings available for fixed charges by $125.2 million.
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
We are a leading developer and operator of premier casinos, resorts and
luxury hotels. We focus our operations on two distinct businesses: destination
casino resorts and luxury resort hotels.
In our destination casino resort business, we own and operate the
Atlantis resort located on Paradise Island, The Bahamas. We believe that the
ocean-themed Atlantis, which features the world's largest open-air aquarium
and the largest hotel and casino in the Caribbean market, is a "one of a kind"
destination resort. We also developed and receive certain revenue from Mohegan
Sun in Uncasville, Connecticut, which we believe is one of the most profitable
casinos in the United States.
In our luxury resort hotel business, we operate eight beach resorts in
Mauritius, Dubai, the Maldives and The Bahamas.
Operating Results
Consolidated Results
2001 vs. 2000. We recorded net income of $31.7 million in 2001 compared to a
net loss of $119.1 million in 2000. In 2001, net income included the following
non-recurring items: a net gain on the sale of luxury homesites at Ocean Club
Estates, on Paradise Island, The Bahamas, of $6.9 million, pre-opening
expenses of $6.9 million related to our internet gaming operations and the
opening of the Ocean Club Golf Course and restructuring costs of $5.7 million
related to severance costs incurred as a result of the termination of
employees at Atlantis in the aftermath of the September 11 terrorist attacks.
In 2000, the net loss included certain non-recurring items, as follows: a
$229.2 million write-down of the Resorts Atlantic City property and related
option to their net realizable value, $11.2 million of purchase termination
costs related to the termination of our agreement to acquire the Desert Inn,
$7.0 million of transaction costs incurred in connection with our self-ender
offer in June 2000 and the termination of a proposal by our former majority
shareholder to acquire all of our outstanding ordinary shares that it did not
already own and $7.6 million of pre-opening expenses related to the expansion
of Ocean Club Estates and the opening of the golf course at Ocean Club
Estates. Also in 2000, we recorded a net gain of $76.4 million from the sale
of luxury homesites at Ocean Club Estates. Excluding these non-recurring
items, we earned net income of $37.4 million in 2001 and $59.6 million in
2000. As described below under "Atlantic City," the results of Resorts
Atlantic City are not included in our consolidated results of operations for
the year 2001, whereas they are included in the year 2000. Net revenues in
2001, excluding the sale of lots at Ocean Club Estates, were $523.3 million as
compared to $518.1 million, excluding the sale of lots at Ocean Club Estates
and revenues earned at Resorts Atlantic City, in 2000. Operating expenses
excluding non-recurring items were $441.9 million in 2001 versus $422.3
million, excluding Resorts Atlantic City, in 2000. The reduction in net income
as compared to last year was largely due to a decline in earnings in the third
and fourth quarter of 2001 as a result of the September 11 terrorist attacks.
These variances are described in more detail below under "Segment Results."
2000 vs. 1999. We recorded a net loss of $119.1 million in 2000 compared to
net income of $69.8 million in 1999. The net loss in 2000 reflected the
non-recurring items described above. Net income in 1999 included the write-off
of $5.4 million of pre-opening expenses related to the 1999 renovation of
Resorts Atlantic City. Net revenues in 2000, excluding the sale of homesites
at Ocean Club Estates, were $776.0 million as compared to $739.0 million in
1999. Operating expenses excluding non-recurring items were $672.2 million in
2000 versus $619.1 million in 1999. Excluding non-recurring items, we earned
net income of $59.6 million and $75.2 million in 2000 and 1999, respectively.
Segment Results
Paradise Island
2001 vs. 2000. Our Paradise Island operations generated income from operations
of $68.2 million in 2001, as compared to $85.7 million in 2000. Our largest
property on Paradise Island is Atlantis. The decline in operating earnings of
$17.5 million, or 20.4% was largely due to the effect of the September 11
terrorist attacks, which resulted in reductions in earnings generated by the
casino and rooms operations, compared to 2000, of $9.8 million and $3.2
million, respectively. In addition, operating earnings in 2001 were
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negatively impacted by an increase in depreciation costs of $7.6 million and
an increase in selling, general and administrative expense of $3.6 million.
These items were partially offset by $2.0 million of business insurance
proceeds received in 2001 in connection with Hurricane Michelle and an
increase in earnings from other casino/hotel related items none of which was
individually significant. Although Atlantis achieved a 4% increase in its
average daily room rate to $252, occupancy in 2001 declined to 77% compared to
83% in 2000 due primarily to the effects of the September 11 terrorist
attacks. For the first eight months of 2001, occupancy and average daily room
rate at Atlantis were 91% and $262, respectively, compared to 89% and $251,
respectively, in the same period of 2000. After the September 11 terrorist
attacks, significantly reduced discretionary spending, disruptions in airline
travel and cancelation of business conventions had a material adverse impact
on our occupancy at Atlantis for the remainder of the year. As a result,
earnings over the twelve month period were negatively impacted.
The Atlantis casino generated gaming win of $116.5 million in 2001 as
compared to $132.1 million in 2000. The decrease in revenues for the twelve
month period, partially offset by a decrease of $5.8 million in gaming
expenses, resulted in a net decline of $9.8 million (or 15%) in casino
operating earnings. In 2001, table game win of $68.5 million reflected a
decrease of $12.9 million (or 15.8%) as a result of a decrease in hold
percentage in table games (ratio of table game win to dollar amount of chips
purchased) as well as a decrease in table game drop (the dollar amount of
chips purchased). The table hold percentage decreased from 14.2% in 2000 to
13.1% in 2001. Table game drop was lower by $48.8 million (or 8.5%) as
compared to 2000. Slot win of $48.5 million in 2001 reflected a $2.9 million
decrease (or 5.6%) as compared to 2000. This was primarily due to a decrease
in slot hold percentage from 9.7% in 2000 to 9.2% in 2001. The decrease in
gaming expenses was mainly due to reduced promotional expenses, particularly
after the September 11 terrorist attacks, as fewer complimentary services were
provided due to a reduced number of casino patrons.
The increase in depreciation expense in 2001 was mainly a result of the
newly renovated Ocean Club Golf Course and Club House and the addition of 50
luxury rooms and suites at the Ocean Club Resort, both of which opened shortly
after the beginning of 2001.
Selling, general and administrative expense increased in 2001 due to
higher marketing costs of $4.4 million for increases in national advertising,
the majority of which occurred after the September 11 terrorist attacks,
higher insurance costs of $3.4 million due to increases in premiums and higher
information technology costs of $2.8 million. These increases were partially
offset by decreases in payroll and miscellaneous costs in the amount of $7.0
million. We eliminated approximately 250 employee positions as part of our
cost containment program during the fourth quarter of 2001.
2000 vs. 1999. Our Paradise Island operations generated income from operations
of $85.7 million in 2000, as compared to $93.6 million in 1999. Atlantis
achieved an average occupancy of 83%, compared to 81% in 1999, and the average
daily room rate increased by 15% from $211 in 1999 to $242 in 2000. While we
experienced growth in the contribution to operating earnings from the rooms
and food and beverage operations on Paradise Island, a decrease in earnings
generated by the casino and increased selling, general and administrative
costs resulted in the lower income from operations. The casino generated
gaming win of $132.1 million in 2000 as compared to $130.5 million in 1999.
While casino revenues increased slightly, the overall contribution to
operating earnings from the casino in 2000 decreased by $10.4 million as
compared to 1999. Higher casino operating expenses, which included promotional
and marketing costs, resulted in increased play in the casino, the effects of
which was not fully beneficially realized due to a decline in table hold
percentage in table games. In 2000, table game win of $81.3 million, a
decrease of $1.2 million (or 1.5%), was the result of a decrease in table hold
percentage from 16.1% to 14.2% which more than offset an increase of $58.2
million (or 11.3%) in table game drop. Slot win of $50.8 million reflected an
increase of $2.7 million (or 5.6%) as compared to 1999, which resulted from an
increase in slot handle (dollar amount wagered) of $31.7 million (or 6.3%).
Selling, general and administrative expense increased by $8.3 million (or
14.4%) in 2000 as compared to 1999. We experienced increases in costs related
to information technology and process re-engineering projects in an effort to
improve operational efficiency, computer systems and the gathering of
marketing information. Sales and marketing costs increased primarily due to
more special events on Paradise Island. We also incurred additional costs in
windstorm insurance premiums as a result of the effects of Hurricane Floyd,
which passed within 60 miles of Paradise Island, in September 1999 as well as
overall premium increases experienced by the industry.
In the fourth quarter of 1999, operations at Atlantis were negatively
impacted by the continuing effects of Hurricane Floyd, which occurred in
September 1999. During the fourth quarter of 1999, the average
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occupancy at Atlantis was 74% with an average room rate of $204. We recorded
net revenues in 1999 of $14.2 million from business interruption insurance
recovery associated with the hurricane.
Harborside at Atlantis
In 1999, through one of our Bahamian subsidiaries, we formed a joint
venture with Vistana, a subsidiary of Starwood, to develop a timeshare project
on Paradise Island, Harborside at Atlantis, adjacent to Atlantis. We and
Vistana each have a 50% interest in the joint venture. Construction of 82 two
bedroom units was completed by February 2001 and sales of the timeshare units
began in May 2000.
In 2001, we earned $1.4 million in marketing fees, as compared to $0.9
million in 2000. In addition, in 2000, we earned $2.5 million in fees for
development services provided to Harborside at Atlantis. Equity earnings in
2001 were $0.5 million as compared to $0.8 million in 2000. We did not earn
marketing and development fees or equity earnings in 1999 related to
Harborside at Atlantis.
Atlantic City
2001 vs. 2000. We completed the sale of Resorts Atlantic City on April 25,
2001. As of December 31, 2000, we accounted for Resorts Atlantic City as an
investment held for sale and the loss resulting from the write-down of Resorts
Atlantic City to its net realizable value was recorded during the fourth
quarter of 2000. Accordingly, as of January 1, 2001, the operations of Resorts
Atlantic City were no longer included in our consolidated financial
statements.
2000 vs. 1999. In 2000, Resorts Atlantic City generated income from operations
of $7.6 million as compared to a loss of $0.3 million in 1999. The increase in
operating earnings was a result of increased earnings from the casino. Net
revenues in 2000 included gaming win of $235.8 million, an increase of $14.8
million (or 6.7%) from gaming win of $221.0 million in 1999. Table game
revenues in 2000 increased by $8.2 million (or 12.7%) primarily due to an
increase in table hold percentage to 15.5% from 14.1% in 1999 and to a lesser
extent an increase of $12.2 million (or 2.7%) in table game drop as compared
to 1999. Slot revenues in 2000 increased by $6.1 million (or 3.9%) compared to
1999 due to an increase in slot handle of $241.1 million (or 14.3%), partially
offset by a decrease in slot hold percentage to 8.3% in 2000 from 9.2% in
1999. The average number of slot units in operation during the year 2000 was
2,298 as compared to 2,033 in 1999. Commencing in February 1999, we had taken
out of service and/or removed from the floor as many as 800 slot units at a
time during the renovation of Resorts Atlantic City, which was completed in
early July 1999. Gaming costs and expenses in 2000 increased by $6.0 million
(or 3.8%) as compared to 1999. This represented higher costs attributable to
increased gaming revenues compared to the prior year, principally promotional
expenses, labor costs and casino win tax. Partially offsetting the increased
earnings from the casino was a reduction in other casino/hotel revenues
compared to the prior year. This was mainly due to decreased entertainment
revenues as there were fewer headliner acts at Resorts Atlantic City in 2000
compared to 1999.
Connecticut
We have a 50% interest in, and are a managing partner of, TCA, a
Connecticut general partnership that developed and, until January 1, 2000,
managed Mohegan Sun, a casino and entertainment complex in Uncasville,
Connecticut. TCA managed Mohegan Sun from its opening in 1996 to December 1999
pursuant to a management agreement from which TCA earned management fees based
on a percentage of Mohegan Sun's earnings after depreciation and interest.
In 1998, the Mohegan Tribe appointed TCA to develop its current $1.0
billion expansion of Mohegan Sun for a development fee of $14.0 million. The
expansion includes an additional 119,000 square foot casino, a 34-story
1,200-room hotel, 100,000 square feet of convention space, a 10,000-seat
arena, as well as additional parking and retail space. The new casino opened
in September 2001, the hotel opened in April 2002 and the remainder of the
expansion opened in phases and was completed in June 2002. In addition, TCA
and the Mohegan Tribe entered into the Relinquishment Agreement whereby it was
agreed that effective January 1, 2000, TCA would turn over management of
Mohegan Sun as expanded to the Mohegan Tribe. Pursuant to the Relinquishment
Agreement, the Management Agreement was terminated and, commencing January 1,
2000, TCA receives annual payments of five percent of the gross revenues of
Mohegan Sun for a 15-year period. The payments received by TCA in 2001 and
2000 under the Relinquishment Agreement contributed less income than was
previously earned under the Management Agreement. However, the Relinquishment
Agreement will expire at the end of 2014, whereas the Management Agreement was
to expire in 2003. In addition, fees received pursuant to the Relinquishment
Agreement have increased since 2000 as a result of increasing gross revenues
of Mohegan Sun.
30
2001 vs. 2000. During the fiscal year ended September 30, 2001, Mohegan Sun
generated gross revenues of $858.0 million as compared to $809.3 million in
fiscal 2000, an increase of 9.4%. Gross revenues included gaming win of $751.0
million and $709.6 million in fiscal 2001 and fiscal 2000, respectively. In
2001, TCA received payments under the Relinquishment Agreement of $52.7
million as compared to $41.0 million in 2000. We recorded income from TCA of
$27.4 million and $19.8 million in 2001 and 2000, respectively. During 2000,
we also earned development fees of $3.8 million from TCA.
2000 vs. 1999. During the fiscal year ended September 30, 2000, Mohegan Sun
generated gross revenues of $809.3 million as compared to $725.5 million for
the comparable period in 1999. Gross revenues included gaming win of $709.6
million and $641.1 million for the fiscal year ended September 30, 2000 and
for fiscal 1999, respectively. Slot win increased by $51.8 million to $537.0
million in the fiscal year ended September 30, 2000 from $485.2 million for
fiscal 1999. This was largely due to an increase in handle of $585.8 million
to approximately $6.8 billion, and to a lesser extent, an increase in hold
percentage to 7.9% in the fiscal year ended September 30, 2000 from 7.8% for
fiscal 1999. The gross win per slot machine per day increased from $447 in
fiscal 1999 to $488 in fiscal 2000. Table game win increased by $12.9 million
to $164.0 million for the fiscal year ended September 30, 2000 from $151.1
million for fiscal 1999. This was primarily a result of an increase in table
game drop of $73.4 million (or 8.2%) while table game hold percentage was
virtually flat at approximately 17.0% in both the fiscal year ended September
30, 2000 and fiscal 1999.
In 2000, TCA received payments under the Relinquishment Agreement of
$41.0 million as compared to $59.6 million of management fees earned in 1999
under the former management agreement. We received payments from TCA of $19.8
million and $32.6 million in 2000 and 1999, respectively. We also earned
development fees of $3.8 million and $6.7 million in 2000 and 1999,
respectively.
Sun Resorts Limited Equity Ownership
Through June 16, 2000, we owned a 22.8% interest in Sun Resorts Limited.
Effective June 16, 2000, Sun Resorts Limited issued additional shares of stock
under a rights issue in which we did not participate, effectively reducing our
ownership interest to 20.4%. Sun Resorts Limited owns five beach resort hotels
in Mauritius and, until late 2000, owned one hotel in the Comoro Islands. In
November 2000, the property in the Comoro Islands was sold to an unaffiliated
party. Equity earnings from Sun Resorts Limited were $3.3 million, $3.4
million and $2.6 million in 2001, 2000 and 1999, respectively.
Kanuhura Equity Ownership
Effective August 1, 2001, we acquired a 25% interest in Kanuhura for $3.8
million. Kanuhura is a 110-room luxury hotel located on Kanuhura Island in the
Maldives, 600 miles southwest of the southern tip of India. During the five
months ended December 31, 2001, we recorded an equity loss in Kanuhura of $0.7
million.
Indian Ocean, Dubai and Maldives Management Contracts
We have long-term management contracts with Sun Resorts Limited's
Mauritian properties and Kanuhura, which expire in 2008 and 2026,
respectively. In addition, we manage the Royal Mirage Hotel, a 258-room beach
resort hotel on Jumeira Beach in Dubai, United Arab Emirates, which opened in
August 1999. The Dubai management contract expires in 2019. The hotels in
Mauritius, along with Kanuhura and the Royal Mirage, are collectively referred
to as the Management Properties.
2001 vs. 2000. In 2001, the Management Properties generated revenues of $124.8
million as compared to $133.7 million in 2000 and had net income of $22.3
million compared to $23.8 million in 2000. The 6.6% decrease in revenues was a
result of reduced revenues from Sun Resorts Limited. This was primarily due to
the devaluation of the Mauritian Rupee to the U.S. dollar. In addition, in
2000, Sun Resorts Limited earned revenues from its property in the Comoro
Islands, which was sold in November of that year. The decrease experienced at
Sun Resorts Limited was partially offset by revenues earned at Kanuhura for
the five months during the year ended December 31, 2001 following our
acquisition of an interest in the property. The decrease in net income of the
Management Properties was a result of a net loss incurred at Kanuhura,
partially offset by slight increases in earnings at Sun Resorts Limited and
Dubai properties. For Sun Resorts Limited, net income was higher than in 2000
primarily due to a reduction in interest costs that more than offset the
effect of the devaluation of the Mauritius Rupee.
In 2001, the occupancy and average daily room rate for Sun Resorts
Limited's Mauritian properties were 77.0% and $162, as compared to 83.1% and
$160 in 2000. At the Royal Mirage Hotel in Dubai, the occupancy and average
daily room rate in 2001 were 72.1% and $226, as compared to 81.7% and $202 in
31
2000. At Kanuhura, the occupancy and average daily room rate for the five
months ended December 31, 2001 were 44.2% and $224.
In 2001, we earned management fees from the Management Properties of $8.0
million as compared to $8.7 million in 2000, a decrease of 8.0%.
2000 vs. 1999. In 2000, the Management Properties generated revenues of $133.7
million as compared to $92.9 million in 1999 and earned net income of $23.8
million in 2000 compared to $12.4 million in 1999. The increased earnings were
largely a result of higher operating profits from Le Saint Geran, a high-end
luxury hotel in Mauritius, which operated for the full year in 2000, whereas
in 1999 the hotel was closed in April for renovations and did not reopen until
December. In addition, as noted above, the Royal Mirage Hotel in Dubai
commenced operations in August 1999 and thus operated for a full year in 2000
compared to four months in 1999.
In 2000, the occupancy and average daily room rate for Sun Resorts
Limited's Mauritian properties were 83.1% and $160, as compared to 82.3% and
$131 in 1999. At the Royal Mirage Hotel in Dubai, the occupancy and average
daily room rate in 2000 were 81.7% and $202 as compared to 67.7% and $185 for
its first four months of operation in 1999.
In 2000, we earned management fees from the Management Properties of $8.7
million as compared to $6.2 million in 1999. We also earned development fees
of $0.8 million in 1999 related to the renovation of Le Saint Geran.
Other Factors Affecting Earnings
2001 vs. 2000. In 2001, non-recurring items included a gain of $6.9 million
from the sale of luxury homesites at Ocean Club Estates on Paradise Island, as
compared to $76.4 million in 2000. During 2000, we completed the development
of the infrastructure for Ocean Club Estates, which includes 121 luxury
homesites situated around the newly renovated Ocean Club Golf Course. By the
end of 2000, we had sold 102 of the lots with an additional 9 lots sold during
2001. Other non-recurring items in 2001 included $6.9 million of pre-opening
expenses relating to our internet gaming operations as well as the opening of
the Ocean Club Golf Course in January 2001, as well as restructuring costs of
$5.7 million. Restructuring costs were comprised of severance costs related to
the termination of employees as a result of reduced occupancy levels at
Atlantis in the aftermath of the September 11 terrorist attacks. During 2000,
non-recurring expenses included a write-down of assets related to the Resorts
Atlantic City sale and the related Atlantic City option to their realizable
value. As a result of entering into the agreement to sell Resorts Atlantic
City at a purchase price less than its carrying value, we recorded a loss of
$229.2 million in the fourth quarter of 2000. Purchase termination costs of
$11.2 million in 2000 were related to the cancelation of our agreement to
acquire the Desert Inn from Starwood. These costs included $7.2 million paid
to Starwood. Also in 2000, we incurred $7.0 million of transaction costs in
connection with our self-tender offer in June 2000 and the termination of the
proposal by SIIL to acquire, in a merger transaction, all of our ordinary
shares that it did not already own. Pre-opening expenses in 2000 of $7.6
million related primarily to the expansion of our deluxe Ocean Club Resort and
the new Ocean Club Golf Course.
General corporate expenses were virtually flat for the year 2001 compared
to 2000. We incurred higher new project development costs of approximately
$2.0 million in 2001 as compared to 2000. We continuously explore new business
opportunities and all associated costs are written off to corporate expenses
as incurred. The increase in new project development costs was offset by
reduced payroll and related costs, as well as a reduction in information
technology costs allocated to our corporate segment in 2001.
Other segments in 2001 contributed $3.2 million to consolidated operating
income as compared to $1.7 million in 2000. In 2001, $3.1 million was received
from Kersaf pursuant to a long-term contract, as compared to $3.0 million in
2000. This contribution was fixed at $2.4 million in 1994 and increases at a
rate of 3% per annum and has been paid annually. Additional items included in
other segments during 2001 were not significant, however in 2000, the revenues
from Kersaf were partially offset by costs relating to undeveloped real estate
owned in Atlantic City, primarily real estate taxes.
In 2001, interest income was $7.5 million as compared to $4.2 million in
2000. This increase was primarily due to interest earned during the first four
months of 2001 on the proceeds of the Resorts Atlantic City sale. In addition,
in 2001, we earned interest on the $17.5 million promissory note issued to us
by an affiliate of Colony Capital LLC ("Colony") on April 25, 2001 in
connection with the Resorts Atlantic City sale. The promissory note and
accrued interest was repaid in full by Colony in March 2002.
32
Interest expense, net of capitalized interest, in 2001 was higher than
the previous year by $7.0 million (or 15.4%). Interest costs capitalized
during 2001 amounted to $1.1 million as compared to $11.1 million in 2000,
resulting in an increase of $10.0 million to net interest expense. During 2000
we added an additional 50 luxury rooms and suites at the Ocean Club and
completed the newly renovated Ocean Club Golf Course. This increase was
partially offset by a reduction in cash interest due to a reduction in the
weighted average amount of borrowings outstanding.
2000 vs. 1999. As described above, non-recurring items in 2000 included the
gain of $76.4 million from the sale of luxury homesites, a write-down of net
assets held for sale to their realizable value of $229.2 million, purchase
termination costs of $11.2 million, $7.0 million of transaction costs and
pre-opening expenses of $7.6 million. In 1999, non-recurring expenses included
$5.4 million of pre-opening expenses related to the opening of the renovation
completed at Resorts Atlantic City.
General corporate expenses increased by $6.4 million (or 37.9%) to $23.3
million in 2000 as compared to $16.9 million in 1999. The increase was largely
due to higher information technology costs incurred in connection with the
enhancement of certain computer software programs and improving the overall
structure of computer systems throughout the company. Also contributing to the
increase in corporate expenses, to a lesser extent, were new project costs
incurred as we continue to research the possibility of new investment and/or
development opportunities. Additionally, corporate expenses were affected by
slight increases in corporate marketing and public relations costs.
Other segments in 2000 contributed $1.7 million to consolidated operating
income as compared to $2.3 million in 1999. In 2000, $3.0 million was received
from Kersaf related to the long-term contract discussed above. These revenues
were partially offset by costs relating to undeveloped real estate owned in
Atlantic City, primarily real estate taxes. In 1999, other segments included
$2.9 million received from Kersaf, a $1.0 million gain from the cancelation of
notes that were previously included in long-term debt and $0.6 million
received as a final installment on the 1996 sale of a management contract.
These amounts were partially offset by costs incurred with our Year 2000
information technology compliance program as well as real estate taxes.
In 2000, interest income was $4.2 million as compared to $12.7 million in
1999. In connection with the development of Mohegan Sun in 1996, we held
subordinated notes issued by the Mohegan Tribal Gaming Authority, for which
interest payments were satisfied by the issuance of additional notes. The
aggregate principal balance of these notes, including accrued interest, was
$94.1 million at December 31, 1999 at which time they were repaid in full.
Interest earned in 1999 on the subordinated notes amounted to $9.9 million.
Interest expense, net of capitalized interest, in 2000 was lower than the
previous year by $5.0 million. Interest costs capitalized during 2000 amounted
to $11.1 million as compared to $4.9 million in 1999.
Seasonality and Weather
Our business has historically been seasonal, with the largest number of
patrons visiting Atlantis, our largest resort, in the first quarter of the
year, the prime tourist season. Accordingly, our revenues and operating
profits have historically been higher during the first calendar quarter than
in successive quarters. Higher revenues and earnings are typically realized
from the Mauritius properties during the fourth quarter of the year and from
Mohegan Sun during the middle third of the year.
During the third and fourth quarter of 1999, our Bahamian operations were
negatively impacted by the effects of Hurricane Floyd in September 1999. The
property sustained approximately $45.0 million of property damage, for which
remedial work was completed by year-end 1999, and experienced a number of
customer cancelations. We were fully insured for property loss and business
interruption. We expect to remain fully insured against property and business
interruption damage resulting from storms. However, as a result of Hurricane
Floyd, as well as substantial losses experienced by the overall insurance
industry throughout the past year, effective July 1, 2000, we incurred
substantial increases in our insurance premiums paid. In November 2001,
Hurricane Michelle, a category one hurricane, moved through The Bahamas.
Although there was no disruption in our operations caused by the storm, our
properties suffered approximately $25.0 million in damage that was also
significantly covered by our insurance policies.
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Liquidity, Capital Resources and Capital Spending
At December 31, 2001, our current liabilities exceeded current assets by
$40.1 million. During 2001, we completed the sale of Resorts Atlantic City
resulting in a significant decrease in current assets as the net assets held
for sale were disposed of in their entirety. As described below, the cash
proceeds received were used to pay down our long-term debt. At December 31,
2001, cash and cash equivalents were $30.5 million. During the year, we
generated $99.3 million in cash flow from operations.
Sale of Resorts Atlantic City
On April 25, 2001, we completed the sale of Resorts Atlantic City and
certain related assets to Colony for a purchase price of approximately $144.0
million, including accrued interest. The proceeds received from Colony
consisted of approximately $127.0 million in cash and a $17.5 million
promissory note. The cash proceeds were used to repay borrowings outstanding
under our revolving credit facility and permanently reduce the size of the
facility. These proceeds were offset by approximately $6.0 million in costs
paid by us after closing, which included employee termination costs and legal
fees.
Pursuant to the terms of the Resorts Atlantic City sale, we granted
Colony a two-year option to acquire certain undeveloped real estate that we
own adjacent to Resorts Atlantic City, for a purchase price of $40.0 million,
which option can be extended for an additional two years under certain
circumstances. Effective April 25, 2001, the closing date of the Resorts
Atlantic City sale, Colony leases from us certain of the property included in
the Atlantic City option for $100,000 per month.
In March 2002, we received approximately $19.0 million from Colony as
payment in full of the promissory note and all outstanding accrued interest.
Issuance of 8-7/8% Senior Subordinated Notes
On August 14, 2001, we issued the 8-7/8% senior subordinated notes for
$200.0 million, which resulted in net proceeds of $194.0 million. Those notes
are unsecured obligations and are unconditionally guaranteed by all of our
wholly-owned subsidiaries. All of the proceeds received from the issuance of
the 8-7/8% senior subordinated notes were used to further repay amounts
outstanding under our revolving credit facility. Interest on the 8-7/8% senior
subordinated notes is payable semi-annually.
On May 20, 2002, we issued additional 8-7/8% senior subordinated notes
(which are referred to as the Old Notes) for $200.0 million, which resulted in
net proceeds of $201.5 million. We used the proceeds from that offering to
consummate the tender offer and redemption discussed below.
Tender Offer, Consent Solicitation and Redemption
On May 8, 2002, we commenced a cash tender offer to purchase any and all
of our outstanding 9% senior subordinated notes. The tender offer was made
pursuant to an Offer to Purchase and Consent Solicitation Statement (the
"Statement") and a related Letter of Transmittal and Consent, dated May 8,
2002. The tender offer expired at midnight, New York City time, on June 5,
2002. In conjunction with the tender offer, we solicited consents to proposed
amendments to the indenture governing the 9% senior subordinated notes. The
proposed amendments eliminated substantially all of the restrictive covenants
and certain events of default from the indenture governing the notes. We and
the trustee executed a supplemental indenture on May 21, 2002 effectuating the
proposed amendments. At the expiration time, a total of $177,493,000 of the
outstanding $200,000,000 aggregate principal amount of the Notes were tendered
and accepted for purchase in the tender offer.
On June 21, 2002 we redeemed, in accordance with the terms of the
indenture governing the notes, all notes that remained outstanding at the
time, at the applicable redemption price of $1,045 per $1,000 of principal
amount thereof, plus interest accrued to the redemption date.
Revolving Credit Facility
In November 2001, we entered into an amended revolving credit facility
with a syndicate of banks. The borrowings then outstanding under our previous
revolving credit facility were paid in full. Under the revolving credit
facility, as amended, the maximum amount of borrowings that may be outstanding
is $300.0 million. An additional $50.0 million of borrowings may be available
under certain circumstances. See "Summary--Recent Developments--Revolving
Credit Facility."
Loans under the revolving credit facility bear interest at (i) the higher
of (a) the administrative agent's base rate or (b) the federal funds rate plus
one half of one percent, in either case plus an additional 0.25% to 1.75%
based on a debt to earnings ratio during the period, which we refer to as the
debt ratio or (ii) the LIBO Rate (as defined) plus 1.25% to 2.75% based on the
debt ratio. For loans based on the LIBO Rate,
34
interest is payable on the last day of each applicable interest period, or the
date of any payment or prepayment of such loans. For loans based on the
Alternate Base Rate (as defined), interest is payable quarterly. Loans under
the revolving credit facility may be prepaid and reborrowed at any time and
are due in full on November 8, 2006.
The amount of borrowings outstanding as of December 31, 2001 on the
revolving credit facility was $24.0 million. As of April 30, 2002, this amount
has been repaid in full.
Shelf Registration
On May 23, 2002, we filed a universal shelf registration statement with
the SEC. The universal shelf registration statement permits us, from time to
time, to issue various types of securities, including various types of debt
securities, ordinary shares, preference shares and warrants. The universal
shelf registration statement replaces our previously filed shelf registration
statement which related only to debt securities, and pursuant to which, in
December 1997 we issued $100.0 million of 8-5/8% senior subordinated notes.
Stock Option Repricing
We adopted stock option plans for our employees, officers and directors
in 1995, in 1997, and in 2000 (collectively, the "Plans") that provide for the
issuance of options to acquire an aggregate of 7,500,000 of our ordinary
shares. As of April 30, 2002 nearly all of these options had been granted at
exercise prices ranging from $11.69 to $44.63. As of December 31, 2001,
options to acquire 5,742,000 ordinary shares were outstanding, of which
2,965,000 were exercisable as of that date.
We are currently evaluating our compensation policies and plans, and
intend to modify existing plans and/or adopt new plans, including adopting a
new stock option plan and granting stock options pursuant thereto, as we deem
necessary and appropriate to retain and motivate management.
On May 7, 2002, our board of directors resolved, under certain
conditions, to make available to employees and directors holding options with
an exercise price higher than $32.00 per share, an offer to surrender all or
some of the options granted to them under the Plans. In exchange, such
employees and directors would have the possibility, under certain conditions,
to be granted new options giving the right to subscribe for 75% of the number
of shares as the surrendered options. The grant date for the new options would
be no sooner than six months and one day after the date of cancelation of the
options. The exercise price for the new options would be the fair market value
of the ordinary shares on the new grant date subject to the conditions set
forth in the Schedule TO documents filed with the Securities and Exchange
Commission on May 27, 2002, the commencement date of the offer period. The
exchange program is voluntary on the part of the option holders and is subject
to a number of conditions set forth in the Schedule TO documents. Accordingly,
there can be no assurance that the exchange program will be completed or that
holders will elect to exchange their options under the program. There are a
total of approximately 1.2 million options that are eligible for cancelation
under the exchange program. The offer to option holders under the exchange
program expired at 12:00 midnight Eastern Standard Time on June 25, 2002. The
eligible options that were properly submitted for exchange were accepted and
canceled effective June 26, 2002.
Other Sources and Uses of Funds
During 2001, we completed a major maintenance capital expenditure program
of approximately $25.0 million to complete renovations at Atlantis. This
included the renovation of approximately 400 rooms in the Coral Towers,
including improvements to certain public spaces, as well as additional costs
incurred for the Beach Tower renovations completed in 2000. Improvements to
public spaces included the construction of the Atlantis Showroom and Sports
Center. Other capital expenditures during 2001 included $16.4 million of
operating maintenance expenditures, $7.0 million to complete the newly
renovated Ocean Club Golf Course and other miscellaneous projects. Capital
expenditures for 2002 are expected to be approximately $26.0 million, the
majority of which relates to operating maintenance capital expenditures.
In connection with the Majority Shareholder Reorganization described
under "Major Shareholders and Related Party Transactions," Kersaf agreed to
pay us $15.5 million. This was settled by a one-time cash payment of $3.5
million and the issuance of a five-year, $12.0 million note, bearing interest
at 9% per annum. In December 2001, the principal amount of the note and
accrued interest thereon was paid in full.
35
Effective August 1, 2001, we acquired a 25% interest in Kanuhura for $3.8
million. During the second half of 2001, we advanced $3.3 million to Kanuhura
to fund their operations.
During the second half of 2000, we completed a maintenance capital
expenditure program of approximately $20.0 million at Atlantis' Beach Tower.
This program included the renovation of all of the Beach Tower's 423 rooms and
improvements to certain public spaces.
During 2000, we also completed the redevelopment of the Ocean Club Golf
Course, including a new clubhouse, and developed the infrastructure to support
the Ocean Club Estates. Also during 2000, we completed an addition to the
Ocean Club. The addition comprised 50 luxury rooms, including ten deluxe
suites, as well as a new beachfront restaurant and significant enhancements to
the existing pool and garden areas. The cost of developing the golf course,
the infrastructure at Ocean Club Estates and the addition to the Ocean Club
was approximately $113.8 million.
In June 2000, we purchased 5,000,000 of our ordinary shares at $24 per
share pursuant to our self-tender offer for an aggregate purchase price of
$120.0 million. The self-tender offer was financed with borrowings under our
revolving credit facility.
We believe that available cash on hand, combined with funds generated
from operations, funds available under the revolving credit facility and the
net proceeds of this offering will be sufficient to finance our cash needs
over the next twelve months.
Future Commitments and Funding Sources
At December 31, 2001, our material contractual obligations, with initial
or remaining terms in excess of one year, were as follows (in thousands)(a):
Contractual Cash Obligation Total 2002 2003 2004 2005 2006 Thereafter
- --------------------------- ----- ----- ----- ----- ----- ----- ----------
Senior subordinated notes(a)............... $500,000 $-- $-- $-- $-- $-- $500,000
Revolving Credit Facility(a)............... 24,000 -- -- -- -- 24,000 --
Operating leases........................... 12,232 4,625 4,340 1,532 670 670 395
Capital leases............................. 576 261 157 152 6 -- --
Total contractual cash obligations......... $536,808 $4,886 $4,497 $1,684 $676 $24,670 $500,395
- ------------------
(a) See Note 9 of the notes to our consolidated financial statements included
herein and "Description of Other Indebtedness" for a further description
of our debt commitments.
Other Matters
Critical Accounting Policies
Our critical accounting policies are those that we believe require our
most subjective or complex judgments as a result of the need to make estimates
about the effect of matters that are inherently uncertain. We prepare our
consolidated financial statements in conformity with accounting principles
generally accepted in the United States. Certain of our accounting policies,
including the estimated lives assigned to our assets, the determination of bad
debt, asset impairment, the calculation of our income tax liabilities,
valuation allowance on deferred tax assets and estimation of contingencies and
other liabilities and inventory reserves, require that we apply significant
judgment in defining the appropriate assumptions for calculating financial
estimates. We periodically assess the potential liabilities related to any
lawsuits or claims brought against us. While it is typically very difficult to
determine the timing and ultimate outcome of these actions, we use our best
judgment to determine if it is probable that we will incur an expense related
to the settlement or final adjudication of such matters and whether a
reasonable estimation of such probable loss, if any, can
36
be made. There can be no assurance that actual results will not differ from
our estimations. To provide an understanding of the methodology we apply, our
significant accounting policies are discussed where appropriate and in the
notes to our consolidated financial statements.
Market Risks
Our major market risk exposure is interest rate risk associated with our
bank debt and interest rate swaps on a portion of our fixed rate debt. We
attempt to limit our exposure to interest rate risk by managing the mix of
fixed and floating rate debt, and by entering into variable interest rate swap
agreements to hedge a portion of our fixed rate debt. These interest rate swap
agreements are entered into with a group of financial institutions with
investment grade credit ratings, thereby minimizing the risk of credit loss.
In August and December 2001, we entered into fixed-to-variable rate swap
agreements designated as fair value hedges of our 8-7/8% senior subordinated
notes due 2011. As of December 31, 2001, the aggregate notional amount of the
swap agreements was $200.0 million and they mature in August 2011 concurrent
with the 8-7/8% senior subordinated notes. Under the terms of the swap
agreements, we make payments based on specific spreads over six-month LIBOR,
and receive payments equal to the interest payments due on the notes. The
spreads in excess of six-month LIBOR are 3.02% for $150.0 million notional
amount, 2.95% for $25.0 million notional amount and 2.905% for the remaining
$25 million notional amount. As of December 31, 2001, the weighted average
variable rate on the swap agreements was 6.12%. Giving effect to these swap
agreements, our fixed and floating rate debt as of December 31, 2001
represented approximately 57% and 43%, respectively, of total debt.
We prepare our financial statements in U.S. dollars. Our most significant
non-U.S. operations are in The Bahamas. Due to current governmental policies
in The Bahamas that equate one Bahamian dollar to one United States dollar and
to our limited operations in other jurisdictions outside the United States, we
do not have material market risk exposures relative to changes in foreign
exchange rates.
Internet Gaming
During the second half of 2001, we operated our internet gaming site on a
test basis without live wagering to determine the viability of the business
and the effectiveness of our systems in maintaining compliance with all
applicable laws. In September 2001, we were awarded one of the first three
internet gaming licenses granted by the government of the Isle of Man.
Effective January 2002, we commenced live gaming operations under
www.CasinoAtlantis.com, our internet gaming site. It is too soon to determine
what impact, if any, our internet gaming operations will have on our future
results of operations.
On February 15, 2002, we entered into an agreement with Station Casinos,
Inc. ("Station"), pursuant to which Station will purchase a 50% interest in
Kerzner Interactive, our internet gaming subsidiary. Each company will have
equal board representation and Kerzner Interactive will be the exclusive
vehicle for both Kerzner International and Station to pursue the internet
gaming business in certain jurisdictions. Currently, the purchase price is
estimated at $7.0 million, which is subject to change based on Kerzner
Interactive's results of operations between now and the closing of the
transaction. We expect the transaction to close by the third quarter of 2002.
The transaction is subject to a number of conditions, including regulatory
approvals.
Trading Cove New York
Through a wholly-owned subsidiary, we own 50% of Trading Cove New York
LLC ("TCNY"), a Delaware limited liability company. In March 2001, TCNY
entered into a development agreement with the Stockbridge-Munsee Band of
Mohican Indians (the "Stockbridge-Munsee Tribe") for the development of a
casino project (the "Project") in the Catskill region of the State of New
York. The development agreement was amended and restated in February 2002. The
Stockbridge-Munsee Tribe does not currently have reservation land in New York,
but is federally recognized and operates a casino on its reservation in
Wisconsin and has a land claim pending in the U.S. District Court for the
Northern District of New York against New York.
Pursuant to the development agreement, as amended, TCNY will provide
preliminary funding, certain financing and exclusive development services to
the Stockbridge-Munsee Tribe in conjunction with the Project. As compensation
for these services, TCNY will earn a fee of 5% of revenues, as defined in the
development agreement, beginning with the opening of the Project and
continuing for a period of twenty years. TCNY has secured land and/or options
on approximately 400 acres of property in the Town of Thompson, County of
Sullivan (the "County"), of which approximately 333 acres are currently
designated for the Project. In February 2002, the Stockbridge-Munsee Tribe
filed a "Land to Trust" Application with the U.S. Department of the Interior,
Bureau of Indian Affairs (the "BIA"), for the Project site properties. Should
the BIA approve the "Land to Trust" Application and the Stockbridge-Munsee
Tribe obtain other required approvals, the land could be taken into trust by
the Federal Government on behalf of the Stockbridge-Munsee Tribe for the
purpose of conducting Class III gaming.
In October 2001, New York enacted legislation authorizing up to three
Class III Native American casinos in the counties of Sullivan and Ulster and
three Native American casinos in western New York pursuant to Tribal State
Gaming Compacts to be entered into by New York and applicable Native American
tribes (Chapter 383 of the Laws of 2001).
37
In January 2002, a lawsuit was filed in the Supreme Court of the State of
New York by various plaintiffs against New York Governor George Pataki, the
State of New York and various other defendants alleging that Chapter 383 of
the Laws of 2001 violates the New York State Constitution. Motions to dismiss
the litigation were filed in April 2002 and are pending.
In January 2002, the Stockbridge-Munsee Tribe entered into an agreement
with the County pursuant to which the Stockbridge-Munsee Tribe will make
certain payments to the County to mitigate any potential impacts the Project
may have on the County and other local government subdivisions within the
County. The payments will not commence until after the opening of the Project.
The Project is contingent upon the receipt of numerous federal, state and
local approvals to be obtained by the Stockbridge-Munsee Tribe, including the
execution of a Class III Gaming Compact with New York, which approvals are
beyond the control of TCNY. A number of other groups are seeking Class III
Gaming Compacts. We can make no representation as to whether any of the
required approvals will be obtained by the Stockbridge-Munsee Tribe or whether
the Project will be completed.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as
amended, is effective for fiscal years beginning after June 15, 2000. SFAS 133
requires that every derivative instrument be recorded in the balance sheet as
either an asset or liability measured at its fair value. Changes in the
derivative's fair values will be recognized in income unless specific hedge
accounting criteria are met. We have adopted SFAS 133 as of January 1, 2001.
We utilize interest rate protection agreements to manage the impact of
interest rate changes on our long-term debt obligations. These agreements are
accounted for in accordance with SFAS 133. See Note 9 to our consolidated
financial statements herein for a description of our long-term debt and
related derivative financial instruments.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations"
("SFAS 141") and SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 requires all business combinations initiated after June 30,
2001 to be accounted for using the purchase method. SFAS 142 is effective for
fiscal years beginning after December 15, 2001, with respect to goodwill
recognized on an entity's balance sheet as of the beginning of that fiscal
year. Under SFAS 142 goodwill and certain other intangible assets with
indefinite lives will no longer be amortized, but rather tested at least
annually for impairment using a fair value based test. A loss resulting from
impairment of such goodwill should be recognized as the effect of a change in
accounting principle in the initial period of adopting SFAS 142. In subsequent
reporting periods, goodwill impairment losses are to be recognized on a
separate line item on the income statement as a component of income from
operations. As a result of the Resorts Atlantic City sale, all of the goodwill
previously amortized to expense was written off in its entirety in the fourth
quarter of 2000. Goodwill related to our investment in associated companies,
and included therein in the accompanying consolidated financial statements,
relates to our ownership interest in Sun Resorts Limited. We believe that such
goodwill is not impaired and therefore, this new pronouncement is not expected
to have a material impact on our consolidated financial statements.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). This pronouncement addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS 143
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. We believe the adoption of SFAS 143 will not have a material
impact on our consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), effective for
fiscal years beginning after December 15, 2001. For long-lived assets to be
held and used, SFAS 144 retains the existing requirements to (a) recognize an
38
impairment loss only if the carrying amount of a long-lived asset is not
recoverable from its undiscounted cash flows and (b) measure an impairment
loss as the difference between the carrying amount and the fair value of the
asset. SFAS 144 establishes one accounting model to be used for long-lived
assets to be disposed of by sale. The adoption of SFAS 144 did not have a
material effect on our consolidated financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS 145"). SFAS 145 rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt ("Statement 4"), and an
amendment of that Statement, FASB Statement No. 64, and Extinguishments of
Debt Made to Satisfy Sinking--Fund Requirements ("Statement 69"). SFAS 145
also rescinds FASB Statement No. 44, and amends FASB Statement No. 13. SFAS
145 also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings or describe their applicability under
changed conditions. The provisions of SFAS 145 related to the rescission of
Statement 4 shall be applied in fiscal years beginning after May 15, 2002. Any
gain or loss on extinguishment of debt that was classified as an extraordinary
item in prior periods presented that does not meet the criteria in APB Opinion
30 for classification as an extraordinary item shall be reclassified.
Under Statement 4, all gains and losses from extinguishment of debt were
required to be aggregated and, if material, classified as an extraordinary
item, net of related income tax effect. SFAS 145 eliminates Statement 4 and,
thus, the exception to applying APB Opinion 30 to all gains and losses related
to extinguishments of debt (other than extinguishments of debt to satisfy
sinking-fund requirements, the exception to application of Statement 4 noted
in Statement 64). As a result, gains and losses from extinguishment of debt
should be classified as extraordinary items only if they meet the criteria in
APB Opinion 30. Applying the provisions of APB Opinion 30 will distinguish
transactions that are part of an entity's recurring operations from those that
are unusual or infrequent or that meet the criteria for classification as an
extraordinary item.
We believe the adoption of SFAS 145 will require the extraordinary loss
on extinguishment of the 9% senior subordinated notes to be reclassified upon
adoption of SFAS 145.
Research and Development
We continually research and assess new development and/or investment
opportunities and management contracts throughout the world. Before pursuing
any new business, we consider our available capital, business trends and
alternative uses of our capital in determining the feasibility and timing of
proceeding with such new business.
The costs we incur on research and assessment of new business are not
significant and are written off in corporate expense as incurred.
Trends
Our Paradise Island operations continue to recover following a slowdown
in business as a result of the September 11 terrorist attacks. During the
first quarter of 2002, Atlantis experienced monthly sequential improvement in
revenue per available room. Revenue per available room declined by 17% and 8%
in January and February of 2002, compared to the same months in 2001,
respectively, but increased in March 2002 by 2% as compared to March 2001. For
the quarter ending March 31, 2002, revenue per available room declined by 6%
as compared to the same period of 2001. During the month of March, Atlantis
achieved record call volumes into its wholly-owned tour operator. Casino
volumes were also strong in the quarter. Table drop decreased in the quarter,
but the decrease was primarily due to the occurrence of the Michael Jordan
Celebrity Invitational in January 2001. In spite of reduced occupancy for the
first quarter of 2002 versus 2001, slot volumes were flat versus the same
period last year.
Despite these improvements, we are still operating below September 11
levels. Revenue per available room decreased by 12% in April 2002 as compared
to April 2001. The decline in revenue per available room for the month was
partially due to the timing of the Easter holiday which fell in March of 2002,
as opposed to April in the previous year. However, call volumes were up 18%
and net bookings increased by 22% as compared to April 2001, suggesting
continued improvements.
Management fees earned by us for the year 2001, related to the operations
at Sun Resorts Limited, amounted to $6.8 million. We anticipate that such fees
will be reduced by approximately 10% for the year 2002 due to the decline in
the Mauritian Rupee as compared to the U.S. dollar. This devaluation has
impacted us historically and management believes this trend will continue.
These fees will also be impacted negatively by the closure of Le Touessrok for
much of the year for major renovation.
Due to the recent proliferation of internet gaming, we anticipate that
there may be future competition affecting our gaming operations. We are unable
to predict whether, or to what extent, internet gaming in general will affect
our future results of operations.
We expect our insurance premiums to increase by approximately $6.0
million in 2002 as compared to 2001 and our deductibles to increase as well.
39
BUSINESS
Business Overview
We are a leading developer and operator of premier casinos, resorts and
luxury hotels. We focus our operations on two distinct businesses: destination
casino resorts and luxury resort hotels.
In our destination casino resort business, we own and operate the
Atlantis resort located on Paradise Island, The Bahamas. We believe that the
ocean-themed Atlantis, which features the world's largest open-air aquarium
and the largest hotel and casino in the Caribbean market, is a "one of a kind"
destination resort. We also developed and receive certain revenue from Mohegan
Sun in Uncasville, Connecticut, which we believe is one of the most profitable
casinos in the United States.
In our luxury resort hotel business, we operate eight beach resorts in
Mauritius, Dubai, the Maldives and The Bahamas.
Businesses
Destination Casino Resorts
Our destination casino resort business consists of large-scale, premier
destination resorts that we believe are "must see" properties. The existing
properties in this business are Atlantis and Mohegan Sun. These properties
feature distinctive themes, unique architectural designs and decors, and offer
a wide range of casino gaming, entertainment and other amenities. We believe
these properties maintain competitive advantages due to their scale, location,
design, variety of amenities and significant barriers to entry in the markets
in which they operate.
Atlantis
Our flagship destination casino resort is Atlantis, a 2,317-room
ocean-themed resort located on Paradise Island, The Bahamas. Atlantis consists
of three interconnected hotel towers that cater to multiple segments of the
resort and gaming markets. Based upon the myth of the lost continent of
Atlantis, the resort features:
o a 7-acre lagoon;
o a 34-acre marine environment that includes the world's largest
open-air aquarium, including over 100 species of marine life,
waterfalls, lagoons and adventure walks;
o "the Dig," an area through which visitors can walk surrounded by
sharks, numerous species of tropical fish, sea turtles, stingrays and
other marine life;
o a 100,000 square foot entertainment complex which includes the
largest casino in the Caribbean market, containing approximately
1,000 slot machines and 80 table games;
o 16 restaurants ranging from casual poolside to upscale formal dining;
o approximately 100,000 square feet of convention space;
o a sports center;
o over 30,000 square feet of high-end retail space;
o a 63-slip, full-service Marina at Atlantis, which generates among the
highest average docking rates in the Caribbean market and can
accommodate yachts up to 200 feet in length;
o several thrill waterslides, including the six-story Mayan Temple
Slide, which propels guests through an acrylic tube in a shark
infested tank; and
o a 25,000 square foot spa operated by Mandara, offering our customers
a wide variety of spa amenities.
We acquired the property in May 1994 for $125.0 million and redeveloped
the property into an ocean-themed destination resort through an initial
$140.0 million capital expenditure program. The property
40
achieved an average occupancy and average daily room rate of 85% and $122,
respectively, in 1995, a substantial increase from the 62% and $95,
respectively, achieved in 1993 under previous management. Seeking to
capitalize on the early success of Atlantis, we began construction of an
approximately $640.0 million expansion of the property in 1997. This major
expansion was completed in December 1998 and effectively doubled the size of
Atlantis. The 1998 expansion included a deluxe 1,200-room hotel, a new 100,000
square foot entertainment complex which includes a casino containing
approximately 1,000 slot machines and 80 table games, a new marina, and an
expansion of the ocean-themed environment. During 1999, we completed several
additional development projects at Atlantis, including the addition of 30,000
square feet of new retail and restaurant space, the conversion of a previously
existing 30,000 square foot casino space into a convention center and the
construction of a sports center, including an 18-hole Tom Fazio-designed
putting course and a tennis center. Atlantis achieved an average occupancy and
average daily room rate of 77% and $252, respectively, in 2001.
To add to our product mix at Atlantis, we developed Harborside at
Atlantis, a timeshare project adjacent to Atlantis, through a joint venture
with Starwood. The first phase of the project was completed in February 2001
and consisted of 82 two-bedroom units. We began selling the units in May 2000
and have sold approximately 46% of the units through March 31, 2002. As part
of the joint venture agreement, Starwood contributed cash and we contributed
land, based on the number of units to be developed. We are evaluating plans to
develop a second phase of timeshare development.
We currently own approximately 100 acres of land on Paradise Island
available for future development. Atlantis is a master-planned resort that
started with 1,147 rooms and has been expanded to its current size of 2,317
rooms with the development of the Royal Towers. In addition, we believe that
due in part to our having spent over $100.0 million in infrastructure
improvements on Paradise Island, we have the ability to add more than 2,000
new hotel rooms, as well as condominiums and additional timeshare units,
restaurants, retail space and other facilities.
We previously had plans for an additional 700-room Phase III hotel
project at Atlantis. However, we have postponed this project, and as a result,
annual tax incentives of approximately $3.0 million pursuant to our agreement
with the Bahamian government have been suspended. We are currently evaluating
plans to expand Phase III to a 1,000-room hotel expansion at Atlantis that
would cater primarily to the middle-market customer segment. This expansion is
contingent upon a number of factors, including demand for rooms at Atlantis
and reaching agreement with the Bahamian government regarding certain
development-related matters, including further improvements to some of the
island's infrastructure. In the event we begin construction of this or certain
other expansion projects, the suspended tax incentives will be prospectively
reinstated.
Paradise Island is easily accessible by air from the eastern United
States and has an extensive infrastructure. The majority of patrons at our
resorts on Paradise Island arrive through Nassau International Airport located
on New Providence Island. This large facility is served by several carriers
offering scheduled jet service from New York, Atlanta, Toronto, Miami and
other cities. Ground transportation is facilitated by two bridges linking
Paradise Island and New Providence Island.
Mohegan Sun
Owned by the Mohegan Tribe, Mohegan Sun currently features a 176,500
square foot Casino of the Earth, which incorporates an historical Native
American theme through unique architectural features and the use of natural
design elements such as timber, stone and water, and an approximate 119,000
square foot Casino of the Sky. Mohegan Sun is located approximately one-mile
from the interchange of Interstate 395 and Connecticut Route 2A in Uncasville,
Connecticut and is within 150 miles of approximately 22 million adults.
Mohegan Sun spent $40.0 million for infrastructure improvements providing
direct highway access to the property from Boston, Providence and New York.
Mohegan Sun is located on 240 acres and currently has approximately 6,200 slot
machines, 240 table games and 42 poker tables, and various food and beverage,
retail and entertainment venues.
We believe the Connecticut gaming market has been extremely strong.
Mohegan Sun's unique design and superior location have helped it to become one
of the most profitable casinos in the United States with gross slot revenues
of $164.8 million in the quarter ended March 31, 2002, an increase in gross
slot revenues of 21.8% over the same quarter in fiscal 2001. This exceeded the
State of Connecticut's reported gross slot win increase of 13.4% over the same
periods.
We developed Mohegan Sun and managed the property from its opening in
1996 until January 2000 through TCA, a partnership in which we own a 50%
interest. Since opening, gross revenues at the property
41
have grown to $858.0 million for the fiscal year ended September 30, 2001,
exceeding the gross revenues of each casino in Atlantic City. On January 1,
2000, TCA turned over management of the property to the Mohegan Tribe and TCA
now receives payments equal to 5% of gross revenues generated by the property
from January 2000 through December 2014, including the expansion described
below. Approximately half of such fees rank pari passu with the Mohegan
Tribe's senior debt and half rank pari passu with the Mohegan Tribe's
subordinated debt.
We are currently overseeing the completion of the approximate $1.0
billion expansion of Mohegan Sun. This expansion includes the Casino of the
Sky, a 10,000-seat arena, a 300-seat cabaret, a 130,000 square foot specialty
retail area and restaurants that opened in September 2001. The expansion also
includes a 100,000 square foot convention center and a 34-story, 1,200-room
hotel that opened with 734 rooms in April 2002. Mohegan Sun plans to open the
remaining rooms in phases through June 2002 and an additional 2,700 parking
spaces in June 2002.
Luxury Resort Hotel Business
Our luxury resort hotel business consists of a collection of premier
beach resort hotels that operate primarily in the five-star, deluxe-end of the
resort market. Located on what we believe to be some of the leading beach
locations in the world, these resort hotels are architecturally unique and
have been developed to blend into their surrounding environment. This business
consists of five properties on Mauritius, the Royal Mirage Hotel in Dubai, the
Kanuhura Resort & Spa in the Maldives and the Ocean Club on Paradise Island,
The Bahamas. We expect to leverage our existing management expertise and
business infrastructure and continue to grow this segment of our business in
the Caribbean, the Indian Ocean, The Bahamas, the Middle East and Southeast
Asia to obtain additional management contracts, which may also include
strategic equity investments.
Indian Ocean
In Mauritius, we manage and own interests in five beach resorts:
o the renovated 175-room Le Saint Geran Hotel;
o the 200-room Le Touessrok Hotel & Ile Aux Cerfs;
o the 248-room La Pirogue Hotel;
o the 333-room Le CoCo Beach; and
o the 238-room Sugar Beach Resort Hotel.
The properties cater primarily to luxury and development-relate tourists
in Europe and southern Africa. Le Saint Geran and Le Touessrok offer deluxe
accommodations and we believe that such properties are among the finest beach
resorts in the world. Le Saint Geran and Le Touessrok have recently been rated
as among the world's finest leisure hotels in Conde Nast Traveller magazine.
Le Saint Geran also was voted "Hotel of the Year 2002" by Tatler magazine in
the United Kingdom. La Pirogue, Le CoCo Beach and Sugar Beach primarily cater
to middle-market travelers.
Mauritius' tourist industry is mainly comprised of visitors from Great
Britain, Germany, France, Italy and South Africa. Scheduled air service to and
from Mauritius is provided through scheduled flights on numerous airlines
including Air France, British Airways, Cathay Pacific, Singapore Airlines, Air
India, Air Mauritius, Condor and South African Airlines.
In the Maldives, located off the southern tip of India, we manage the
Kanuhura Resort & Spa, a 110-room luxury resort located on Kanuhura Island. In
August 2001, we acquired approximately 25% of the equity of the Kanuhura
Resort & Spa for approximately $3.8 million.
We manage these resorts under long-term management contracts and receive
management fees based upon a percentage of the revenues and gross operating
profits of these properties. We continue to actively pursue new luxury resort
management opportunities in this region.
42
Middle East
We currently manage the Royal Mirage Hotel in Dubai in the Middle East, a
luxury 258-room hotel which opened in August 1999. Under the terms of the
management agreement, which expires in 2019, we receive management fees based
on a percentage of the revenues and gross operating profits of the property.
We are overseeing the expansion of the Royal Mirage Hotel, which will include
a new 175-room luxury hotel and a new 50-room high-end luxury hotel that we
expect to manage. The expansion is expected to be completed by the end of
2002.
The Ocean Club
We own and operate the Ocean Club, a high-end luxury resort hotel with
106 rooms and suites located on Paradise Island, The Bahamas. In October 2000,
we completed an addition to the Ocean Club that comprised 50 rooms, including
10 deluxe suites, a new beachfront restaurant operated by Jean-Georges
Vongerichten and significant enhancements to the existing pool and garden
areas. The Ocean Club also features a championship golf course (designed by
Tom Weiskopf) and a clubhouse with 121 luxury homesites set around the golf
course. As of March 31, 2002, we have closed on 111 of the 121 available
homesites and realized approximately $118.4 million in gross proceeds from
such sales.
Since more than doubling the number of rooms in October 2000, the Ocean
Club has maintained its occupancy levels and increased its average daily room
rate. The property achieved an average occupancy of 70.8% and an average daily
room rate of $865 for the three months ended March 31, 2002, compared to 73.3%
and $739 for the same period in 2001.
Competition
The resort and casino industries are highly competitive. Our destination
casino resorts compete with other destination resorts and casinos, including
land-based casinos, riverboat, dockside and cruise ship on-board casinos and
other forms of gaming as well as with other forms of entertainment. Our luxury
resort hotels compete with other resorts and hotels in markets in which we
conduct business. We believe the ability to compete effectively in these
industries is based on a number of factors, including the scope, quality,
location and accessibility of facilities, the effectiveness of marketing
efforts, customer service, the relative convenience of available
transportation, service and the quality and price of rooms, food and
beverages, convention facilities and entertainment.
Paradise Island
Our Paradise Island operations primarily compete with cruise ships and
other hotels and resorts, on Paradise Island, New Providence, Grand Bahama
Island and the neighboring Caribbean islands. We estimate that there are
approximately 8,500 hotel rooms on Paradise Island and New Providence
combined, of which approximately 4,000 are located on Paradise Island,
including 2,423 in hotels owned and operated by us. The Nassau Marriott, our
primary competitor in The Bahamas, is an 867-room resort and casino.
We also compete with The Resort and Casino at Bahamia (formerly the
Princess Casino and Hotel) and Our Lucaya, both located on Grand Bahama
Island, approximately 40 minutes by air from Paradise Island. The Resort and
Casino at Bahamia includes a 20,000 square foot casino, a 965-room hotel,
restaurants and other leisure facilities. Our Lucaya has 1,350 rooms and a new
35,000 square foot casino, that is not yet open.
Mohegan Sun
The Connecticut market is the fourth largest gaming market in the United
States, with approximately 22 million adults within 150 miles of Mohegan Sun.
Mohegan Sun and Foxwoods Resort and Casino at present are the only two casinos
in the Connecticut market. Foxwoods has approximately 6,600 slot machines and,
for the twelve months ended March 31, 2002, reported slot revenue of
approximately $796.4 million. The Oneida Nation operates a casino near
Syracuse, New York and other Native American tribes in the states of New York,
Rhode Island, Massachusetts and Connecticut are seeking approvals to establish
gaming operations which would further increase competition, particularly for
day-trip patrons. Mohegan Sun also competes with Atlantic City and several
small Native American gaming facilities throughout the northeastern United
States.
In Connecticut, under the tribal-state compacts between the State and
each of the Mohegan Tribe and the other Native American casino in the State,
Mohegan Sun is subject to a 25% gaming fee on slot revenues payable to the
State of Connecticut so long as the State does not issue any further licenses
for gaming operations with slot machines or other commercial casino games
(other than to a Native American tribe on Native American land). In March
2000, two additional Native American tribes in Connecticut, the Eastern
43
Pequots and the Paucatuck Eastern Pequots, received a proposed positive
recommendation by the Federal Bureau of Indian Affairs (the "BIA") to receive
federal recognition as tribes. The applications for federal recognition are
pending and the federal district court ordered the BIA to make a final
determination on federal recognition by early December 2001; however, the
court granted the BIA a six-month extension to make a final decision. If
either of the two tribes receives federal recognition, they could seek to
obtain trust land and approvals to conduct casino gaming in Connecticut. In
addition, two other Connecticut tribes have filed a letter of intent to
petition the BIA for federal recognition which are being actively considered.
Indian Ocean
In the Indian Ocean market, we primarily compete with other resorts on
the islands in which we operate as well as other locations offering vacations
to tourists from Europe, southern Africa and parts of Asia. Sun Resorts
Limited owns five major hotels in Mauritius. In the luxury end of the
Mauritian hotels market, Sun Resorts Limited owns two of the seven luxury
hotels and offers a total of 375 of the approximately 1,000 rooms in
Mauritius. Sun Resorts Limited faces more competition for the middle-market La
Pirogue, Sugar Beach and Le CoCo Beach hotels.
Maldives
Kanuhura, a five star resort, competes with other resorts on the Maldives
islands as well as other locations offering vacations to tourists from Europe,
Southern Africa, and parts of Asia. Kanuhura primarily competes with the four
other five star resorts in the Maldives. In this market, Kanuhura offers
approximately 23% of the 489 available rooms.
Dubai
The premium leisure market in Dubai is mainly centered on the exclusive
Jumeira Beach "golden mile," which currently is host to seven competing five
star hotels. Each hotel has its own theme and particular leisure market niche.
For example, the Royal Mirage Hotel focuses on the higher spending leisure
traveler aged 40-65 seeking tranquility, the 600-room Jumeira Beach Hotel
focuses on the family and group incentive market, while the 500-room Royal
Meridien focuses on the middle spending leisure holiday market. Royal Mirage's
258 rooms account for over 10% of the beach rooms and has a distinctive local
Arabian architecture and theme.
Sales and Marketing
Our marketing goal is to drive demand direct from the consumer through
high profile public relations, publications and special events promotions and
advertising. To support our operations in The Bahamas, we maintain an
inventory of rooms for distribution through our tour operator, PIV, Inc. For
the year ending December 31, 2001, PIV, Inc. generated tour operations
revenues of approximately $33.2 million as compared to $36.3 million for 2000.
Similarly, our operations in Mauritius and Dubai are supported through our own
European marketing offices. In addition, we channel distribution for all of
our operations through primary wholesalers in the travel agent community with
a favorable commission structure.
We spent approximately $20.0 million in 2001 on sales and marketing for
our operations in The Bahamas and expect to spend a similar amount in 2002.
Pursuant to the Heads of Agreement described below, we receive $4.0 million
per year from the Bahamian government toward the direct costs related to
certain marketing events, public relations activities and the production and
placement of advertisement in media through 2003.
Certain Matters Affecting Our Bahamian Operations
Casino License
Through a subsidiary, we are currently licensed to operate Atlantis under
the Bahamian Gaming Act. In accordance with Bahamian casino licensing
requirements, our subsidiary's casino license must be renewed annually by the
Bahamian gaming board. Other than an existing contingent obligation to grant
two casino licenses, the Bahamian government has agreed that it will grant no
new casino licenses with respect to gaming operations on Paradise Island or
New Providence Island until 2013.
44
Basic License Fee
Currently, the Bahamian Gaming Act provides for taxes on casino revenues
consisting of an annual basic license fee of $200,000.
Taxes and Fees
The following table summarizes, for the periods shown, the taxes and fees
paid or accrued by Kerzner International Bahamas Limited under the Gaming Act
and certain agreements with the Bahamian government:
Year Ended December 31,
-----------------------------------------------------
1999 2000 2001
------ ------ ------
Casino win fees and taxes..................... $ 9,631,000 $ 10,719,000 $ 10,749,000
Basic license and operating fees.............. 200,000 200,000 200,000
----------- ------------ ------------
Total......................................... $ 9,831,000 $ 10,919,000 $ 10,949,000
=========== ============ ============
Heads of Agreement
We have an agreement with the Bahamian government, which we refer to as
the Heads of Agreement, that governs our gaming taxes and fees in The Bahamas
and provides us with certain tax incentives to encourage us to further expand
Atlantis. Under this agreement, we currently pay an annual license fee of
$100,000 per thousand square feet of casino space, a minimum annual casino win
tax of $4.3 million on all gaming win up to $20.0 million and a 10% gaming tax
on all gaming win over $20.0 million. Subject to the condition described
below, the agreement also provides for tax incentives consisting of a $5.0
million reduction of annual casino license fees and a 50% credit against all
win tax on win over $20.0 million until 2009. This tax structure became
effective January 1, 1998.
In order to secure the tax incentives, we were obligated to begin
construction of at least 562 rooms on Paradise Island in place of Pirate's
Cove Beach Resort, a 562-room hotel on Paradise Island, which we demolished
during the fourth quarter of 1998. We had plans for an additional 700-room
Phase III hotel project at Atlantis which would have satisfied this condition.
However, considering our available development resources and alternative uses
of capital, we postponed this project. As a result, in June 2000, we were
notified by the Bahamian government that these additional incentives would not
be currently realized. Effective July 1, 2000, the casino win tax reverted
back to the structure in place prior to January 1, 1998 as follows: there is
no change in win tax on gaming win up to $20.0 million, however, we incur
12.5% win tax on gaming win between $20.0 million and $120.0 million, and a
10% win tax on gaming win in excess of $120.0 million. The $5.0 million annual
reduction of fees still applies, however, in lieu of the 50% credit on win tax
to be paid on gaming win over $20.0 million, we receive a 45% credit on win
tax to be paid on gaming win between $20.0 million and $120.0 million. The
suspended tax incentives will be prospectively reinstated if and when we meet
the expansion targets referenced in the agreement. We estimate that the effect
of these additional incentives when we had them in place was an approximate
$3.0 million decrease per year in gaming win tax.
The agreement also provides for a five-year joint marketing agreement
that expires in 2003, pursuant to which the Bahamian government agreed to
match our contribution, up to $4.0 million annually, toward the direct costs
related to staging certain marketing events, public relations activities and
the production and placement of advertisements in all media.
The Heads of Agreement also requires that SIIL control a majority of our
board of directors until June 30, 2004. As part of the restructuring of SIIL,
we entered into a governance agreement with the shareholders of SIIL that,
among other things, required us to submit to our shareholders an amendment to
our articles of association that would set the term of our existing directors
to expire at our annual general meeting in 2004. At our annual shareholders
meeting in September 2001, the amendment to our articles of association were
adopted and our existing directors were elected to terms expiring in 2004. We
believe that this amendment to our articles of association satisfies the terms
of the Heads of Agreement.
45
The Commonwealth of The Bahamas
The Commonwealth of The Bahamas had a population of approximately 300,000
in 2001. The Bahamas includes approximately 700 islands, 29 of which are
inhabited, and extends from east of the Florida coast to just north of Cuba
and Haiti. Over 60% of the population lives on New Providence Island, where
Nassau, the capital of The Bahamas, is located. The Bahamas first obtained
internal self-government in 1964 and became an independent nation within the
British Commonwealth in 1973. The first elections under universal adult
suffrage were held in November 1962. The former government was first elected
in 1992 and re-elected in March 1997, having succeeded a government that was
in power for over 20 years. Most recently, on May 2, 2002 general elections
were held and a new government elected, including a new Prime Minister and
Deputy Prime Minister. The official language is English.
The currency of The Bahamas has been tied to the U.S. dollar since 1970
with an official exchange rate of U.S. $1.00 equal to 1.00 Bahamian dollar.
The Ministry of Tourism spends over $60 million annually to promote The
Bahamas and in recent years the former government has made large investments
in the expansion of both Nassau Harbor and Nassau International Airport.
Certain Matters Affecting Mohegan Sun
Regulation
The Mohegan Tribe is a federally recognized Native American tribe whose
federal recognition became effective May 15, 1994. In May 1994, the Mohegan
Tribe and the State of Connecticut entered into a gaming compact to authorize
and regulate Class III gaming operations (slot machines and table games).
Under this tribal-state compact, Mohegan Sun is subject to a 25% gaming fee on
slot revenues payable to the State of Connecticut so long as the State does
not issue any further licenses for gaming operations with slot machines or
other commercial casino games (other than to a Native American tribe on Native
American land).
Each of the partners of TCA must be licensed by relevant tribal and state
authorities. Each of the partners of TCA has received a gaming registration
from the Commissioner of Revenue Services of the State of Connecticut which is
subject to annual renewal.
Priority Payments
Pursuant to subcontracts for management services, organization and
administrative services and marketing services provided to TCA, prior to
January 1, 2000 we received certain priority payments from TCA. Each of these
priority payments was paid from TCA's management fees prior to the pro rata
distribution to TCA's partners of TCA's profits. Furthermore, for seven years
beginning January 1, 2000, TCA pays us the first $5.0 million of the profits
it receives each year pursuant to the relinquishment agreement as a priority
payment prior to making pro rata distributions to its partners.
Waiver of Sovereign Immunity
Pursuant to the relinquishment agreement, the Mohegan Tribe has waived
sovereign immunity for the purpose of permitting, compelling or enforcing
arbitration and has agreed to be sued by TCA in any court of competent
jurisdiction for the purpose of compelling arbitration or enforcing any
arbitration or judicial award arising out of TCA's agreement with the Mohegan
Tribe. The parties have agreed that all disputes and claims arising out of
TCA's agreement with the Mohegan Tribe or the Mohegan Tribe's gaming ordinance
will be submitted to binding arbitration, which shall be the sole remedy of
the parties, and that punitive damages may not be awarded to either party by
any arbitrator. The Mohegan Tribe's waiver of sovereign immunity is limited to
enforcement of monetary damages from undistributed or future net revenues of
Mohegan Sun (or, under certain conditions, net revenues of other gaming
operations of the Mohegan Tribe). Funds earned and paid to the Mohegan Tribe
as the Mohegan Tribe's share of net revenues prior to any judgment or award
are not subject to the waiver and would not be available for levy pursuant to
any judgment or award.
New Jersey Gaming Regulation
As a result of the Resorts Atlantic City sale, effective April 25, 2001,
we no longer operate a casino in Atlantic City. However, as the lessor of real
estate in Atlantic City to Colony, KINA is required to maintain a casino
service industry license.
46
Environmental Matters
We are subject to federal, state and local laws and regulations that:
o govern activities or operations that may have adverse environmental
effects, such as discharges to air and water as well as handling and
disposal practices for solid and hazardous wastes, and
o impose liability for the costs of cleaning up, and certain damages
resulting from, past spills, disposals or other releases of hazardous
substances.
From time to time, our operations have resulted or may result in
noncompliance with applicable environmental laws. However, past noncompliance
has not and we believe that any future noncompliance would not, have a
material adverse effect on our financial conditions or results of operations.
The Mohegan Sun site was formerly occupied by UNC, a naval products
manufacturer of, among other things, nuclear reactor fuel components. UNC's
facility was officially decommissioned on June 8, 1994, when the Nuclear
Regulatory Commission confirmed that all licensable quantities of special
nuclear material had been removed from the Mohegan Sun site and that any
residual special nuclear material contamination was remediated in accordance
with the Nuclear Regulatory Commission-approved decommissioning plan.
From 1991 through 1993, UNC commissioned an environmental consultant to
perform a series of environmental assessments on the Mohegan Sun site,
including extensive soil investigations and groundwater monitoring. The
environmental assessments detected, among other things, volatile organic
chemicals, heavy metals and fuel hydrocarbons in the soil and groundwater.
Extensive remediation of contaminated soils and additional investigations were
then completed. Although the Mohegan Sun site currently meets applicable
remediation requirements, no assurance can be given that the various
environmental assessments with respect to the Mohegan Sun site revealed all
existing environmental conditions, that any prior owners or tenants of the
Mohegan Sun site did not create any material environmental condition not known
to the Mohegan Tribal Gaming Authority, that future laws, ordinances or
regulations will not impose any material environmental liability or that a
material environmental condition does not otherwise exist on Mohegan Sun.
Future remediation may be necessary if excavation and construction exposes
contaminated soil, which has otherwise been deemed isolated and not subject to
cleanup requirements. Such remediation could adversely impact the results of
operations of Mohegan Sun and therefore our results of operations and
financial conditions.
In addition, the Environmental Protection Agency has named a predecessor
to KINA as a potentially responsible party, or a PRP, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, or CERCLA, for
the cleanup of contamination resulting from past disposals of hazardous waste
at the Bay Drum site in Florida, to which the predecessor, among others, sent
waste in the past. CERCLA requires PRPs to pay for cleanup of sites at which
there has been a release or threatened release of hazardous substances. Courts
have interpreted CERCLA to impose strict, joint and several liability upon all
persons liable for cleanup costs. As a practical matter, however, at sites
where there are multiple PRPs, the costs of cleanup typically are allocated
among the parties according to a volumetric or other standard. Because we have
only limited information at this time regarding this site and the wastes sent
to it by the predecessor, we are unable to determine the extent of our
potential liability, if any, at this site.
Property, Plant and Equipment
Our headquarters and registered office are located at Executive Offices,
Coral Towers, Paradise Island, The Bahamas.
We own or lease properties in The Bahamas, the United States, the United
Kingdom and France. Set forth below is a table listing our principal
properties as of December 31, 2001:
Owned Extent
Name and or Principal Utilized
Location Leased Use Size Capacity Year 2001
-------- ------- --------- ---- -------- ---------
Atlantis........................... Owned Hotel/Casino 117 acres 2,317 77.0%
Paradise Island, Rooms Occupancy
The Bahamas
Ocean Club......................... Owned Hotel/Casino 35 acres 106 Rooms 57.0%
Paradise Island, Occupancy
The Bahamas
47
Ocean Club Golf.................... Owned Golf Course 209 acres N/A N/A
Paradise Island,
The Bahamas
Undeveloped Land................... Owned Future Development 100 acres N/A N/A
Paradise Island,
The Bahamas
Undeveloped Land................... Owned (1) 23 acres N/A N/A
Atlantic City,
New Jersey
Kerzner International Leased Administrative and 58,000 400 100%
Resorts Inc........................ Marketing Office and square feet Employees
Ft. Lauderdale, Travel Agency
Florida
- -----------------
(1) Approximately 13 acres are included in the option we granted to Colony in
connection with the sale of Resorts Atlantic City, and we lease this
property to Colony for $100,000 per month. All other land that we own in
Atlantic City is available for sale.
In addition to the properties listed above, we lease several small
administration offices throughout various locations in the United States that
we use for marketing purposes. The number of employees at each of these
offices is less than ten. We lease a small administrative office in
Oxfordshire, United Kingdom, as well as two offices in Paris, France, which
Kerzner International Vacances SA, our wholly owned European tour operator
subsidiary, uses as a travel agency and a marketing office. We also lease an
office outside of Frankfurt, Germany, which we use as a marketing office.
Employees
Set forth below is a table showing the approximate total number of
employees at our properties worldwide by geographic location for the periods
indicated.
As of December 31, As of March 31,
2002
-------------------------------------------------------------------------
1999 2000 2001
---- ---- ----
The Bahamas......................... 5,700 5,800 5,800 5,800
Atlantic City....................... 3,300 3,300 --(1) --
Other............................... 500 500 400 400
- -----------------
(1) Reflects the sale of Resorts Atlantic City on April 25, 2001.
We do not employ a significant number of temporary workers.
In The Bahamas, as of March 31, 2002, approximately 3,800 employees are
represented by The Bahamas Catering and Allied Workers Union. Kerzner
International Bahamas Limited participates in The Bahamas Hotel Employers
Association, which represents resort operators in the Paradise Island-New
Providence Island area. The association's existing contract with the union
expires January 1, 2003. Labor relations in The Bahamas have been unstable at
times with occasional work stoppages occurring, not only at Atlantis, but also
at publicly run entities such as the Bahamian Electric Corporation and Bahamas
Telephone Company. As the country's largest private employer, we are sometimes
the target of labor disputes.
48
Legal Proceedings
From time to time, we are a party to litigation which arises in the
ordinary course of business. We are not currently a party to any litigation
that we believe would be likely to have a material adverse effect on us.
In October 2001, we commenced a lawsuit in the Supreme Court of the State
of New York against Kersaf and certain of its subsidiaries for breach of
contract, breach of confidentiality, tortious interference with prospective
business relations and unjust enrichment. The gravamen of the complaint is
that, shortly after entering into the settlements described under "Major
Shareholders and Related Party Transactions," Kersaf breached them by engaging
in business in areas of the world from which it was contractually barred from
doing business and that Kersaf misused confidential information to which it
had access to interfere with and attempt to usurp business opportunities that
rightly belonged to us. In the lawsuit, we seek compensatory damages in an
amount to be determined, punitive damages in an amount not less than $50
million and a permanent injunction barring Kersaf from violating its
agreements with us in the future. Kersaf has since moved to dismiss a portion
of the action for lack of jurisdiction and the entire action on the ground
that the New York court is an inconvenient forum in which to hear the parties'
dispute. The motion was scheduled to be heard by the court in June 2002.
A suit was brought against Kerzner International and Kerzner
International Bahamas Limited for wrongful death arising from an August 8,
2000 snorkeling accident which occurred in the Paradise Lagoon at Atlantis and
resulted in the death of a fourteen-year old boy. We have asserted third-party
claims against the general contractor, sub-contractor and the design
professional that were involved in the Phase I construction project. The three
third-party defendants have filed procedural motions to dismiss challenging
venue and lack of personal jurisdiction that remain pending. Trial is
scheduled to begin in December 2002. We maintain general liability insurance
coverage for ourselves and our subsidiaries covering our Atlantis operations.
49
MANAGEMENT
Directors and Senior Management
Our current directors are:
Country of Director
Name Citizenship Since
- ---- ---------- ---------
Solomon Kerzner.......................... South Africa 1993
Peter N. Buckley......................... United Kingdom 1994
Howard S. Marks.......................... United States 1994
Eric B. Siegel........................... United States 1994
Heinrich von Rantzau..................... Germany 2001
Our current executive officers are:
Executive
Officer
Name Title Age Since
- ---- ----- ----- ---------
Solomon Kerzner..................... Chairman and Chief Executive Officer 66 1993
Howard B. Kerzner................... President 38 1995
Charles D. Adamo.................... Executive Vice President-Corporate Development 41 1995
John R. Allison..................... Executive Vice President-Chief Financial Officer 56 1994
The executive officers serve indefinitely at the pleasure of the board of
directors.
Solomon Kerzner, Chairman and Chief Executive Officer: Mr. Kerzner has
been our Chairman and Chief Executive Officer since October 1993 and from
October 1993 to June 1996 he served as our President. Mr. Kerzner is the
Chairman of World Leisure Group Limited, a British Virgin Islands corporation,
which owns approximately 16.2% of our shares and has the right to vote an
additional 10.3% of our shares. Mr. Kerzner is one of the visionary leaders of
the resort and gaming industries. Prior to founding Kerzner International, Mr.
Kerzner pioneered the concept of an entertainment and gaming destination
resort designed and managed to appeal to multiple market segments by
developing Sun City, located near Johannesburg, South Africa. Sun City
features four hotels with approximately 1,300 rooms, an entertainment center
that includes a 6,000-seat indoor superbowl, a 46-acre man-made lake for
watersports and approximately 55,000 square feet of gaming space. In 1992, Sun
City was expanded to include The Lost City, a themed resort which features a
350-room luxury hotel and a man-made jungle in which over one million trees
were transplanted. Mr. Kerzner has been responsible for the development of 21
hotels and founded both of southern Africa's largest hotel groups, Southern
Sun Hotels and Sun International South Africa. We do not have any interest in
any of the southern African properties developed by Mr. Kerzner. Mr. Kerzner
is the father of Mr. Howard B. Kerzner.
Howard B. Kerzner, President: Mr. Kerzner joined Kerzner International in
May 1995 as Executive Vice President-Corporate Development and has been
President since June 1996. Prior to that time, he was Director- Corporate
Development of SIIL from September 1992. Previously, Mr. Kerzner was an
Associate of Lazard Freres & Co. LLC from September 1991. Prior to that Mr.
Kerzner worked for the First Boston Corporation. Mr. Kerzner is the son of Mr.
Solomon Kerzner.
Charles D. Adamo, Executive Vice President-Corporate Development &
General Counsel: Mr. Adamo joined Kerzner International in May 1995 as General
Counsel and has been responsible for corporate development since January 1997.
Prior to that time, he was Group Legal Advisor of SIIL from September 1994.
Previously, Mr. Adamo was engaged in the practice of law at the firm of
Cravath, Swaine & Moore in New York from 1986. Mr. Adamo is admitted to the
bar in the State of New York.
John R. Allison, Executive Vice President-Chief Financial Officer: Mr.
Allison joined Kerzner International in May 1995 as Chief Financial Officer.
Mr. Allison joined SIIL in March 1994 as Group Financial Director. From
December 1987 until February 1994, Mr. Allison was Financial Director of Sun
50
International Inc., a resort and management holding company with interests in
approximately 27 hotels in southern Africa. Prior to that time, he was the
Group Financial Director of Kimberly-Clark (South Africa) Limited for four
years. He is a fellow of the Institute of Chartered Accountants in England and
Wales and a member of the South African Institute of Chartered Accountants.
Peter N. Buckley, Director: Mr. Buckley has been a Director since April
1994. Mr. Buckley is Chairman and Chief Executive Officer of Caledonia, which
owns approximately 21.0% of our shares and has the right to vote an additional
10.3% of our shares. In 1994 he was appointed Chairman of Caledonia, having
been Deputy Chairman and Chief Executive since 1987. He is also Chairman of
English & Scottish Investors PLC and Bristow Helicopter Group Limited. He is a
non-executive Director of Close Brothers Group plc, Offshore Logistics, Inc.
(a NASDAQ listed company) and The Telegraph PLC.
Howard S. Marks, Director: Mr. Marks has been a Director since April
1994. Mr. Marks is Chairman of Oaktree Capital Management, LLC, which manages
funds in excess of $20.0 billion for institutional investors. Previously, Mr.
Marks was employed by The TCW Group, Inc. where he became Chief Investment
Officer for Domestic Fixed Income and President of its largest affiliate, TCW
Asset Management Company.
Eric B. Siegel, Director: Mr. Siegel has been a Director since April
1994. Mr. Siegel is a retired limited partner of Apollo Advisors, L.P. Mr.
Siegel is also a Director and member of the executive committee of El Paso
Electric Company, a publicly traded utility company.
Heinrich von Rantzau, Director: Mr. von Rantzau has been a director since
July 2001. Mr. von Rantzau is a principal of Cement Merchants SA and an
executive of Deutsche Afrika-Linien GmbH, Reederei John T. Essberger and VORA
Schiffahrts-und Beteiligungsgesellschaft gmbH. Mr. von Rantzau is a board
member of The United Kingdom Mutual Steam Ship Assurance Association (Bermuda)
Limited and a member of the Trade Advisory Board of Germanischer Lloyd,
Lloyd's Register of Shipping and German National Committee.
Board Practices
Pursuant to our Articles of Association, as amended, our maximum number
of directors is fixed at five. At our September 24, 2001 annual meeting of
shareholders, our existing directors, consisting of Messrs. S. Kerzner,
Buckley, Marks, Siegel and von Rantzau were elected to terms set to expire at
our annual general meeting to be held in 2004.
Our board of directors has appointed an audit committee of the board
consisting of Messrs. Buckley, Marks and Siegel. Members of the audit
committee comprise individuals who have no relationship to us that may
interfere with the exercise of their independence from us and our management.
To ensure complete independence, Arthur Andersen LLP historically has had full
and free access to meet with the audit committee, without management
representatives present, to discuss the results of the audit, the adequacy of
internal controls and the quality of financial reporting. The primary function
of the audit committee is to assist our board of directors in fulfilling its
oversight responsibilities by reviewing the financial information that will be
provided to the stockholders and others, the systems of internal controls that
our management and board of directors have established and the audit process.
The audit committee meets four times per year.
We also have a remuneration committee consisting of Messrs. S. Kerzner,
Buckley, Marks and Siegel. The remuneration committee is mandated to review
and adopt our executive compensation plans and policies, including the
adoption of stock option plans and the granting of options to senior
executives thereunder.
Our stock option committee, consisting of Messrs. S. Kerzner, H. Kerzner
and Adamo, is authorized to grant stock options under our stock options plan
in amounts not to exceed 100,000 ordinary shares in any one quarter or 15,000
options per grant for any one individual.
51
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Restructuring of Relationship with Majority Shareholder
On July 3, 2001, we announced the restructuring of our former majority
shareholder, SIIL, and the resolution of certain matters with SIIL and certain
of its shareholders. Pursuant to the restructuring, SIIL was dissolved and its
shareholders received interests in Kerzner International directly
proportionate to their interests in SIIL. The former shareholders of SIIL
currently beneficially own approximately 57.7% of our issued and outstanding
shares. SIIL was owned in equal thirds by Kersaf, Caledonia and WLG, a company
controlled by a Kerzner family trust. SIIL previously was governed by a
shareholders agreement pursuant to which all major decisions of SIIL required
the unanimous consent of its shareholders. Kersaf operates a number of hotel,
casino and resort properties in southern Africa under the "Sun International"
name and there has been some confusion regarding the use of the Sun
International name by both Kersaf and us. As part of the restructuring and
settlement:
o The SIIL shareholders agreement was terminated effective July 3, 2001
and SIIL was dissolved in May 2002. SIIL's shareholders now hold
their shares in us directly.
o Kersaf has granted a proxy to vote half of its shares to WLG and half
of its shares to Caledonia. As a result, Caledonia owns shares
representing approximately 21.0% of our outstanding shares and has
the right to vote an additional 10.3% and WLG owns shares
representing 16.2% of our outstanding shares and has the right to
vote an additional 10.3%.
o Cement Merchants SA, or CMS, a partner in Kersaf's hotel, casino and
resort management activities in southern Africa, owns shares
representing approximately 6.1% of our outstanding shares. Heinrich
von Rantzau, a principal of CMS, has joined our board of directors.
o Kersaf, Caledonia and WLG have agreed to certain standstill
provisions through June 2006 pursuant to which each of them will
refrain from proposing or consummating certain extraordinary
corporate transactions involving us, including any merger or the sale
of substantially all of our assets. See "Major Shareholders and
Related Party Transactions--Registration Rights and Governance
Agreement."
o Pursuant to a registration rights and governance agreement, we
granted certain registration rights to Kersaf, Caledonia, WLG and
CMS, and Kersaf has agreed to sell not less than two million of our
ordinary shares in a registered public offering before June 30,
2002 (which date was subsequently amended to October 30, 2002),
subject to certain extensions. See "Major Shareholders and Related
Party Transactions--Registration Rights and Governance Agreement."
o The terms of our directors, consisting of Messrs. S. Kerzner,
Buckley, Siegel, Marks and von Rantzau, have been extended until our
annual general shareholders meeting in 2004, which we believe will
satisfy our agreement with the Bahamian government that SIIL control
a majority of the board of directors until June 30, 2004. See
"Certain Matters Affecting Our Bahamian Operations--Heads of
Agreement."
o We agreed that, after a transition period not to exceed one year from
July 3, 2001, we would cease using the names "Sun" and "Sun
International" and, as between the parties, Kersaf would have
exclusive rights to use such names. On July 1, 2002, we announced
that we had changed our corporate name to Kerzner International
Limited. Our ordinary shares, which formerly traded on The New York
Stock Exchange under the symbol "SIH," now trade under the ticker
symbol "KZL." We do not expect any change in our business or
operations as a result of the name change.
o Kersaf may pursue a potential resort development project in Port
Ghalib, Egypt, and we will receive between 25% and 50% of Kersaf's
gross receipts from this project, if consummated, such percentage to
be determined based on certain thresholds.
o Kersaf made a one-time payment of $3.5 million to us and issued a
secured note to us with a principal amount of $12.0 million and a
maturity date of June 30, 2003. In December 2001, Kersaf repaid in
full the principal amount of the note and accrued interest.
In October 2001, we commenced a lawsuit against Kersaf and certain of its
subsidiaries. See "Business--Legal Proceedings."
52
Major Shareholders
As of April 30, 2002, we had 27,716,010 shares outstanding. The following
table sets forth certain information as of April 30, 2002, after giving effect
to the dissolution of SIIL, regarding the beneficial ownership of Kerzner
International's ordinary shares by: (i) any person who is known to us to be
the owner of more than 5% of any class of our voting securities and (ii) our
directors and officers as a group:
Percent of
Beneficial Owner Amount Class
- ---------------- ------ ----------
Caledonia Investments plc.................... 8,673,948(1) 31.2%
Baron Capital Group, Inc..................... 5,627,735 20.3%
World Leisure Group Limited.................. 7,361,448(2) 26.5%
Cement Merchants SA.......................... 1,686,984 6.1%
Kersaf Investments Limited................... 5,733,310(3) 20.6%
Directors and officers as a group
(excluding shares deemed owned
by WLG and S. Kerzner)....................... -- less than 1%
- -----------------
(1) Includes 2,866,655 shares owned by Kersaf with respect to which Kersaf
has granted the right to vote by proxy.
(2) Includes 2,866,655 shares owned by Kersaf with respect to which Kersaf
has granted the right to vote by proxy.
(3) Kersaf has no right to vote these shares.
Related Party Transactions
Set forth below is a summary of certain agreements that have been entered
into or transactions that have occurred since January 1, 2000 involving us and
any of our subsidiaries, affiliates or key management.
Registration Rights and Governance Agreement
As part of the SIIL reorganization, we entered into a registration rights
and governance agreement with Kersaf, WLG, Caledonia, CMS and certain of their
affiliates. Among other things, under this agreement:
o we have granted certain registration rights to Kersaf, Caledonia,
WLG and CMS in respect of their Kerzner International ordinary
shares, and Kersaf has agreed to sell not less than 2.0 million of
our shares in a registered public offering before June 30, 2002
(which date was subsequently amended to October 30, 2002), subject
to certain extensions;
o we submitted to our shareholders an amendment to our articles of
association that was adopted in September 2001 and set the term of
our existing directors to expire at our annual general meeting in
2004;
o Kersaf has agreed until June 30, 2006 not to acquire any of our
shares. In addition, subject to certain rights of first refusal as
between themselves, each of Caledonia, WLG and CMS has agreed not to
acquire any additional shares of Kerzner International in excess of
0.9 million, in the case of Caledonia and WLG, and 4.0 million, in
the case of CMS, prior to June 30, 2006, in each case subject to
certain exceptions; and
o Kersaf, Caledonia, CMS and WLG will refrain from proposing or
consummating certain extraordinary corporate transactions involving
us, including any merger or the sale of substantially all of our
assets, unless an independent third party proposes such an
extraordinary corporate transaction and our Board of Directors
determines to enter into discussions or negotiations with that third
party.
This summary is qualified in its entirety by reference to the particular
provisions of the registration rights and governance agreement, incorporated
by reference hereto to Exhibit 10.8 of our registration
53
statement on Form F-4 filed on September 21, 2001.
Harborside Promissory Notes
In conjunction with Starwood, we have entered into a series of promissory
notes with Harborside at Atlantis to fund the construction cost of the
timeshare development. As of December 31, 2001, we had advanced a total of
$25.0 million to Harborside at Atlantis. Of this amount, Harborside at
Atlantis has repaid $3.5 million to us resulting in an outstanding balance of
$21.5 million as of December 31, 2001. During the first quarter of 2002,
Harborside at Atlantis repaid an additional $2.1 million to us. As of April
30, 2002, the principal amount owed to us is $19.5 million. The loans we made
were made simultaneously with loans from Starwood. Our loans and the Starwood
loans mirror each other in amounts, terms and conditions. Interest on the
loans accrues at a rate of LIBOR plus 250 basis points. Our loans and the
Starwood loans are pari passu with respect to payments of principal and
accrued interest and such payments will be made as cash is available from the
sale of timeshare units.
Management Services and Fees
We provide management services to Sun Resorts Limited, a Mauritius
company in which we currently own a 20.4% equity interest. Pursuant to the
management agreement with Sun Resorts Limited, we provide comprehensive
management services under individual management agreements relating to each of
Le Saint Geran, Le Touessrok, La Pirogue, Sugar Beach and Le Coco Beach resort
hotels which Sun Resorts Limited owns. The term of each of these management
agreements expires in December 2008.
We provide management services to Kanuhura, a Maldives company in which
we currently own a 25% equity interest. The terms of the management agreement
run concurrent with the terms of a lease between Kanuhura and the government
of the Maldives to lease Kanuhura. That lease expires in 2026 and is subject
to extension.
We also provide management services to Harborside at Atlantis, a joint
venture in which we own a 50% equity interest.
Office Lease
Effective February 2002, we entered into a lease agreement with Tennyson
Properties Limited whereby we are leasing office space in Buckinghamshire in
the United Kingdom for a period of 15 years. The annual rent is approximately
(pound)205,000 (which is the equivalent of approximately $300,000 at December
31, 2001) and is subject to increase every five years to the current fair
market value. Tennyson Properties Limited is owned by a family trust
established by Solomon Kerzner.
Long-Term Contract Fees
In 2001, we received $3.1 million from Kersaf pursuant to a long-term
contract. This payment was established at $2.4 million in 1994 and increases
at a rate of 3.0% per year and has been paid annually.
54
THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the Old Notes, we entered into a
registration rights agreement with the initial purchasers, under which we
agreed to use our best efforts to file and have declared effective an exchange
offer registration statement under the Securities Act.
We are making the exchange offer in reliance on the position of the SEC
as set forth in certain no-action letters. However, we have not sought our own
no-action letter. Based upon these interpretations by the SEC, we believe that
a holder of New Notes, but not a holder who is our "affiliate" within the
meaning of Rule 405 of the Securities Act, who exchanges Old Notes for New
Notes in the exchange offer, generally may offer the New Notes for resale,
sell the New Notes and otherwise transfer the New Notes without further
registration under the Securities Act and without delivery of a prospectus
that satisfies the requirements of Section 10 of the Securities Act. This does
not apply, however, to a holder who is our "affiliate" within the meaning of
Rule 405 of the Securities Act. We also believe that a holder may offer, sell
or transfer the New Notes only if the holder acquires the New Notes in the
ordinary course of its business and is not participating, does not intend to
participate and has no arrangement or understanding with any person to
participate in a distribution of the New Notes.
Any holder of the Old Notes using the exchange offer to participate in a
distribution of New Notes cannot rely on the no-action letters referred to
above. This includes a broker-dealer that acquired Old Notes directly from us,
but not as a result of market-making activities or other trading activities.
Consequently, the holder must comply with the registration and prospectus
delivery requirements of the Securities Act in the absence of an exemption
from such requirements.
Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The letter of
transmittal states that by acknowledging and delivering a prospectus, a
broker-dealer will not be considered to admit that it is an "underwriter"
within the meaning of the Securities Act. We have agreed that for a period of
180 days after the expiration date, we will make this prospectus available to
broker-dealers for use in connection with any such resale. See "Plan of
Distribution."
Except as described above, this prospectus may not be used for an offer
to resell, resale or other transfer of New Notes.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of Old Notes in any jurisdiction in which the exchange
offer or the acceptance of it would not be in compliance with the securities
or blue sky laws of such jurisdiction.
Terms of the Exchange
Upon the terms and subject to the conditions of the exchange offer, we
will accept any and all Old Notes validly tendered prior to 5:00 p.m., New
York time, on the expiration date. The date of acceptance for exchange of the
Old Notes, and completion of the exchange offer, is the exchange date, which
will be the first business day following the expiration date (unless extended
as described in this document). We will issue, on or promptly after the
exchange date, an aggregate principal amount of up to $200,000,000 of New
Notes for a like principal amount of outstanding Old Notes tendered and
accepted in connection with the exchange offer. The New Notes issued in
connection with the exchange offer will be delivered on the earliest
practicable date following the exchange date. Holders may tender some or all
of their Old Notes in connection with the exchange offer, but only in $1,000
increments of principal amount.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except that the New Notes have been registered under
the Securities Act and are issued free from any covenant regarding
registration, including the payment of liquidated damages upon a failure to
file or have declared effective an exchange offer registration statement or to
complete the exchange offer by certain dates. The New Notes will evidence the
same debt as the Old Notes and will be issued under the same indenture and
entitled to the same benefits under that indenture as the Old Notes being
exchanged. As of the date of this prospectus, $200,000,000 in aggregate
principal amount of the Old Notes is outstanding.
55
In connection with the issuance of the Old Notes, we arranged for the Old
Notes originally purchased by qualified institutional buyers and those sold in
reliance on Regulation S under the Securities Act to be issued and
transferable in book-entry form through the facilities of The Depository Trust
Company, acting as depositary. Except as described under "Description of
Notes--Book-Entry, Delivery and Form," the New Notes will be issued in the
form of a global note registered in the name of DTC or its nominee and each
beneficial owner's interest in it will be transferable in book-entry form
through DTC. See "Description of Notes--Book-Entry, Delivery and Form."
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the exchange offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the exchange
offer will remain outstanding and be entitled to the benefits of the indenture
under which they were issued, but certain registration and other rights under
the registration rights agreement will terminate and holders of the Old Notes
will generally not be entitled to any registration rights under the
registration rights agreement (subject to limited exceptions).
We shall be considered to have accepted validly tendered Old Notes if and
when we have given oral or written notice to the exchange agent. The exchange
agent will act as agent for the tendering holders for the purposes of
receiving the New Notes from us.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events described in this
prospectus or otherwise, we will return the Old Notes, without expense, to the
tendering holder as promptly as possible after the expiration date.
Holders who tender Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes on exchange of Old Notes in connection with the
exchange offer. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. See
"--Fees and Expenses."
Expiration Date; Extensions; Amendments
The expiration date for the exchange offer is 5:00 p.m., New York City
time, on , 2002, unless extended by us in our sole discretion, in
which case the term "expiration date" shall mean the latest date and time to
which the exchange offer is extended.
We reserve the right, in our sole discretion:
o to delay accepting any Old Notes, to extend the offer or to
terminate the exchange offer if, in our reasonable judgment, any
of the conditions described below shall not have been satisfied,
by giving oral or written notice of the delay, extension or
termination to the exchange agent, and
o to amend the terms of the exchange offer in any manner.
If we amend the exchange offer in a manner that we consider material, we
will disclose such amendment by means of a prospectus supplement, and we will
extend the exchange offer for a period of five to ten business days.
If we determine to make a public announcement of any delay, extension,
amendment or termination of the exchange offer, we will do so by making a
timely release through an appropriate news agency.
Interest on the New Notes
Interest on the New Notes will accrue at the rate of 8-7/8% per annum
from the most recent date to which interest on the New Notes has been paid or,
if no interest has been paid, from the date of the indenture governing the
notes. Interest will be payable semiannually in arrears on February 15 and
August 15, commencing on August 15, 2002. On August 15, 2002, we will pay
interest on the New Notes, the Old Notes and the 2001 Notes for the full
six-month period from and including February 15, 2002 to but not including
August 15, 2002.
Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or
56
exchange New Notes for, any Old Notes and may terminate the exchange offer as
provided in this prospectus before the acceptance of the Old Notes, if:
o any action or proceeding is instituted or threatened in any court
or by or before any governmental agency relating to the exchange
offer which, in our reasonable judgment, might materially impair
our ability to proceed with the exchange offer or materially
impair the contemplated benefits of the exchange offer to us, or
any material adverse development has occurred in any existing
action or proceeding relating to us or any of our subsidiaries;
o any change, or any development involving a prospective change, in
our business or financial affairs or any of our subsidiaries has
occurred which, in our reasonable judgment, might materially
impair our ability to proceed with the exchange offer or
materially impair the contemplated benefits of the exchange offer
to us;
o any law, statue, rule or regulation is proposed, adopted or
enacted, which in our reasonable judgment, might materially
impair our ability to proceed with the exchange offer or
materially impair the contemplated benefits of the exchange offer
to us; or
o any governmental approval has not been obtained, which approval
we, in our reasonable discretion, consider necessary for the
completion of the exchange offer as contemplated by this
prospectus.
The conditions listed above are for our sole benefit and may be asserted
by us regardless of the circumstances giving rise to any of these conditions.
We may waive these conditions in our reasonable discretion in whole or in part
at any time and from time to time. The failure by us at any time to exercise
any of the above rights shall not be considered a waiver of such right, and
such right shall be considered an ongoing right which may be asserted at any
time and from time to time.
If we determine in our reasonable discretion that any of the conditions
are not satisfied, we may:
o refuse to accept any Old Notes and return all tendered Old Notes to
the tendering holders;
o extend the exchange offer and retain all Old Notes tendered before
the expiration of the exchange offer, subject, however, to the rights
of holders to withdraw these Old Notes (See "--Withdrawal of Tenders"
below); or
o waive unsatisfied conditions relating to the exchange offer and accept
all properly tendered Old Notes which have not been withdrawn.
Procedures for Tendering
Unless the tender is being made in book-entry form, to tender in the
exchange offer, a holder must
o complete, sign and date the letter of transmittal, or a facsimile
of it,
o have the signatures guaranteed if required by the letter of
transmittal, and
o mail or otherwise deliver the letter of transmittal or the facsimile,
the Old Notes and any other required documents to the exchange agent
prior to 5:00 p.m., New York City time, on the expiration date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer the Old Notes into the exchange agent's account.
Although delivery of Old Notes may be effected through book-entry transfer
into the exchange agent's account at DTC, the letter of transmittal (or
facsimile), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or confirmed by
the exchange agent at its address set forth under the caption "exchange agent"
below, prior to 5:00 p.m., New York City time, on the expiration date.
Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
The tender by a holder of Old Notes will constitute an agreement between
us and the holder in accordance with the terms and subject to the conditions
set forth in this prospectus and in the letter of transmittal.
57
The method of delivery of Old Notes and the letter of transmittal and all
other required documents to the exchange agent is at the election and risk of
the holders. Instead of delivery by mail, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. No letter of transmittal of Old Notes should be sent to us. Holders may
request their respective brokers, dealers, commercial banks, trust companies
or nominees to effect the tenders for such holders.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on behalf of the beneficial owner. If the
beneficial owner wishes to tender on that owner's own behalf, the owner must,
prior to completing and executing the letter of transmittal and delivery of
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in the owners' name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership
may take a considerable period of time.
Signature on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Exchange Act, unless the Old Notes tendered pursuant thereto
are tendered:
o by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal, or
o for the account of an eligible guarantor institution.
In the event that signatures on a letter or transmittal or a notice of
withdrawal are required to be guaranteed, such guarantee must be by:
o a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,
o a commercial bank or trust company having an office or correspondent
in the United States, or
o an "eligible guarantor institution."
If the letter of transmittal is signed by a person other than the
registered holder of any Old Notes, the Old Notes must be endorsed by the
registered holder or accompanied by a properly completed bond power, in each
case signed or endorsed in blank by the registered holder.
If the letter of transmittal or any Old Notes or bond powers are signed
or endorsed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless such requirement is waived by us, submit evidence satisfactory to us of
their authority to act in that capacity with the letter of transmittal.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance and withdrawal of tendered Old
Notes in our sole discretion. We reserve the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes whose acceptance by us
would, in the opinion of our counsel, be unlawful. We also reserve the right
to waive any defects, irregularities or conditions of tender as to any
particular Old Notes either before or after the expiration date. Our
interpretation of the terms and conditions of the exchange offer (including
the instructions in the letter of transmittal) will be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes must be cured within a time period we will determine.
Although we intend to request the exchange agent to notify holders of defects
or irregularities relating to tenders of Old Notes, none of we, the exchange
agent nor any other person will have any duty or incur any liability for
failure to give such notification. Tenders of Old Notes will not be considered
to have been made until such defects or irregularities have been cured or
waived. Any Old Notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holders, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
58
In addition, we reserve the right, as set forth above under the caption
"Conditions to the Exchange Offer," to terminate the exchange offer.
By tendering, each holder represents to us, among other things, that:
o the New Notes acquired in connection with the exchange offer are
being obtained in the ordinary course of business of the person
receiving the New Notes, whether or not such person is the
holder;
o neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such New Notes; and
o neither the holder nor any such other person is our "affiliate" (as
defined in Rule 405 under the Securities Act).
If the holder is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes, it will acknowledge that it acquired such
Old Notes as the result of market-making activities or other trading
activities and it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
Guaranteed Delivery Procedures
A holder who wishes to tender its Old Notes and:
o whose Old Notes are not immediately available;
o who cannot deliver the holder's Old Notes, the letter of transmittal
or any other required documents to the exchange agent prior to the
expiration date; or
o who cannot complete the procedures for book-entry transfer before the
expiration date
may effect a tender if:
o the tender is made through an eligible guarantor institution;
o before the expiration date, the exchange agent receives from the
eligible guarantor institution:
-- a properly completed and duly executed notice of guaranteed
delivery by facsimile transmission, mail or hand delivery,
-- the name and address of the holder, and
-- the certificate number(s) of the Old Notes and the principal
amount of Old Notes tendered, stating that the tender is being
made and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of transmittal
and the certificates representing the Old Notes (or a
confirmation of book- entry transfer), and any other documents
required by the letter of transmittal will be deposited by the
eligible guarantor institution with the exchange agent; and
o the exchange agent receives, within three New York Stock Exchange
trading days after the expiration date, a properly completed and
executed letter of transmittal or facsimile, as well as the
certificate(s) representing all tendered Old Notes in proper form
for transfer or a confirmation of book-entry transfer, and all
other documents required by the letter of transmittal.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.
To withdraw a tender of Old Notes in connection with the exchange offer,
a written facsimile transmission notice of withdrawal must be received by the
exchange agent at its address set forth herein prior
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to 5:00 p.m., New York City time, on the expiration date. Any such notice of
withdrawal must:
o specify the name of the person who deposited the Old Notes to be
withdrawn,
o identify the Old Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Old Notes),
o be signed by the depositor in the same manner as the original
signature on the letter of transmittal by which such Old Notes
were tendered (including any required signature guarantees) or be
accompanied by documents or transfer sufficient to have the
trustee register the transfer of such Old Notes into the name of
the person withdrawing the tender, and
o specify the name in which any such Old Notes are to be registered,
if different from that of the depositor.
We will determine all questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices. Any Old Notes so
withdrawn will be considered not to have been validly tendered for purposes of
the exchange offer, and no New Notes will be issued in exchange for such Old
Notes unless the Old Notes withdrawn are validly re-tendered. Any Old Notes
that have been tendered but are not accepted for exchange or are withdrawn
will be returned to the holder without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn Old Notes may be re-tendered by following
one of the procedures described above under the caption "Procedures for
Tendering" at any time prior to the expiration date.
Exchange Agent
The Bank of New York has been appointed as exchange agent in
connection with the exchange offer. Questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal should be directed to the exchange agent, at its offices at 101
Barclay Street - Floor 7E, Corporate Trust Operations, Reorganization Unit,
New York, N.Y. 10286. The exchange agent's telephone number is (212) 815-5076
and facsimile number is (212) 298-1915.
Fees and Expenses
We will not make any payment to brokers, dealers or others soliciting
acceptances of the exchange offer. We will pay certain other expenses to be
incurred in connection with the exchange offer, including the fees and
expenses of the exchange agent, accounting and certain legal fees.
Holders who tender their Old Notes for exchange will not be obligated to
pay transfer taxes. If, however:
o New Notes are to be delivered to, or issued in the name of, any person
other than the registered holder of the Old Notes tendered, or
o tendered Old Notes are registered in the name of any person other
than the person signing the letter of transmittal, or
o a transfer tax is imposed for any reason other than the exchange of
Old Notes in connection with the exchange offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption from them is not
submitted with the letter of transmittal, the amount of such transfer taxes
will be billed directly to the tendering holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old
Notes as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes
upon the completion of the exchange offer. The expenses of the exchange offer
that we pay will increase our deferred financing costs in accordance with
generally accepted accounting principles.
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Consequences of Failures to Properly Tender Old Notes in the Exchange
Issuance of the New Notes in exchange for the Old Notes under the
exchange offer will be made only after timely receipt by the exchange agent of
such Old Notes, a properly completed and duly executed letter of transmittal
and all other required documents. Therefore, holders of the Old Notes desiring
to tender such Old Notes in exchange for New Notes should allow sufficient
time to ensure timely delivery. We are under no duty to give notification of
defects or irregularities of tenders of Old Notes for exchange. Old Notes that
are not tendered or that are tendered but not accepted by us will, following
completion of the exchange offer, continue to be subject to the existing
restrictions upon transfer thereof under the Securities Act, and, upon
completion of the exchange offer, certain registration rights under the
registration rights agreement will terminate.
In the event the exchange offer is completed, we generally will not be
required to register the remaining Old Notes (subject to limited exceptions).
Remaining Old Notes will continue to be subject to the following restrictions
on transfer:
o the remaining Old Notes may be resold only if registered pursuant
to the Securities Act, if any exemption from registration is
available, or if neither such registration nor such exemption is
required by law, and
o the remaining Old Notes will bear a legend restricting transfer in
the absence of registration or an exemption.
We do not currently anticipate that we will register the remaining Old
Notes under the Securities Act. To the extent that Old Notes are tendered and
accepted in connection with the exchange offer, any trading market for
remaining Old Notes could be adversely affected.
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DESCRIPTION OF NEW NOTES
The New Notes will be issued under the indenture dated August 14, 2001
(the "Original Indenture"), among the Issuers, the Guarantors, and The Bank of
New York, as trustee (the "Trustee"), as amended by the first supplemental
indenture dated as of September 19, 2001 and the second supplemental indenture
dated May 20, 2002 (the Original Indenture, as amended, the "Indenture"). The
following summaries of certain material provisions of the Indenture and the
registration rights agreement dated May 20, 2002 (the "Registration Rights
Agreement"), by and among the Issuers, the Guarantors and the initial
purchasers do not purport to be complete, and where reference is made to
particular provisions of the Indenture and the Registration Rights Agreement,
such provisions, including the definitions of certain terms, are incorporated
by reference as a part of such summaries or terms, which are qualified in
their entirety by such reference.
Unless the context otherwise requires, in this section "Notes" means the
New Notes, the Old Notes, the 2001 Notes and any Additional Securities issued
in the future pursuant to the Indenture, as described below under
"--Principal, Maturity and Interest; Additional Notes."
The definitions of certain capitalized terms used in the following
summary are set forth below under "--Certain Definitions." For purposes of
this section, references to "Issuers" or "we," "our," or "us" include only
Kerzner International Limited ("Kerzner International") and Kerzner
International North America, Inc. ("KINA") and their respective successors in
accordance with the terms of the Indenture and, except pursuant to the terms
of the Guarantees, not their respective Subsidiaries.
Brief Description of the Notes and the Guarantees
The Notes
The Notes will be:
o our unsecured senior subordinated obligations;
o subordinated in right of payment to certain of our other obligations;
o ranked equal in right of payment with all of our existing and future
senior subordinated Indebtedness;
o effectively subordinated to all of our secured Indebtedness to the
extent of the collateral securing such Indebtedness; and
o guaranteed on a senior subordinated basis by the Guarantors.
The Notes will be issued in fully registered form only, without coupons,
in denominations of $1,000 and integral multiples thereof.
The term "Subsidiaries" as used in this Description of New Notes does not
include Unrestricted Subsidiaries. Under certain circumstances, we will be
able to designate current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to the restrictive covenants set
forth in the Indenture. As of the Closing Date, five of our subsidiaries will
be designated as Unrestricted Subsidiaries. On the Closing Date, our
Unrestricted Subsidiaries will not, singly or in the aggregate, constitute a
material portion of our business.
The Guarantees
The Notes will be jointly and severally irrevocably and unconditionally
guaranteed (the "Guarantees") on a senior subordinated basis by substantially
all of our present Subsidiaries (the "Guarantors"). The Notes will also be
guaranteed by each of our future Subsidiaries other than Unrestricted
Subsidiaries. The obligations of each Guarantor under its Guarantee, however,
will be limited in a manner intended to avoid it being deemed a fraudulent
conveyance under applicable law. See "--Bankruptcy Limitations."
General
In the event that (i) the Exchange Offer Registration Statement is not
declared effective by the SEC on or prior to October 17, 2002, (ii) the
exchange offer is not consummated on or before the 30th business
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day after the Exchange Offer Registration Statement is declared effective,
(iii) if obligated to file a Shelf Registration Statement, the Shelf
Registration Statement is not declared effective on or prior to the 90th day
after the date on which the Issuers and Guarantors have an obligation to file
a Shelf Registration Statement or (iv) if the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, is declared
effective but thereafter ceases to be effective or useable for such time of
non-effectiveness or non- usability (each, a "Registration Default"), the
Issuers and Guarantors have agreed to pay to each Holder of Transfer
Restricted Securities (as defined the registration rights agreement) affected
thereby liquidated damages ("Liquidated Damages") in an amount equal to $0.05
per week per $1,000 principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of Liquidated Damages shall increase by
an additional $0.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $0.50 per week per $1,000 in principal amount of Transfer
Restricted Securities. The Issuers and Guarantors shall not be required to pay
Liquidated Damages for more than one Registration Default at any given time.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
Principal, Maturity and Interest; Additional Notes
We will issue the New Notes with a maximum aggregate principal amount of
$200.0 million. The Indenture provides, in addition to (i) the $200.0 million
aggregate principal amount of 2001 Notes previously issued and (ii) the $200.0
million aggregate principal amount of Old Notes issued on the Closing Date,
for the issuance of additional notes having identical terms and conditions to
the other outstanding Notes (the "Additional Notes"), subject to compliance
with the terms of the Indenture, including the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock." Any
such Additional Notes will be issued on the same terms as the Notes and will
constitute part of the same series of securities as the Notes and will vote
together as one series on all matters with respect to the Notes. All
references to Notes herein include the 2001 Notes, the New Notes, the Old
Notes and the Additional Notes, if any; provided that such Additional Notes
could be incurred as additional Indebtedness pursuant to the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock."
The Notes will mature on August 15, 2011. The New Notes will bear
interest at the rate per annum of 8-7/8%, payable semi-annually in arrears on
February 15 and August 15 of each year, commencing August 15, 2002, to the
persons in whose names such Notes are registered at the close of business on
the February 1 or August 1 immediately preceding such Interest Payment Date.
On August 15, 2002, we will pay interest on the New Notes, the Old Notes and
the 2001 Notes for the full six-month period from and including February 15,
2002 to but not including August 15, 2002. Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Methods of Receiving Payments on the Notes
Principal of, premium, if any, and interest and Liquidated Damages, if
any, on the Notes will be payable, and the Notes may be presented for
registration of transfer or exchange, at the office or agency of the Issuers
maintained for such purpose, which office or agency shall be maintained in the
Borough of Manhattan, The City of New York. At the option of the Issuers,
payment of interest may be made by check mailed to the Holders of the Notes at
the addresses set forth upon the registry books of the Issuers; provided that
all payments with respect to Global Notes and Certificated Securities, the
holders of which have given wire transfer instructions to the Issuers and the
paying agent, will be required to be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof. No service
charge will be made for any registration of transfer or exchange of Notes, but
the Issuers may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Until otherwise designated
by the Issuers, the Issuers' office or agency will be the corporate trust office
of the Trustee in the Borough of Manhattan, The City of New York.
Subordination
The Notes and the Guarantees will be general, unsecured obligations of
the Issuers and the Guarantors, respectively, subordinated in right of payment
to all Senior Debt of the Issuers and the Guarantors, respectively. On a pro
forma basis, at April 30, 2002, after giving effect to the issuance of the Old
Notes and the application of the proceeds therefrom as described in "Use of
Proceeds," Kerzner International on a consolidated basis would have had
approximately $0.6 million of Senior Debt outstanding, consisting entirely of
capital leases, and would have had $200.0 million of unused availability under
the Credit Agreement.
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The Indenture provides that no payment of any kind or character from any
source may be made by or on behalf of the Issuers or a Guarantor, as
applicable, on account of the principal of, premium, if any, or interest or
Liquidated Damages or Additional Amounts on the Notes (including any
repurchases of Notes and rescission payments), or on account of the redemption
provisions of the Notes, for cash or property (other than from the trust
described under "Legal Defeasance and Covenant Defeasance"), (i) upon the
maturity of any Senior Debt of the Issuers or such Guarantor by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, the interest on and any fee or other amount due in respect of
such Senior Debt are first paid in full in cash or Cash Equivalents or
otherwise to the extent holders accept satisfaction of amounts due by
settlement in other than cash or Cash Equivalents, or (ii) in the event of
default in the payment of any principal of, premium, if any, or interest on or
any fee or other amount due in respect of Senior Debt of the Issuers or such
Guarantor when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or otherwise
has ceased to exist.
Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Debt to declare such Senior Debt
to be due and payable and (ii) written notice of such event of default given
to the Trustee by the Representative under the Credit Agreement or the holders
of an aggregate of at least $25 million principal amount outstanding of any
other Senior Debt or their representative (a "Payment Blockage Notice"), then,
unless and until such event of default has been cured or waived or otherwise
has ceased to exist (including by reason of the repayment in full of such
Senior Debt in cash or Cash Equivalents), no payment (by set-off or otherwise)
may be made by or on behalf of the Issuers or any Guarantor which is an
obligor under such Senior Debt on account of the principal of, premium, if
any, or interest or Liquidated Damages or Additional Amounts on the Notes,
including any repurchases of Notes and rescission payments, other than
payments made from the trust described under "--Legal Defeasance and Covenant
Defeasance"; provided, however, that so long as the Credit Agreement is in
effect, a Payment Blockage Notice may only be given by the Representative
under the Credit Agreement unless otherwise agreed in writing by the requisite
lenders under the Credit Agreement. Notwithstanding the foregoing, unless the
Senior Debt in respect of which such event of default exists has been declared
due and payable in its entirety within 179 days after the Payment Blockage
Notice is delivered as set forth above (the "Payment Blockage Period") (and
such declaration has not been rescinded or waived), at the end of the Payment
Blockage Period, the Issuers and the Guarantors shall be required to pay all
sums not paid to the Holders of the Notes during the Payment Blockage Period
due to the foregoing prohibitions and to resume all other payments as and when
due on the Notes. Any number of Payment Blockage Notices may be given;
provided, however, that (i) not more than one Payment Blockage Notice shall be
given within a period of any 360 consecutive days, and (ii) no default that
existed upon the date of such Payment Blockage Notice or the commencement of
such Payment Blockage Period (whether or not such event of default is on the
same issue of Senior Debt) shall be made the basis for the commencement of any
other Payment Blockage Period, unless such event of default shall have been
cured or waived for a period of not less than 90 days.
Upon any distribution of assets of either Issuer or any Guarantor upon
any dissolution, winding up, total or partial liquidation or reorganization of
either Issuer or a Guarantor, whether voluntary or involuntary, in bankruptcy,
insolvency, receivership or a similar proceeding or upon assignment for the
benefit of creditors or any marshalling of assets or liabilities, (i) the
holders of all Senior Debt of such Issuer or such Guarantor, as applicable,
will first be entitled to receive payment in full in cash or Cash Equivalents
or otherwise to the extent holders accept satisfaction of amounts due by
settlement in other than cash or Cash Equivalents before the Holders are
entitled to receive any payment on account of principal of, premium, if any,
and interest and Liquidated Damages or Additional Amounts on the Notes,
including any repurchases of Notes and rescission payments, other than
payments by way of the issuance of Junior Securities or from the trust
described under "--Legal Defeasance and Covenant Defeasance," and (ii) any
payment or distribution of assets of such Issuer or such Guarantor of any kind
or character from any source, whether in cash, property or securities, other
than Junior Securities or from the trust described under "--Legal Defeasance
and Covenant Defeasance," to which the Holders or the Trustee on behalf of the
Holders would be entitled (by set-off or otherwise), except for the
subordination provisions contained in the Indenture, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of such Senior Debt or their
representative to the extent necessary to make payment in full in cash or Cash
Equivalents on all such Senior Debt remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior Debt.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets (other than, where applicable, Junior Securities or
from the trust described under "--Legal Defeasance and Covenant Defeasance")
shall be received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as
the case
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may be, to the holders of such Senior Debt remaining unpaid or unprovided for
or to their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of such
Senior Debt may have been issued, ratably according to the aggregate principal
amounts remaining unpaid on account of such Senior Debt held or represented by
each, for application to the payment of all such Senior Debt remaining unpaid,
to the extent necessary to pay all such Senior Debt in full in cash or Cash
Equivalents or otherwise to the extent holders accept satisfaction of amounts
due by settlement in other than cash or Cash Equivalents after giving effect
to any concurrent payment or distribution to the holders of such Senior Debt.
No provision contained in the Indenture or the Notes will affect the
obligation of the Issuers and the Guarantors, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest
and Liquidated Damages on the Notes. The subordination provisions of the
Indenture and the Notes will not prevent the occurrence of any Default or
Event of Default under the Indenture or limit the rights of the Trustee or any
Holder to pursue any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Issuers or
a marshalling of assets or liabilities of the Issuers, Holders of the Notes
may receive ratably less than other creditors. The Indenture limits, subject
to certain financial tests, the amount of additional Indebtedness, including
Senior Debt, the Issuers and their Subsidiaries can incur. See "Certain
Covenants--Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock."
Certain Bankruptcy Limitations
Each Issuer is a holding company, conducting all its business through
Subsidiaries, which have guaranteed or will guarantee the Issuers' obligations
with respect to the Notes, and Unrestricted Subsidiaries. Holders of the Notes
will be direct creditors of each Guarantor by virtue of its guarantee.
Nonetheless, in the event of the bankruptcy or financial difficulty of a
Guarantor, such Guarantor's obligations under its guarantee may be subject to
review and avoidance under state, United States Federal and foreign fraudulent
transfer laws. Among other things, such obligations may be avoided if a court
concludes that such obligations were incurred for less than reasonably
equivalent value or fair consideration at a time when the Guarantor was
insolvent, was rendered insolvent, or was left with inadequate capital to
conduct its business. A court would likely conclude that a Guarantor did not
receive reasonably equivalent value or fair consideration to the extent that
the aggregate amount of its liability on its guarantee exceeds the economic
benefits it received in the issuance of the Notes. The obligations of each
Guarantor under its guarantee will be limited in a manner intended to cause it
not to be a fraudulent conveyance under applicable law, although no assurance
can be given that a court would give the Holder the benefit of such provision.
See "Risk Factors--The guarantees may not be enforceable because of fraudulent
conveyance laws."
If the obligations of a Guarantor under its guarantee were avoided,
Holders of Notes would have to look to the assets of any remaining Guarantors
for payment. There can be no assurance in that event that such assets would
suffice to pay the outstanding principal and interest on the Notes.
Optional Redemption
The Issuers will not have the right to redeem any Notes prior to August
15, 2006 (other than out of the Net Cash Proceeds of a Qualified Equity
Offering, as described in the next following paragraph, or pursuant to a
Required Regulatory Redemption or an Optional Tax Redemption). The Notes will
be redeemable for cash at the option of the Issuers, in whole or in part, at
any time on or after August 15, 2006 upon not less than 30 days' nor more than
60 days' notice to each Holder of Notes, at the following redemption prices
(expressed as percentages of the principal amount) if redeemed during the
12-month period commencing August 15 of the years indicated below, in each
case (subject to the right of Holders of record on a Record Date to receive
interest due on an Interest Payment Date that is on or prior to such
Redemption Date) together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Redemption Date:
Year Percentage
- ---- ----------
2006............................................ 104.438%
2007............................................ 102.958%
2008............................................ 101.479%
2009 and thereafter............................. 100.000%
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On or prior to August 15, 2004, upon one or more Qualified Equity
Offerings, we may redeem up to 35% of the aggregate principal amount of the
Notes issued pursuant to the Indenture within 60 days of such Qualified Equity
Offering, on not less than 30 days, but not more than 60 days, notice to each
Holder of the Notes to be redeemed, with cash from the Net Cash Proceeds of
such Qualified Equity Offering, at 108.875% of the principal amount thereof
(subject to the right of Holders of record on a Record Date to receive
interest due on an Interest Payment Date that is on or prior to such
Redemption Date), together with accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption; provided, however, that
immediately following each such redemption not less than 65% of the aggregate
principal amount of the Notes issued pursuant to the Indenture remain
outstanding.
Required Regulatory Redemption
If a Holder or a beneficial owner of a Note is required by any Gaming
Authority to be found suitable to hold the Notes, the Holder shall apply for a
finding of suitability within 30 days after a Gaming Authority requests or
sooner if so required by such Gaming Authority. The applicant for a finding of
suitability must pay all costs of the investigation for such finding of
suitability. If a Holder or beneficial owner is required to be found suitable
to hold the Notes and is not found suitable by a Gaming Authority, the Holder
shall, to the extent required by applicable law, dispose of his Notes within
30 days or within that time prescribed by a Gaming Authority, whichever is
earlier. If the Holder fails to dispose of its Notes within such time period,
the Issuers may, at their option, redeem the Holder's Notes (a "Required
Regulatory Redemption") at, depending on applicable law, (i) the principal
amount thereof, together with accrued and unpaid interest and Liquidated
Damages, if any, to the date of the finding of unsuitability by a Gaming
Authority, (ii) the amount that such Holder paid for the Notes, (iii) the fair
market value of the Notes, (iv) the lowest of clauses (i), (ii) and (iii), or
(v) such other amount as may be determined by the appropriate Gaming
Authority. See "Risk Factors--We may require you to dispose of your Notes or
redeem your Notes if required by applicable gaming regulations."
Payment of Additional Amounts
The Issuers will, subject to certain limitations and exceptions (as set
forth below), pay to each Holder such amounts (the "Additional Amounts") as
may be necessary in order that every net payment or deemed payment of (i)
principal, premium, Liquidated Damages and interest, if any, with respect to a
Note, or (ii) net proceeds on the sale or exchange of a Note, each after
deduction or withholding for or on account of any taxes, duties, assessments
or governmental charges of whatever nature imposed or levied by or on behalf
of the government of The Bahamas or any authority thereof or therein having
power to tax, will result in the receipt by the Holders of the amounts that
would have been received by them had no such deduction or withholding been
required; provided, however, that no such Additional Amounts shall be payable
in respect of any Note for:
1. any tax, duty, assessment, or other governmental charge which would
not have been imposed but for the fact that such Holder:
(a) is a resident, domiciliary or national of, or engaged in
business or maintains a permanent establishment or was physically present in,
The Bahamas or any political subdivision thereof or therein or otherwise has
some connection with The Bahamas other than the mere ownership of, or receipt
of payment under, such Note;
(b) presented such Note for payment in The Bahamas or any political
subdivision thereof or therein, unless such Note could not have been presented
for payment elsewhere; or
(c) presented such Note for payment more than 30 days after the date
on which the payment in respect of such Note became due and payable or
provided for, whichever is later, except to the extent that the Holder would
have been entitled to such Additional Amounts if it had presented such Note
for payment on any day within such period of 30 days;
2. any estate, inheritance, gift, sales, transfer, or similar tax,
assessment or other governmental charge or any taxes, duties, assessments or
other governmental charges that are payable otherwise than by deduction or
withholding from payments on the Notes;
3. any tax, duty, assessment, or other governmental charge imposed on a
Holder that is not
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the beneficial owner of a Note to the extent that the beneficial owner would
not have been entitled to the payment of Additional Amounts had the beneficial
owner directly held the Note; or
4. any combination of items (1), (2) and (3).
Whenever there is mentioned, in any context, the payment of the principal
of or any premium or interest on, or in respect of, any Note or the net
proceeds received on the sale or exchange of any Note, such mention shall be
deemed to include mention of the payment of Additional Amounts provided for in
the Indenture to the extent that, in such context, Additional Amounts are,
were or would be payable in respect thereof pursuant to the Indenture.
Without limiting a Holder's right to receive payment of Additional
Amounts, in the event that Additional Amounts actually paid with respect to
the Notes are based on rates of deduction or withholding of Bahamian taxes in
excess of the appropriate rate applicable to the Holder of such Notes and, as
a result thereof, such Holder of Notes is entitled to make a claim for a
refund or credit of such excess, then such Holder of Notes shall, by accepting
the Notes and receiving a payment of Additional Amounts, be deemed to have
assigned and transferred all right, title and interest to any such claim for a
refund or credit of such excess to the Issuers. By making such assignment, the
Holder of Notes makes no representation or warranty that the Issuers will be
entitled to receive such claim for a refund or credit and incurs no other
obligation with respect thereto.
Optional Tax Redemption
The Notes may be redeemed at the option of the Issuers, in whole but not
in part, upon not less than 30 nor more than 60 days' notice given as provided
in the Indenture, at any time at a redemption price equal to the principal
amount thereof, plus accrued and unpaid interest, if any, thereon, plus
Liquidated Damages, if any, to the date fixed for redemption if, as a result
of any change in or amendment to the laws, treaties, rulings or regulations of
The Bahamas, or of any political subdivision or taxing authority thereof or
therein, or any change in the official position of the applicable taxing
authority regarding the application or interpretation of such laws, treaties,
rulings or regulations (including a holding, judgment or order of a court of
competent jurisdiction) or any execution thereof or amendment thereto, which
is enacted into law or otherwise becomes effective after August 9, 2001,
either Issuer is or would be required on the next succeeding interest payment
date to pay Additional Amounts on the Notes as a result of the imposition of a
Bahamian tax and the payment of such Additional Amounts cannot be avoided by
the use of any reasonable measures available to the Issuers which do not cause
the Issuers to incur any material costs. The Issuers shall also pay to holders
on the redemption date any Additional Amounts then due and which will become
due as a result of the redemption or would otherwise be payable.
Prior to the publication of any notice of redemption in accordance with
the foregoing, the Issuers shall deliver to the Trustee an officer's
certificate stating that (i) the payment of Additional Amounts cannot be
avoided by the use of any reasonable measures available to the Issuers which
do not cause the Issuers to incur any material costs and (ii) the Issuers are
entitled to effect such redemption based on the written, substantially
unqualified opinion of counsel, which counsel shall be reasonably acceptable
to the Trustee, that the Issuers have or will become obligated to pay
Additional Amounts as a result of such change or amendment. The notice, once
delivered by the Issuers to the Trustee, will be irrevocable.
Selection and Notice
In the case of a partial redemption (other than a Required Regulatory
Redemption), the Trustee shall select the Notes or portions thereof for
redemption on a pro rata basis, by lot or in such other manner it deems
appropriate and fair. The Notes may be redeemed in part in multiples of $1,000
only.
The Notes will not have the benefit of any sinking fund.
Except as required by a Gaming Authority with respect to a Required
Regulatory Redemption, notice of any redemption will be sent, by first class
mail, at least 30 days and not more than 60 days prior to the date fixed for
redemption to the Holder of each Note to be redeemed to such Holder's last
address as then shown upon the registry books of the Registrar. Any notice
which relates to a Note to be redeemed in part only must state the portion of
the principal amount equal to the unredeemed portion thereof and must state
that on and after the date of redemption, upon surrender of such Note, a new
Note or Notes in a principal amount equal to the unredeemed portion thereof
will be issued. On and after the date of redemption, interest will cease to
accrue on the Notes or portions thereof called for redemption, unless the
Issuers default in the payment thereof.
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Certain Covenants
Set forth below are certain covenants contained in the Indenture. During
any period of time that (i) the Notes have Investment Grade Status and (ii) no
Default or Event of Default has occurred and is continuing under the Indenture
with respect to the Notes, the Issuers and their Subsidiaries will not be
subject to the provisions of the Indenture with respect to the Notes described
below under "--Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," "--Limitation on Restricted Payments,"
"--Limitation on Sale of Assets and Subsidiary Stock" and clause (iv) of the
first paragraph of the covenant described under "--Limitation on Merger,
Consolidation or Sale of Kerzner International" (collectively, the "Suspended
Covenants"). In the event that the Issuers and their Subsidiaries are not
subject to the Suspended Covenants with respect to the Notes for any period of
time as a result of the preceding sentence and, subsequently, either of the
Rating Agencies withdraws its rating or assigns the Notes a rating below the
required Investment Grade Ratings, then the Issuers and their Subsidiaries
will thereafter again be subject to the Suspended Covenants for the benefit of
the Notes and compliance with the Suspended Covenant with respect to
Restricted Payments made after the time of such withdrawal or assignment will
be calculated in accordance with the terms of the covenant described below
under "--Limitation on Restricted Payments" as if such covenant had been in
effect during the entire period of time from the Issue Date with respect to
the Notes.
Repurchase of Notes at the Option of the Holder upon a Change of Control
The Indenture provides that in the event that a Change of Control
Triggering Event has occurred, each Holder of Notes will have the right, at
such Holder's option, pursuant to an irrevocable and unconditional offer by
the Issuers (the "Change of Control Offer"), to require the Issuers to
repurchase all or any part of such Holder's Notes (provided that the principal
amount of such Notes must be $1,000 or an integral multiple thereof) on a date
(the "Change of Control Purchase Date") that is no later than 45 Business Days
after the occurrence of such Change of Control Triggering Event, at a cash
price equal to 101% of the principal amount thereof (the "Change of Control
Purchase Price"), together with accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Purchase Date. The Change of Control
Offer shall be made within 20 Business Days following a Change of Control
Triggering Event and shall remain open for at least 20 Business Days following
its commencement (the "Change of Control Offer Period"). Upon expiration of
the Change of Control Offer Period, the Issuers promptly shall purchase all
Notes properly tendered in response to the Change of Control Offer.
As used herein, a "Change of Control Triggering Event" shall be deemed to
occur if either of the Rating Agencies shall downgrade or withdraw their
rating of the Notes as a result of or, in any case, within 90 days of, a
Change of Control. A "Change of Control" means (i) any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets, on a consolidated basis, of Kerzner International in one transaction
or a series of related transactions (in each case other than to a person that
is a Permitted Holder); (ii) any merger or consolidation of Kerzner
International with or into any person if, immediately after giving effect to
such transaction, any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable)
(other than one or more Permitted Holders) is or becomes the "beneficial
owner," directly or indirectly, of more than 50% of the total voting power in
the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the surviving entity or entities;
(iii) any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than
one or more Permitted Holders) is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total voting power in the aggregate of
all classes of Capital Stock of Kerzner International then outstanding
normally entitled to vote in elections of directors; (iv) during any period of
12 consecutive months after the Issue Date, individuals who at the beginning
of any such 12-month period constituted the Board of Directors of Kerzner
International (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of Kerzner
International was approved by a vote of a majority of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of Kerzner
International then in office; or (v) the adoption of a plan relating to the
liquidation or dissolution of Kerzner International.
On or before the Change of Control Purchase Date, the Issuers will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Issuers. The Paying Agent promptly will pay the Holders of Notes so accepted
an amount equal to the Change of
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Control Purchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any), and the Trustee promptly will authenticate and
deliver to such Holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered. Any Notes not so accepted will be
delivered promptly by the Issuers to the Holder thereof. The Issuers publicly
will announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date.
The phrase "all or substantially all" of the assets of Kerzner
International will likely be interpreted under applicable state law and will
be dependent upon particular facts and circumstances. As a result, there may
be a degree of uncertainty in ascertaining whether a sale or transfer of "all
or substantially all" of the assets of Kerzner International has occurred.
The Issuers' ability to pay such purchase price is, and may in the future
be, limited by the terms of the Credit Agreement, as the same may be amended
or other agreements relating to Senior Debt. The occurrence of certain of the
events that would constitute a Change of Control may constitute a default
under the Credit Agreement, as the same may be amended. Future indebtedness of
the Issuers may contain prohibitions of certain events that would constitute a
Change of Control or require the Issuers to offer to redeem such indebtedness
upon a Change of Control. Moreover, the exercise by the Holders of Notes of
their right to require the Issuers to purchase the Notes could cause a default
under such future indebtedness, even if the Change of Control itself does not,
due to the financial effect of such purchase on the Issuers. Finally, the
Issuers' ability to pay cash to Holders of Notes upon a purchase may be
limited by the Issuers' then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required purchases.
Any Change of Control Offer will be made in compliance with any and all
applicable laws, rules and regulations, including, if applicable, Regulation
14E under the Exchange Act and the rules thereunder and any and all other
applicable United States Federal and state securities laws. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this covenant, our compliance or compliance by any of the
Guarantors with such laws and regulations shall not in and of itself cause a
breach of their obligations under such covenant.
Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock
The Indenture provides that, except as set forth below in this covenant,
the Issuers and the Guarantors will not, and will not permit any of their
Subsidiaries to, individually or collectively, directly or indirectly, issue,
assume, guaranty, incur, become directly or indirectly liable with respect to
(including as a result of an Acquisition), or otherwise become responsible
for, contingently or otherwise (individually and collectively, to "incur" or,
as appropriate, an "incurrence"), any Indebtedness or any Disqualified Capital
Stock (including Acquired Indebtedness), except Permitted Indebtedness.
Notwithstanding the foregoing, if:
(i) no Event of Default shall have occurred and be continuing at the
time of, or would occur after giving effect on a pro forma basis to, such
incurrence of Indebtedness or Disqualified Capital Stock, and
(ii) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of Kerzner International for the Reference
Period immediately preceding the Incurrence Date, after giving effect on
a pro forma basis to such incurrence of such Indebtedness or Disqualified
Capital Stock and, to the extent set forth in the definition of
Consolidated Coverage Ratio, the use of proceeds thereof, would be at
least 2.5 to l (the "Debt Incurrence Ratio"),
then the Issuers and the Guarantors may incur such Indebtedness or Disqualified
Capital Stock.
Acquired Indebtedness shall be deemed to have been incurred at the time
the person who incurred such Indebtedness becomes a Subsidiary of either of
the Issuers (including upon designation of any Unrestricted Subsidiary or
other person as a Subsidiary) or is merged with or into or consolidated with
either of the Issuers or a Subsidiary of either of the Issuers, as applicable.
Upon each incurrence of Indebtedness, the Issuers may designate pursuant to
which provision of this covenant (including pursuant to which clause of the
definition of "Permitted Indebtedness") such Indebtedness is being incurred
and the Issuers may subdivide an amount of Indebtedness and designate more
than one provision pursuant to which such amount of Indebtedness is being
incurred and such Indebtedness shall not be deemed to have been incurred or
outstanding under any other provision of this covenant.
69
Limitation on Restricted Payments
The Indenture provides that the Issuers and the Guarantors will not, and
will not permit any of their Subsidiaries to, individually or collectively,
directly or indirectly, make any Restricted Payment if, after giving effect to
such Restricted Payment on a pro forma basis, (i) a Default or an Event of
Default shall have occurred and be continuing, (ii) Kerzner International is
not permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Debt Incurrence Ratio in the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," or (iii) the
aggregate amount of all Restricted Payments made by Kerzner International and
its Subsidiaries, including after giving effect to such proposed Restricted
Payment, from and after the Issue Date, would exceed, without duplication, the
sum of (a) 50% of the aggregate Consolidated Net Income of Kerzner
International for the period (taken as one accounting period), commencing
January 1, 2001 to and including the last day of the fiscal quarter ended
immediately prior to the date of each such calculation (or, in the event
Consolidated Net Income for such period is a deficit, then minus 100% of such
deficit), plus (b) the aggregate Net Cash Proceeds received by Kerzner
International from the sale of its Qualified Capital Stock (other than (i) a
sale to a Subsidiary of Kerzner International and (ii) to the extent such Net
Cash Proceeds are applied in connection with a Qualified Exchange after the
Issue Date, plus (c) the amount (not to exceed the aggregate amount of
Investments previously made by the Issuers or any Guarantor which were treated
as Restricted Payments and counted against the amount available under this
clause (iii)) equal to the net reduction in Investments resulting from either
(1) any dividends, repayments of loans or advances or other transfers of
assets to the Issuers or any Guarantor or the proceeds realized on sale of
such Investments or representing the return of capital or the satisfaction or
reduction (other than by means of payments by the Issuers or any Subsidiary)
of obligations of other persons which have been guaranteed by the Issuers or
any Guarantor or the release or expiration of any such guarantee, including
the expiration or release of any Investment Guarantee or (2) the redesignation
of an Unrestricted Subsidiary as a Subsidiary which executes a Guarantee;
provided, however, that the amount of anything credited pursuant to this
clause (c) shall not exceed its fair market value at the time of transfer or
redesignation, as the case may be; plus (d) $50 million.
The immediately preceding paragraph, however, will not prohibit: (1) a
Qualified Exchange, (2) the payment of any dividend on Capital Stock within 60
days after the date of its declaration if such dividend could have been made
on the date of such declaration in compliance with the foregoing provisions,
(3) the redemption or repurchase of any Capital Stock or Indebtedness of the
Issuers or their Subsidiaries (other than Capital Stock or Indebtedness held
by Permitted Holders), if the holder or beneficial owner of such Capital Stock
or Indebtedness is required to be found suitable by any Gaming Authority to
own or vote any such security and is found unsuitable by any such Gaming
Authority to so own or vote such security and (4) any Investment Guarantee
Payments. The full amount of any Restricted Payment made pursuant to the
foregoing clauses (2), (3) and (4) (but not pursuant to clause (1)) of the
immediately preceding sentence, however, will be deducted in the calculation
of the aggregate amount of Restricted Payments available to be made referred
to in clause (iii) of the immediately preceding paragraph.
For purposes of this covenant, the amount of any Restricted Payment made
or returned, if other than in cash, shall be the fair market value thereof, as
determined in the good faith reasonable judgment of the Board of Directors of
Kerzner International, unless stated otherwise, at the time made or returned,
as applicable.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Issuers and Guarantors will not, and will
not permit any of their Subsidiaries to, individually or collectively,
directly or indirectly, create, assume or suffer to exist any consensual
restriction on the ability of any Subsidiary of Kerzner International, KINA or
such Guarantors to pay dividends or make other distributions to or on behalf
of, or to pay any obligation to or on behalf of, or otherwise to transfer
assets or property to or on behalf of, or make or pay loans or advances to or
on behalf of, Kerzner International, KINA, the Guarantors or any Subsidiary of
any of them, or to guaranty the Notes, except (a) restrictions imposed by the
Notes or the Indenture or by our other Indebtedness (which may also be
guaranteed by the Guarantors) ranking pari passu with the Notes or the
Guarantees, as applicable, provided that such restrictions are no more
restrictive taken as a whole than those imposed by the Indenture and the
Notes, (b) restrictions imposed by applicable law, (c) any restriction imposed
by Indebtedness incurred under the Credit Agreement or other Senior Debt
incurred pursuant to the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock"; provided that such restriction
or requirement is no more restrictive than that imposed by the Credit
Agreement as of the Issue Date, (d) restrictions under any Acquired
Indebtedness not incurred in violation of the Indenture or any agreement
relating to any property, asset, or business acquired by Kerzner International
or any of its Subsidiaries, which restrictions in each case existed at the
time of acquisition, were not put in place in connection with or in
70
anticipation of such acquisition and are not applicable to any person, other
than the person acquired, or to any property, asset or business, other than
the property, assets and business so acquired, (e) restrictions with respect
solely to a Subsidiary of Kerzner International imposed pursuant to a binding
agreement that has been entered into for the sale or disposition of all or
substantially all of the Equity Interests or assets of such Subsidiary,
provided such restrictions apply solely to the Equity Interests or assets of
such Subsidiary that are being sold, (f) restrictions on transfer contained in
FF&E Indebtedness incurred pursuant to paragraph (c) of the definition of
"Permitted Indebtedness," provided such restrictions relate only to the
transfer of the property acquired with the proceeds of such FF&E Indebtedness,
and (g) in connection with and pursuant to permitted Refinancings,
replacements of restrictions imposed pursuant to clauses (a), (c) or (d) of
this paragraph that are not more restrictive than those being replaced and do
not apply to any other person or assets than those that would have been
covered by the restrictions in the Indebtedness so refinanced. Notwithstanding
the foregoing, neither (a) customary provisions restricting subletting or
assignment of any lease, license or contract entered into in the ordinary
course of business, consistent with industry practice, nor (b) Liens permitted
under the terms of the Indenture shall in and of themselves be considered a
restriction on the ability of the applicable Subsidiary to transfer such
agreement or assets, as the case may be.
Limitation on Layering Indebtedness
The Indenture provides that the Issuers and the Guarantors will not,
individually or collectively, directly or indirectly, incur, or suffer to
exist any Indebtedness that is subordinate in right of payment to any other
Indebtedness of either Issuer or any Guarantor unless, by its terms, such
Indebtedness is as subordinated in right of payment to, or ranks pari passu
with, the Notes or the Guarantee, as applicable.
Limitation on Liens Securing Indebtedness
The Indenture provides that the Issuers and the Guarantors will not, and
will not permit any of their Subsidiaries to, individually or collectively,
create, incur, assume or suffer to exist any Lien of any kind, other than
Permitted Liens, upon any of their respective assets now owned or acquired on
or after the date of the Indenture or upon any income or profits therefrom
securing any Indebtedness of the Issuers, the Guarantors or any of their
Subsidiaries other than Senior Debt, unless the Issuers and Guarantors each
provide, and cause their Subsidiaries to provide, concurrently therewith, that
the Notes are equally and ratably so secured, provided that, if such
Indebtedness is Subordinated Indebtedness, the Lien securing such Subordinated
Indebtedness shall be subordinate and junior to the Lien securing the Notes
with the same relative priority as such Subordinated Indebtedness shall have
with respect to the Notes.
Limitation on Sale of Assets and Subsidiary Stock
The Indenture provides that each of the Issuers and the Guarantors will
not, and will not permit any of their Subsidiaries to, individually or
collectively, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, business or assets, including by merger or consolidation (in the
case of KINA, a Guarantor or a Subsidiary of Kerzner International or KINA),
and including any sale or other transfer or issuance of any Equity Interests
of any Subsidiary of Kerzner International, including KINA, whether by Kerzner
International, KINA or a Subsidiary of either or through the issuance, sale or
transfer of Equity Interests by a Subsidiary of Kerzner International,
including KINA, and including any sale and leaseback transaction (an "Asset
Sale"), unless (i)(a) within 360 days after the date of such Asset Sale, the
Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to the
optional redemption of the Notes in accordance with the terms of the Indenture
or to the repurchase of the Notes and other Indebtedness on a parity with the
Notes with similar provisions requiring the Issuers to make an offer to
purchase such Indebtedness with the proceeds from such Asset Sale pursuant to
a cash offer (pro rata in proportion to the respective principal amounts (or
accreted values in the case of Indebtedness issued with an original issue
discount) of the Notes and such other Indebtedness then outstanding) pursuant
to an irrevocable, unconditional cash offer (the "Asset Sale Offer") to
repurchase Notes at a purchase price of 100% of principal amount (or accreted
value in the case of Indebtedness issued with an original issue discount) with
respect to each such series of Indebtedness (the "Asset Sale Offer Price")
together with accrued and unpaid interest and Liquidated Damages, if any, to
the date of payment, made within 330 days of such Asset Sale or (b) within 330
days following such Asset Sale, the Asset Sale Offer Amount is (1) invested in
assets and property (other than notes, bonds, obligation and securities) which
in the good faith judgment of the Board of Directors of Kerzner International
will immediately constitute or be a part of a Related Business of Kerzner
International, KINA or such Subsidiary (if it continues to be a Subsidiary)
immediately following such investment or (2) used to permanently reduce Senior
Debt (provided that in the case of a revolving loan agreement or similar
arrangement that makes credit available, such commitment is so permanently
reduced by such amount), (ii) no more than the greater of (A) $20 million or
(B) 15% of the total consideration for such Asset Sale or series of related
Asset Sales consists
71
of consideration other than cash or Cash Equivalents; provided, however, that
more than 15% of the total consideration may consist of consideration other
than cash or Cash Equivalents if (A) the portion of such consideration that
does not consist of cash or Cash Equivalents consists of assets of a type
ordinarily used in the operation of a Related Business (including Capital
Stock of a person that becomes a wholly owned Subsidiary and that holds such
assets) to be used by the Issuers or a Subsidiary in the conduct of a Related
Business and (B) the terms of such Asset Sale have been approved by a majority
of the members of the Board of Directors of Kerzner International having no
personal stake in such transaction, (iii) no Default or Event of Default shall
have occurred and be continuing at the time of, or would occur after giving
effect, on a pro forma basis, to, such Asset Sale, and (iv) if the value of
the assets disposed of is at least $10 million, the Board of Directors of
Kerzner International determines in good faith that Kerzner International or
such Subsidiary, as applicable, receives fair market value for such Asset Sale
(as evidenced by a resolution of the Board of Directors). Pending the final
application of any Net Cash Proceeds, the Issuers may temporarily reduce
revolving credit borrowings or otherwise invest the Net Cash Proceeds in any
manner that is not prohibited by the Indenture.
The Indenture provides that an acquisition of Notes pursuant to an Asset
Sale Offer may be deferred until the accumulated Net Cash Proceeds from Asset
Sales not applied to the uses set forth in (i) above (the "Excess Proceeds")
exceeds $20 million and that each Asset Sale Offer shall remain open for 20
Business Days following its commencement (the "Asset Sale Offer Period"). Upon
expiration of the Asset Sale Offer Period, the Issuers shall apply the Asset
Sale Offer Amount plus an amount equal to accrued and unpaid interest and
Liquidated Damages, if any, to the purchase of all Indebtedness properly
tendered (on a pro rata basis if the Asset Sale Offer Amount is insufficient
to purchase all Indebtedness so tendered) at the applicable Asset Sale Offer
Price (together with accrued and unpaid interest and Liquidated Damages, if
any). To the extent that the aggregate amount of Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, the
Issuers may use any remaining Net Cash Proceeds for general corporate purposes
as otherwise permitted by the Indenture and following the consummation each
Asset Sale Offer the Excess Proceeds amount shall be reset to zero. For
purposes of (ii) above, total consideration received means the total
consideration received for such Asset Sales minus the amount of (a) Senior
Debt assumed by a transferee which assumption permanently reduces the amount
of Indebtedness outstanding on the Issue Date or permitted pursuant to clause
(a) or (c) of the definition of Permitted Indebtedness (including that in the
case of a revolving loan agreement or similar arrangement that makes credit
available, such commitment is so reduced by such amount), (b) FF&E
Indebtedness secured solely by the assets sold and assumed by a transferee and
(c) property that within 30 days of such Asset Sale is converted into Cash or
Cash Equivalents.
Notwithstanding the foregoing provisions of the prior paragraph:
(i) Kerzner International and its Subsidiaries may, in the ordinary
course of business, convey, sell, transfer, assign or otherwise dispose
of inventory acquired and held for resale in the ordinary course of
business;
(ii) Kerzner International and its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the provisions of the covenant "Limitation on Merger,
Sale or Consolidation of Kerzner International";
(iii) Kerzner International and its Subsidiaries may sell or dispose
of damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of Kerzner International or such Subsidiary, as
applicable;
(iv) the Issuers and the Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of assets to any Issuer or any Guarantor; and
(v) the Issuers may sell certain non-strategic real estate on
Paradise Island and in Atlantic City.
All Net Cash Proceeds from an Event of Loss shall be invested, used for
prepayment of Senior Debt, or used to repurchase Notes, all within the period
and as otherwise provided above in clauses (i)(a) or (i)(b) of the first
paragraph of this covenant.
In addition to the foregoing, Kerzner International will not, and will
not permit any Subsidiary to, directly or indirectly make any Asset Sale of
any of the Equity Interests of any Subsidiary, including KINA, except (i)
pursuant to an Asset Sale of all the Equity Interests of such Subsidiary or
(ii) pursuant to an Asset Sale of common stock with no preferences or special
rights or privileges and with no redemption or
72
prepayment provisions, provided that after such sale the Issuers or their
Subsidiaries own at least 50.1% of the voting and economic interests of the
Capital Stock of such Subsidiary.
Any Asset Sale Offer shall be made in compliance with all applicable
laws, rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
United States Federal and state securities laws. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this covenant, the compliance by any of the Issuers or the Guarantors with
such laws and regulations shall not in and of itself cause a breach of their
obligations under such covenant.
Limitation on Transactions with Affiliates
The Indenture provides that none of the Issuers or any of their
Subsidiaries will be permitted on or after the Issue Date to enter into or
suffer to exist any contract, agreement, arrangement or transaction with any
Affiliate (an "Affiliate Transaction"), or any series of related Affiliate
Transactions (other than Exempted Affiliate Transactions) (i) unless it is
determined that the terms of such Affiliate Transaction are fair and
reasonable to Kerzner International or such Subsidiary, as applicable, and no
less favorable to Kerzner International or such Subsidiary, as applicable,
than could have been obtained in an arm's length transaction with a
non-Affiliate and (ii) if involving consideration to either party in excess of
$4 million, unless such Affiliate Transaction(s) has been approved by a
majority of the members of the Board of Directors that are disinterested in
such transaction and (iii) if involving consideration to either party in
excess of $15 million, unless in addition to the foregoing Kerzner
International, prior to the consummation thereof, obtains a written favorable
opinion as to the fairness of such transaction to Kerzner International from a
financial point of view from an independent investment banking firm of
national reputation.
Limitation on Payments for Consent
The Indenture provides that none of the Issuers or any of their
Subsidiaries or Unrestricted Subsidiaries shall, directly or indirectly, pay
or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Notes for, or as an inducement to, any
consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all Holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement, which solicitation documents must be mailed
to all Holders of the Notes prior to the expiration of the solicitation.
Limitation on Merger, Sale or Consolidation of Kerzner International
The Indenture provides that Kerzner International will not, directly or
indirectly, consolidate with or merge with or into another person or sell,
lease, convey or transfer all or substantially all of its assets (computed on
a consolidated basis), whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons or adopt a Plan
of Liquidation, unless (i) either (a) Kerzner International is the resulting
surviving or transferee entity (the "Successor Company") or (b) the Successor
Company or, in the case of a Plan of Liquidation, the entity which receives
the greatest value from such Plan of Liquidation, is a corporation organized
under the laws of the Commonwealth of The Bahamas, any member country of the
European Union, Canada or the United States, any state thereof or the District
of Columbia and expressly assumes by supplemental indenture all of the
obligations of Kerzner International in connection with the Notes and the
Indenture; (ii) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction;
(iii) immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Successor Company or, in the case of
a Plan of Liquidation, the entity which receives the greatest value from such
Plan of Liquidation is at least equal to the Consolidated Net Worth of Kerzner
International immediately prior to such transaction; and (iv) immediately
after giving effect to such transaction on a pro forma basis, the Successor
Company or, in the case of a Plan of Liquidation, the entity which receives
the greatest value from such Plan of Liquidation would immediately thereafter
be permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Debt Incurrence Ratio set forth in the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of Kerzner International or consummation of a Plan of
Liquidation in accordance with the foregoing, the successor corporation formed
by such consolidation or into which Kerzner International is merged or to
which such transfer is made or, in the case of a Plan of Liquidation, the
entity which receives the greatest value from such Plan of Liquidation shall
succeed to, and (except in the case of a lease or any transfer of
substantially all (but less than all) of the assets of Kerzner International)
be substituted for, and may exercise every right
73
and power of, Kerzner International under the Indenture with the same effect
as if such successor corporation had been named therein as Kerzner
International and (except in the case of a lease or any transfer of
substantially all (but less than all) of the assets of Kerzner International)
Kerzner International shall be released from the obligations under the Notes
and the Indenture except with respect to any obligations that arise from, or
are related to, such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise) of all or substantially all of the properties and assets of one
or more Subsidiaries of Kerzner International, including KINA, if applicable,
shall be deemed to be the transfer of all or substantially all of the
properties and assets of Kerzner International if the interest of Kerzner
International in the properties and assets of such Subsidiary or Subsidiaries
constitutes all or substantially all of the properties and assets of Kerzner
International.
Limitation on Merger, Sale or Consolidation of KINA
The Indenture provides that KINA will not consolidate or merge with or
into (whether or not KINA is the surviving person) another person unless
(other than Kerzner International or a Guarantor) (i) subject to the
provisions of the following paragraph, the person formed by or surviving any
such consolidation or merger (if other than KINA) expressly assumes all the
obligations of KINA pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee; and (ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis, no Default or Event of
Default shall have occurred or be continuing. Any Person that expressly
assumes all the obligations of KINA pursuant to a supplemental indenture as
provided in the foregoing, shall succeed to, and be substituted for, and may
exercise every right and power of KINA under the Indenture with the same
effect as if such successor corporation had been named therein as KINA.
Notwithstanding the foregoing, upon the sale or disposition (whether by
merger, stock purchase, or otherwise) of KINA in its entirety to an entity
which is not a Subsidiary, which transaction is otherwise in compliance with
the Indenture (including, without limitation, the provisions of the covenant
"Limitation on Sale of Assets and Subsidiary Stock"), KINA shall be released
from the obligations under the Notes and the Indenture except with respect to
any obligations that arise from, or are related to, such transaction;
provided, however, that any such termination shall occur only to the extent
that all obligations of KINA under all of its guarantees of, and under all of
its pledges of assets or other security interests which secure, any
Indebtedness of Kerzner International or any of its Subsidiaries shall also
terminate upon such release, sale or transfer.
Limitation on Lines of Business
The Indenture provides that none of the Issuers or any of their
Subsidiaries shall directly or indirectly engage to any substantial extent in
any line or lines of business activity other than that which, in the good
faith judgment of the Board of Directors of Kerzner International, is a
Related Business.
Future Subsidiary Guarantors
The Indenture provides that all present and future Subsidiaries of either
Issuer (including any Unrestricted Subsidiary upon being designated a
Subsidiary) will jointly and severally guaranty irrevocably and
unconditionally all principal, premium, if any, and interest on the Notes on a
senior subordinated basis. The term Subsidiary does not include Unrestricted
Subsidiaries.
Release of Guarantors
The Indenture provides that no Guarantor shall consolidate or merge with
or into (whether or not such Guarantor is the surviving person) another person
(other than either Issuer or another Guarantor) unless (i) subject to the
provisions of the following paragraph, the person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form
reasonably satisfactory to the Trustee, pursuant to which such person shall
unconditionally guarantee, on a senior subordinated basis, all of such
Guarantor's obligations under such Guarantor's guarantee and the Indenture on
the terms set forth in the Indenture; and (ii) immediately before and
immediately after giving effect to such transaction on a pro forma basis, no
Default or Event of Default shall have occurred or be continuing.
Notwithstanding the foregoing, upon the sale or disposition (whether by
merger, stock purchase, or otherwise) of a Guarantor in its entirety to an
entity which is not a Subsidiary or the designation of a Subsidiary as an
Unrestricted Subsidiary, which transaction is otherwise in compliance with the
Indenture
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(including, without limitation, the provisions of the covenant "Limitation on
Sale of Assets and Subsidiary Stock"), such Guarantor will be deemed released
from its obligations under its Guarantee of the Notes; provided, however, that
any such termination shall occur only to the extent that all obligations of
such Guarantor under all of its guarantees of, and under all of its pledges of
assets or other security interests which secure, any Indebtedness of either
Issuer or any of their Subsidiaries shall also terminate upon such release,
sale or transfer.
Limitation on Status as Investment Company
The Indenture prohibits Kerzner International and its Subsidiaries from
being required to register as an "investment company" (as that term is defined
in the Investment Company Act of 1940, as amended), or from otherwise becoming
subject to regulation under the Investment Company Act.
Reports
The Indenture provides that whether or not Kerzner International is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Kerzner International shall deliver to the Trustee and to each Holder
within 15 days after it is or would have been (if it were subject to such
reporting obligations) required to furnish such with the SEC, annual and
quarterly financial statements substantially equivalent to financial
statements that would have been included in reports filed with the SEC, if
Kerzner International were subject to the requirements of Section 13 or 15(d)
of the Exchange Act, including, with respect to annual information only, a
report thereon by Kerzner International's certified independent public
accountants as such would be required in such reports to the SEC, and,
together with a management's discussion and analysis of financial condition
and results of operations which would be so required and, to the extent
permitted by the Exchange Act or the SEC, file with the SEC the annual,
quarterly and other reports which it is or would have (if it were subject to
such reporting obligations) been required to file with the SEC.
Events of Default and Remedies
The Indenture defines an Event of Default as (i) the failure by the
Issuers to pay any installment of interest or Liquidated Damages, if any, on
the Notes as and when the same becomes due and payable and the continuance of
any such failure for 30 days, (ii) the failure by the Issuers to pay all or
any part of the principal, or premium, if any, on the Notes when and as the
same becomes due and payable at maturity, redemption, by acceleration or
otherwise, whether or not prohibited by the subordination provisions of the
Indenture, including, without limitation, payment of the Change of Control
Purchase Price or the Asset Sale Offer Price, or otherwise, (iii) the failure
by either of the Issuers or any of their Subsidiaries otherwise to comply with
the covenants described under "Certain Covenants--Repurchase of Notes at the
Option of the Holder upon a Change of Control," "--Limitation on Sale of
Assets and Subsidiary Stock" and "--Limitation on Merger, Sale or
Consolidation of Kerzner International," (iv) (A) failure by either of the
Issuers or any of their Subsidiaries to observe or perform any other covenant
or agreement described under "Certain Covenants" (except as provided in
clauses (i), (ii) and (iii) above) and the continuance of such failure for a
period of 30 days after written notice is given to the Issuers by the Trustee
or to the Issuers and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes outstanding, or (B) failure by either of the
Issuers or any of their Subsidiaries to observe or perform any other covenant
or agreement contained in the Notes or the Indenture (except as provided for
in clauses (i), (ii), (iii) and (iv)(A) above) and the continuance of such
failure for 60 days after written notice is given to the Issuers by the
Trustee or the Issuers and the Trustee by the Holders of at least 25% in
aggregate principal amount of Notes outstanding, (v) certain events of
bankruptcy, insolvency or reorganization in respect of either of the Issuers
or any of their Significant Subsidiaries, (vi) a default in Indebtedness of
either of the Issuers or any of their Subsidiaries with an aggregate principal
amount in excess of $10 million (a) resulting from the failure to pay any
principal at final stated maturity or (b) as a result of which the maturity of
such Indebtedness has been accelerated prior to its stated maturity, and (vii)
final unsatisfied judgments not covered by insurance aggregating in excess of
$10 million, at any one time rendered against either of the Issuers or any of
their Subsidiaries and either (a) the commencement by any creditor of any
enforcement proceeding upon any such judgment that is not promptly stayed or
(b) such judgment is not stayed, bonded or discharged within 60 days. The
Indenture provides that if a Default occurs and is continuing, the Trustee
must, within 90 days after the occurrence of such default, give to the Holders
notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (v), above, relating to either of the Issuers or
any of their Significant Subsidiaries,) then in every such case, unless the
principal of all of the Notes shall have already become due and payable,
either the Trustee or the Holders of 25% in aggregate principal amount of the
Notes then outstanding, by notice in writing to the
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Issuers (and to the Trustee if given by Holders) (an "Acceleration Notice"),
may declare all principal and premium, if any, determined as set forth below,
and accrued and unpaid interest and Liquidated Damages, if any, thereon to be
due and payable immediately; provided, however, that if any Senior Debt is
outstanding pursuant to the Credit Agreement, such acceleration shall not be
effective until the earlier of (x) the fifth Business Day after the giving to
Kerzner International and the Representative of such written notice, unless
such Event of Default is cured or waived prior to such date and (y) the date
of acceleration of any Senior Debt under the Credit Agreement. If an Event of
Default specified in clause (v) above relating to either of the Issuers or any
of their Significant Subsidiaries occurs, all principal and accrued interest
thereon will be immediately due and payable on all outstanding Notes without
any declaration or other act on the part of Trustee or the Holders. The
Holders of a majority in aggregate principal amount of Notes generally are
authorized to rescind such acceleration if all existing Events of Default,
other than the non-payment of the principal of, premium, if any, and interest
and Liquidated Damages on the Notes that have become due solely by such
acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes,
the Holders of a majority in aggregate principal amount of the Notes at the
time outstanding may waive on behalf of all the Holders any default, except a
default in the payment of principal of or interest on any Note not yet cured
or a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
of the Holders, unless such Holders have offered to the Trustee reasonable
security or indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
Notes at the time outstanding will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
Legal Defeasance and Covenant Defeasance
The Indenture provides that the Issuers may, at their option and at any
time, elect to have their obligations and the obligations of the Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Issuers shall be deemed to have paid and
discharged the entire indebtedness represented, and the Indenture shall cease
to be of further effect as to all outstanding Notes and Guarantees, except as
to (i) rights of Holders to receive payments in respect of the principal of,
premium, if any, and interest and Liquidated Damages, if any, on such Notes
when such payments are due from the trust funds; (ii) the Issuers' obligations
with respect to such Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an
office or agency for payment of money for security payments held in trust;
(iii) the rights, powers, trust, duties, and immunities of the Trustee, and
the Issuers' obligations in connection therewith; and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Issuers may, at their
option and at any time, elect to have the obligations of the Issuers and the
Guarantors released with respect to certain covenants that are described in
the Indenture ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, non-payment of guarantees, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default and Remedies" will no longer constitute an Event of Default with
respect to the Notes. The Issuers may exercise their Legal Defeasance option
regardless of whether they previously exercised Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, U.S. legal tender, U.S. Government
Obligations or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on such
Notes on the stated date for payment thereof or on the redemption date of such
principal or installment of principal of, premium, if any, or interest on such
Notes, and the Trustee must have, for the benefit of the Holders of Notes, a
valid, perfected, exclusive security interest in such trust; (ii) in the case
of the Legal Defeasance, the Issuers shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to Trustee
confirming that (A) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of
the Indenture, there has been a change in the applicable United States Federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders of such Notes will not
recognize income, gain or loss for United States Federal income tax purposes
as a result of such Legal Defeasance and will be subject to United States
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Issuers shall have delivered to
the Trustee an opinion of counsel in the United States
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reasonably acceptable to such Trustee confirming that the Holders of such
Notes will not recognize income, gain or loss for United States Federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
United States Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or
constitute a default under the Indenture or any other material agreement or
instrument to which either of the Issuers or any of their Subsidiaries is a
party or by which either of the Issuers or any of their Subsidiaries is bound;
(vi) the Issuers shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by the Issuers with the intent of
hindering, delaying or defrauding any other creditors of the Issuers or
others; and (vii) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that the conditions
precedent provided for in, in the case of the officers' certificate, (i)
through (vi) and, in the case of the opinion of counsel, clauses (i) (with
respect to the validity and perfection of the security interest), (ii), (iii)
and (v) of this paragraph have been complied with.
If the funds deposited with the Trustee to effect Legal Defeasance or
Covenant Defeasance are insufficient to pay the principal of, premium, if any,
and interest on the Notes when due, then the obligations of the Issuers under
the Indenture will be revived and no such defeasance will be deemed to have
occurred.
Amendments and Supplements
The Indenture contains provisions permitting the Issuers, the Guarantors
and the Trustee to enter into a supplemental indenture for certain limited
purposes without the consent of the Holders. With the consent of the Holders
of not less than a majority in aggregate principal amount of the Notes at the
time outstanding, the Issuers, the Guarantors and the Trustee are permitted to
amend or supplement the Indenture or any supplemental indenture or modify the
rights of the Holders; provided that no such modification may, without the
consent of each Holder affected thereby: (i) change the Stated Maturity on any
Note, or reduce the principal amount thereof or the rate (or extend the time
for payment) of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), or reduce the Change of Control Purchase Price or the
Asset Sale Offer Price or alter the provisions (including the defined terms
used therein) regarding the right of the Issuers to redeem the Notes in a
manner adverse to the Holders, or (ii) reduce the percentage in principal
amount of the outstanding Notes, the consent of whose Holders is required for
any such amendment, supplemental indenture or waiver provided for in the
Indenture, or (iii) modify any of the waiver provisions, except to increase
any required percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of
each outstanding Note affected thereby.
No Personal Liability of Partners, Stockholders, Officers, Directors
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Issuers, the
Guarantors or any successor entity shall have any personal liability in
respect of the obligations of the Issuers or the Guarantors under the
Indenture or the Notes by reason of his or its status as such stockholder,
employee, officer or director, except to the extent such person is an Issuer
or Guarantor.
Registration Rights
The holders of the Old Notes were party to the Registration Rights
Agreement. We have filed the registration statement of which this prospectus
forms a part and are conducting the exchange offer in accordance with our
obligations under the Registration Rights Agreement. Following the exchange
offer, if you did not tender your Old Notes you generally will not have any
further registration rights (subject to limited exceptions), and such Old
Notes will continue to be subject to certain transfer restrictions. See "Risk
Factors--Holders who fail to exchange their Old Notes will continue to be
subject to restrictions on transfer."
Holders of the New Notes are not entitled to any registration rights with
respect to the New Notes, except for in limited circumstances.
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Additional Information
Anyone who receives this prospectus may obtain a copy of the Indenture,
all supplemental indentures thereto and the Registration Rights Agreement
without charge by writing to Kerzner International Limited, Coral Towers,
Paradise Island, Bahamas (attention: General Counsel).
Book-Entry, Delivery and Form
The New Notes will be represented by one or more notes in registered,
global form without interest coupons (collectively, the "Global Notes"). The
Global Notes will be deposited upon issuance with the Trustee as custodian for
The Depositary Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or
its nominee. Beneficial interests in the Global Notes may not be exchanged for
notes in certificated form except in the limited circumstances described
below. See "--Exchange of Global Notes for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Notes will not be entitled to receive physical delivery of notes in
certificated form. Transfers of beneficial interests in the Global Notes will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
Depository Procedures
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to changes by DTC. We
take no responsibility for these operations and procedures and urge investors
to contact DTC or its participants directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers
and dealers (including the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participant or the
Indirect Participant. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised us that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the account of
Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership of these interests will be effected
only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interest in the Global
Notes).
The laws of some states require that certain Persons take physical
deliver in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such Persons will
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants, the ability of a Person
having beneficial interests in a Global Note to pledge such interests to
Persons that do not participate in the DTC system, or otherwise take actions
in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY
OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS
OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
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Payments in respect of the principal of, and interest and premium and
liquidated damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, we and the Trustee will
treat the Persons in whose names the notes, including the Global Notes, are
registered as the owners of the notes for the purpose of receiving payments
and for all other purposes. Consequently, none of us, the Trustee nor any
agent of us or the Trustee has or will have any responsibility or liability
for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. Payments by
the Participants and the Indirect Participants to the beneficial owners of
notes will be governed by standing instructions and customary practices and
will be the responsibility of the Participants or the Indirect Participants
and will not be the responsibility of DTC, the Trustee or us. None of us nor
the Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the notes, and we and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
DTC has advised us that it will take any action permitted to be taken by
a Holder of notes only at the direct or one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the notes as to which
such Participant or Participant has or have given such direction. However, if
there is an Event of Default under the notes, DTC reserves the right to
exchange the Global Notes for legended notes in certificated form, and to
distribute such notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilities
transfers of interests in the Global Notes among participants in DTC they are
under no obligation to perform or to continue to perform such procedures, and
may discontinue such procedures at any time. None of us nor the Trustee nor
any of our or their respective agents will have any responsibility for the
performance by DTC or its participants or indirect participants of its
obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Notes and we fail to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under
the Exchange Act and we fail to appoint a successor depositary;
(2) we, at our option, notify the Trustee in writing that we elect to
cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing an Event of Default with respect
to the notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all case, Certificated
Notes delivered in exchange for any Global Note or beneficial interests in
Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
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Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes.
Same Day Settlement and Payment
We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and Liquidated Damages,
if any) by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. We will make all payments of principal,
interest and premium and Liquidated Damages, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the Holders of the Certificated Notes or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The notes represented by the Global Notes are expected to be eligible
to trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such notes
will, therefore, be required by DTC to be settled in immediately available
funds. We expect that secondary trading in any Certificated Notes will also be
settled in immediately available funds.
Certain Definitions
"2001 Notes" means the $200,000,000 aggregate principal amount of the
Issuers' 8-7/8% Senior Subordinated Notes due 2011 issued on August 14, 2001.
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock
of any person existing at the time such person becomes a Subsidiary of either
of the Issuers or is merged or consolidated into or with either of the Issuers
or any of their Subsidiaries.
"Acquisition" means the purchase or other acquisition of any person or
all or substantially all the assets of any person by any other person, or the
acquisition of assets that constitute all or substantially all of an operating
unit of business, whether by purchase, merger, consolidation, or other
transfer, and whether or not for consideration.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with Kerzner
International. For purposes of this definition, the term "control" means the
power to direct the management and policies of a person, directly or through
one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise, provided that, with respect to
ownership interest in Kerzner International and its Subsidiaries a Beneficial
Owner of 10% or more of the total voting power normally entitled to vote in
the election of directors, managers or trustees, as applicable, shall for such
purposes be deemed to constitute control.
"Allowed Non-Recourse Indebtedness" means Indebtedness (a) as to which
neither of the Issuers nor any of their Subsidiaries (1) provide credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (2) is directly or indirectly liable (as a
guarantor or otherwise), or (3) constitutes the lender, and (b) no default
with respect to which (including any rights that the holders thereof may have
to take enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any Indebtedness of the
Issuers or any of their Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior
to its stated maturity.
"Average Life" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal (or redemption) payment
of such security or instrument and (b) the amount of each such respective
principal (or redemption) payment by (ii) the sum of all such principal (or
redemption) payments.
"Beneficial Owner" or "beneficial owner" has the meaning attributed to it
in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York or the
New York Stock Exchange are authorized or obligated by law or executive order
to close.
"Capitalized Lease Obligation" means, as applied to any person, any lease
of any property (whether
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real, personal or mixed) of which the discounted present value of the rental
obligations of such person, as lessee, in conformity with GAAP, is required to
be capitalized on the balance sheet of such person.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not otherwise itself capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Cash Equivalent" means (a) (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit of any domestic commercial bank of recognized standing
having capital and surplus in excess of $500 million or (iii) commercial paper
issued by others rated at least A-1 or the equivalent thereof by Standard &
Poor's Corporation or at least P-1 or the equivalent thereof by Moody's
Investors Service, Inc., and in the case of each of (i), (ii) and (iii) above
maturing within one year after the date of acquisition or (b) shares of money
market mutual funds or similar funds having assets in excess of $500 million.
"Closing Date" means May 20, 2002.
"Consolidated Coverage Ratio" of any person on any date of determination
(a "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such person's Consolidated Fixed Charges
subsequent to the Transaction Date) during the Reference Period; provided that
for purposes of such calculation, (i) Acquisitions which occurred during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the first day of the
Reference Period, (ii) transactions giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period, (iii) the incurrence or repayment of any Indebtedness
or issuance of any Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date
(and the application of the proceeds therefrom to the extent used to refinance
or retire other Indebtedness) (other than Indebtedness incurred under any
revolving credit facility) shall be assumed to have occurred on the first day
of such Reference Period and (iv) the Consolidated Fixed Charges of such
person attributable to interest on any Indebtedness or dividends on any
Disqualified Capital Stock bearing a floating interest (or dividend) rate
shall be computed on a pro forma basis as if the rate in effect on the
Transaction Date had been the applicable rate for the entire period, unless
such Person or any of its Subsidiaries is a party to an Interest Swap or
Hedging Obligation (which shall remain in effect for the 12-month period
immediately following the Transaction Date) that has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any person, for any period,
the Consolidated Net Income of such person for such period adjusted to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of (i) Consolidated income tax
expense, (ii) Consolidated depreciation and amortization expense, provided
that consolidated depreciation and amortization of a Subsidiary that is a less
than wholly owned Subsidiary shall only be added to the extent of the equity
interest of such person in such Subsidiary, (iii) Consolidated Fixed Charges,
less any non-cash interest income, and (iv) consolidated preopening expenses.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to Capitalized Lease Obligations) of
such person and its Consolidated Subsidiaries during such period, including
(i) original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations
and (iii) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and currency
and Interest Swap and Hedging Obligations, in each case to the extent
attributable to such period, and (b) the amount of dividends accrued or
payable (or guaranteed) by such person or any of its Consolidated Subsidiaries
in respect of preferred stock (other than by Subsidiaries of such person to
such person or such person's wholly owned Subsidiaries) other than dividends
payable solely in shares of Qualified Capital Stock. For purposes of this
definition, (x) interest on a Capitalized Lease Obligation shall be deemed to
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accrue at an interest rate reasonably determined by Kerzner International to
be the rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP and (y) interest expense attributable to any Indebtedness
represented by the guaranty (excluding any Investment Guarantee, but including
any interest expense or comparable debt service payments with respect to any
Investment Guarantee Indebtedness to the extent such Investment Guarantee
Indebtedness is being serviced by such person or any Subsidiary of such
person) by such person or a Subsidiary of such person of an obligation of
another person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any person for any
period, the net income (or loss) of such person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing
such net income (or loss) and without duplication): (a) all gains or losses
which are either extraordinary (as determined in accordance with GAAP),
unusual or non-recurring (including any gain or loss from the sale or other
disposition of assets or currency transactions outside the ordinary course of
business or from the issuance or sale of any capital stock), (b) the net
income, if positive, of any person, other than a Consolidated Subsidiary, in
which such person or any of its Consolidated Subsidiaries has an interest,
except to the extent of the amount of any dividends or distributions actually
paid in cash to such person or a wholly owned Consolidated Subsidiary of such
person during such period, but in any case not in excess of such person's pro
rata share of such person's net income for such period, (c) the net income or
loss of any person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition, (d) the net income, if positive,
of any of such person's Consolidated Subsidiaries to the extent that the
declaration or payment of dividends or similar distributions is not at the
time permitted by operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Consolidated Subsidiary, except for restrictions
under the Credit Agreement, and (e) the cumulative effect of a change in
accounting principles.
"Consolidated Net Worth" of any person at any date means the aggregate
consolidated stockholders' equity of such person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would
be shown on the consolidated balance sheet of such person prepared in
accordance with GAAP, adjusted to exclude (to the extent included in
calculating such equity), the amount of any such stockholders' equity
attributable to Disqualified Capital Stock or treasury stock of such person
and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting
purposes with the financial statements of such person in accordance with GAAP.
"Credit Agreement" means the Third Amended and Restated Credit Agreement
dated as of November 1, 1999, by and among Kerzner Bahamas, Kerzner
International, certain of Kerzner International's subsidiaries, certain
financial institutions and The Bank of Nova Scotia, as administrative and
collateral agent, providing for a revolving credit facility, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as such credit agreement and/or related
documents may be amended, restated, supplemented, renewed, replaced or
otherwise modified from time to time whether or not with the same agent,
trustee, representative lenders or holders, and, subject to the proviso to the
next succeeding sentence, irrespective of any changes in the terms and
conditions thereof. Without limiting the generality of the foregoing, the term
"Credit Agreement" shall include agreements in respect of Interest Swap and
Hedging Obligations entered into for bona fide hedging purposes and not
entered into for speculative purposes with lenders party to the Credit
Agreement or their affiliates and shall also include any amendment, amendment
and restatement, renewal, extension, restructuring, supplement or modification
to any Credit Agreement and all refundings, refinancings and replacements of
any Credit Agreement, including any agreement (i) extending or shortening the
maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii)
adding or deleting borrowers or guarantors thereunder, so long as borrowers
and issuers include one or more of Kerzner International and its Subsidiaries
and their respective successors and assigns, (iii) increasing the amount of
Indebtedness incurred thereunder or available to be borrowed thereunder,
provided that on the date such Indebtedness is incurred it would not be
prohibited by the provisions of the covenant described above under "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock," or
(iv) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms hereof.
"Disqualified Capital Stock" means (i) except as set forth in (ii), with
respect to any person, Equity Interests of such person that, by their terms or
by the terms of any security into which they are convertible, exercisable or
exchangeable, are, or upon the happening of an event or the passage of time
would be, required to be redeemed or repurchased (including at the option of
the holder thereof) by such person or any of its
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Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the
Notes and (ii) with respect to any Subsidiary of such person (other than the
Guarantors), any Equity Interests other than any common equity with no
preference, privileges, or redemption or repayment provisions. Notwithstanding
the foregoing, any Equity Interests that would constitute Disqualified Capital
Stock solely because the holders thereof have the right to require the Company
to repurchase such Equity Interests upon the occurrence of a change of control
or with the proceeds of an asset sale shall not constitute Disqualified
Capital Stock if the terms of such Equity Interests provide that the Issuers
may not repurchase or redeem any such Equity Interests pursuant to such
provisions prior to the Issuers' purchase of the Notes as are required to be
purchased pursuant to the provisions of the Indenture as described under
"Repurchase of Notes at the Option of the Holder upon a Change of Control" and
"Limitation on Sale of Assets and Subsidiary Stock," as applicable.
"Equity Interest" of any person means any shares, interests,
participations or other equivalents (however designated) in such person's
equity, and shall in any event include any Capital Stock issued by, or
partnership or membership interests in, such person.
"Event of Loss" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property or asset, or confiscation or requisition of the
use of such property or asset.
"Exempted Affiliate Transaction" means any transaction (i) solely between
or among any of the Issuers and any of the Guarantors, and (ii) solely between
or among any of the Issuers and any of their wholly owned Subsidiaries.
"FF&E Indebtedness" means any Indebtedness of a person to any seller or
other person incurred to finance the acquisition (including in the case of a
Capitalized Lease Obligation, the lease) or improvement of any Gaming Facility
or hotel or gaming or hotel related fixtures, furniture or equipment which is
directly related to a Related Business of Kerzner International and which is
incurred concurrently with such acquisition and is secured only by the assets
so financed.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Gaming Authority" means any regulatory body responsible for a gaming
license held by Kerzner International or a Subsidiary of Kerzner International
or any agency (including, without limitation, any agency established by a
United States Federally-recognized Indian tribe to regulate gaming on such
tribe's reservation) which has, or may at any time after the Issue Date have,
jurisdiction over the gaming activities of the Issuers or any Subsidiary of
any of the Issuers or any successor to such authority.
"Gaming Facility" means any gaming or parimutuel wagering establishment
and other property or assets directly ancillary thereto or used in connection
therewith, including any building, restaurant, hotel, theater, parking
facilities, retail shops, land, golf courses and other recreation and
entertainment facilities, vessel, barge, ship, and equipment.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such person to the
extent such liabilities and obligations would appear as a liability upon the
consolidated balance sheet of such person in accordance with GAAP, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, or (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except those incurred in the ordinary course of its
business that would constitute ordinarily trade payables to trade creditors,
(b) all liabilities and obligations, contingent or otherwise, of such Person
(i) evidenced by bankers' acceptances or similar instruments issued or
accepted by banks, (ii) relating to any Capitalized Lease Obligation, or (iii)
evidenced by a letter of credit or a reimbursement obligation of such person
with respect to any letter of credit; (c) all net obligations of such person
under Interest Swap and Hedging Obligations; (d) all liabilities and
obligations of others of the kind described in the preceding clause (a), (b)
or (c) that such person has guaranteed or that is otherwise its legal
liability or which are secured by any assets or property of such person, (e)
any and all deferrals, renewals, extensions, refinancing and refundings
(whether direct or indirect) of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding clauses (a),
(b) or (c), or this clause (e), whether or not between or among the same
83
parties, and (f) all Disqualified Capital Stock of such Person (measured at
the greater of its voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends). Notwithstanding the foregoing, (1) an
Investment Guarantee shall not constitute Indebtedness and (2) Investment
Guarantee Indebtedness shall constitute Indebtedness. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such
fair market value to be determined in good faith by the board of directors of
the issuer of such Disqualified Capital Stock. The amount of any Indebtedness
outstanding as of any date shall be (1) the accreted value thereof, in the
case of any Indebtedness issued with original issue discount, but the
accretion of original issue discount in accordance with the original terms of
Indebtedness issued with an original issue discount will not be deemed to be
an incurrence and (2) the principal amount thereof, in the case of any other
Indebtedness.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any person in any other person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation
or otherwise) by such person (whether for cash, property, services, securities
or otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other person or any agreement to make any such acquisition; (b) the
making by such person of any deposit with, or advance, loan or other extension
of credit to, such other person (including the purchase of property from
another person subject to an understanding or agreement, contingent or
otherwise, to resell such property to such other person) or any commitment to
make any such advance, loan or extension (but excluding accounts receivable or
deposits arising in the ordinary course of business); (c) other than (i)
guarantees of Indebtedness of Kerzner International or any Subsidiary to the
extent permitted by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" and (ii) Investment Guarantees,
the entering into by such person of any guarantee of, or other credit support
or contingent obligation with respect to, Indebtedness or other liability of
such other person; (d) the making of any capital contribution by such person
to such other person; (e) the designation by the Board of Directors of Kerzner
International of any person to be an Unrestricted Subsidiary; and (f) the
making by such person or any Subsidiary of such person of any Investment
Guarantee Payment. Kerzner International shall be deemed to make an Investment
in an amount equal to the fair market value of the net assets of any
subsidiary (or, if neither Kerzner International nor any of its Subsidiaries
has theretofore made an Investment in such subsidiary, in an amount equal to
the Investments being made), at the time that such subsidiary is designated an
Unrestricted Subsidiary, and any property transferred to an Unrestricted
Subsidiary from Kerzner International or a Subsidiary shall be deemed an
Investment valued at its fair market value at the time of such transfer.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's (or any successor to the rating agency business
thereof) or BBB- (or the equivalent) by S&P (or any successor to the rating
agency business thereof).
"Investment Grade Status" means any time at which the ratings of the
Notes by both Moody's (or any successor to the rating agency business thereof)
and S&P (or any successor to the rating agency business thereof) are
Investment Grade Ratings.
"Investment Guarantee" means (1) any guarantee (with full rights of
subrogation), directly or indirectly, by the Issuers or any Guarantor of
Indebtedness of a Permitted Joint Venture, (2) any guarantee (with full rights
of subrogation), directly or indirectly, by the Issuers or any Guarantor of
Indebtedness of any person to whom any of the Issuers or the Guarantors
provide management services pursuant to a Management Services Agreement, which
Indebtedness matures by its terms prior to the time (if any) that such
Management Services Agreement is scheduled to expire, (3) any guarantee (with
full rights of subrogation), directly or indirectly, by the Issuers or any
Guarantor of Indebtedness of any person to whom any of the Issuers, the
Guarantors or TCA provides management services or development services
pursuant to a Native American Services Agreement, which Indebtedness matures
by its terms prior to the time (if any)
84
that such Native American Services Agreement is scheduled to expire, or (4)
any direct or indirect completion guarantee by the Issuers or any Guarantor,
which terminates or expires by its terms prior to the time (if any) that the
applicable Native American Services Agreement is scheduled to expire, in
connection with any development services or management services provided by
any of the Issuers, the Guarantors or TCA, as applicable, pursuant to such
Native American Services Agreement; provided that in the case of each of (1),
(2), (3) and (4), at the time such guarantee is incurred or such completion
guarantee is entered into, the Issuers and the Guarantors are permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Debt
Incurrence Ratio in the covenant described above under "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock."
"Investment Guarantee Indebtedness" of any Issuer or Guarantor means any
Indebtedness of another person guaranteed by such Issuer or Guarantor pursuant
to an Investment Guarantee, on and after the time such Issuer or Guarantor
makes any interest or comparable debt service payment with respect to such
guaranteed Indebtedness.
"Investment Guarantee Payments" means, without duplication, (1) any
payments made pursuant to any Investment Guarantee, or (2) the full amount of
any Investment Guarantee if, at any time, the person whose Indebtedness is
guaranteed by such Investment Guarantee ceases to constitute a Permitted Joint
Venture as a result of a decline in the Issuers' or Guarantor's ownership
interest to less than 35% as a result of a sale, transfer or other disposition
of Capital Stock of such person by the Issuers or any Guarantor, or (3) the
full amount of any Investment Guarantee if, at any time, the Management
Services Agreement or Native American Services Agreement with respect to the
person whose Indebtedness is guaranteed by such Investment Guarantee is
terminated without a concurrent replacement thereof that has an expiration
after the maturity of all Indebtedness of such person guaranteed by any of the
Issuers or the Guarantors.
"Issue Date" means August 14, 2001, the date of first issuance of any
Notes under the Indenture.
"Junior Security" means any Qualified Capital Stock and any Indebtedness
of an Issuer or a Guarantor, as applicable, that (i) is subordinated in right
of payment to Senior Debt at least to the same extent as the Notes or the
Guarantee, as applicable, (ii) has no scheduled installment of principal due,
by redemption, sinking fund payment or otherwise, on or prior to the Stated
Maturity of the Notes, (iii) does not have covenants or default provisions
materially more beneficial to the holders of the Notes than those in effect
with respect to the Notes on the Issue Date and (iv) was authorized by an
order or decree of a court of competent jurisdiction that gave effect to (and
states in such order or decree that effect has been given to) the
subordination of such securities to all Senior Debt of the applicable Issuer
or Guarantor not paid in full in cash or Cash Equivalents in connection with
such reorganization; provided that all such Senior Debt is assumed by the
reorganized corporation and the rights of the holders of any such Senior Debt
are not, without the consent of such holders, altered by such reorganization,
which consent shall be deemed to have been given if the holders of such Senior
Debt, individually or as a class, shall have approved such reorganization.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Management Services Agreement" means any written agreement (other than a
Native American Services Agreement) pursuant to which the Issuers or any
Guarantor provides or will provide management services in connection with a
Gaming Facility and/or a hotel facility and related amenities.
"Moody's" means Moody's Investor Services, Inc.
"Native American Services Agreement" means any written agreement pursuant
to which the Issuers, any Guarantor or TCA provides or will provide
development services or management services in connection with a Gaming
Facility operated by a Native North American Tribe or agency or
instrumentality thereof, provided that such Issuer or Guarantor or TCA has
obtained a customary opinion from outside counsel that such agreement is
enforceable.
"Net Cash Proceeds" means the aggregate amount of Cash or Cash
Equivalents received by Kerzner International in the case of a sale of
Qualified Capital Stock and by Kerzner International and its Subsidiaries in
respect of an Asset Sale plus, in the case of an issuance of Qualified Capital
Stock upon any exercise, exchange or conversion of securities (including
options, warrants, rights and convertible or exchangeable debt) of Kerzner
International that were issued for cash on or after the Issue Date, the amount
of cash originally received by Kerzner International upon the issuance of such
securities (including options, warrants, rights and convertible or
exchangeable debt) less, in each case, the sum of all payments, fees,
commissions
85
and reasonable and customary expenses (including, without limitation, the fees
and expenses of legal counsel and investment banking fees and expenses)
incurred in connection with such Asset Sale or sale of Qualified Capital
Stock, and, in the case of an Asset Sale only, less the amount (estimated
reasonably and in good faith by Kerzner International) of income, franchise,
sales and other applicable taxes required to be paid by Kerzner International
or any of its respective Subsidiaries in connection with such Asset Sale.
"Non-Recourse Indebtedness" means Indebtedness of a person to the extent
that under the terms thereof or pursuant to applicable law (i) no personal
recourse shall be had against such person for the payment of the principal of
or interest or premium, if any, on such Indebtedness, and (ii) enforcement of
obligations on such Indebtedness is limited only to recourse against interests
in property purchased with the proceeds of the incurrence of such Indebtedness
and as to which none of the Issuers or any of its Subsidiaries provides any
credit support or is liable.
"Permitted Holder" means Solomon Kerzner, his immediate family or a trust
or similar entity existing solely for his benefit or for the benefit of his
immediate family.
"Permitted Indebtedness" means Indebtedness incurred as follows:
(a) the Issuers and the Guarantors may incur Indebtedness (i)
pursuant to the Credit Agreement up to an aggregate principal amount
outstanding (including any Indebtedness issued to refinance, refund or
replace such Indebtedness) pursuant to this clause (a) at any time of
$350 million (excluding any amounts with respect to Interest Swap and
Hedging Obligations), minus the amount of any such Indebtedness retired
with Net Cash Proceeds from any Asset Sale or assumed by a transferee in
an Asset Sale (provided any commitment in respect of such Indebtedness is
permanently reduced) and (ii) the Issuers and the Guarantors may incur
Indebtedness with respect to Interest Swap and Hedging Obligations
entered into for bona fide hedging purposes and not entered into for
speculative purposes;
(b) the Issuers and the Guarantors may incur Indebtedness evidenced
by the Notes and the Guarantees and represented by the Indenture up to
the amounts issued on the Issue Date;
(c) the Issuers and the Guarantors may incur FF&E Indebtedness on or
after the Issue Date, provided that (i) such FF&E Indebtedness is
Non-Recourse Indebtedness and (ii) such Indebtedness shall not constitute
more than 100% of the cost (determined in accordance with GAAP) to the
Issuers or such Guarantor, as applicable, of the property so purchased or
leased or the cost of the relevant improvements;
(d) the Issuers and the Guarantors may incur Indebtedness solely in
respect of bankers' acceptances and performance bonds (to the extent that
such incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry
practices, in amounts and for the purposes customary in their industry;
(e) the Issuers may incur Indebtedness to any wholly owned
Subsidiary, and any wholly owned Subsidiary may incur Indebtedness to any
other wholly owned Subsidiary or to an Issuer; provided that, in the case
of Indebtedness of the Issuers (other than Indebtedness that is required
to be pledged to the lenders under the Credit Agreement), such
obligations shall be unsecured and subordinated in all respects to the
Issuers' obligations pursuant to the Notes, and the date of any event
that causes a Subsidiary to no longer be a wholly owned Subsidiary shall
be an Incurrence Date;
(f) the Issuers and the Guarantors may incur Investment Guarantee
Indebtedness; and
(g) the Issuers and their Subsidiaries, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or Disqualified
Capital Stock, as applicable, described in clauses (b), (f) and (g) of
this definition or incurred under the Debt Incurrence Ratio contained in
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock" or which is outstanding on the Issue Date so
long as such Refinancing Indebtedness is secured only by the assets that
secured the Indebtedness so refinanced or otherwise replaced.
"Permitted Investment" means (a) any Investment in any of the Notes; (b)
any Investment in Cash Equivalents; (c) any Investment in intercompany notes
to the extent permitted under clause (e) of the definition of "Permitted
Indebtedness"; (d) any Investment in a person in a Related Business who, after
such Investment, becomes a Subsidiary of an Issuer and a Guarantor of the
Notes; (e) any Investment in any
86
property or assets to be used by an Issuer or Guarantor in a Related Business;
(f) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the
covenant "Limitation on Sale of Assets and Subsidiary Stock"; (g) Investments
by the Issuers or any Guarantor in one or more persons engaged in a Related
Business, provided that (1) after giving pro forma effect to each such
Investment, the aggregate amount of all such Investments made on and after the
Issue Date pursuant to this clause (g) that are outstanding (less an amount
(not to exceed the aggregate amount of Investments previously made pursuant to
this clause (g)) equal to the net reduction in such Investments resulting from
any dividends, repayment of loans or advances or other transfers of assets to
the Issuers or any Guarantor or the proceeds realized on sale of such
Investments or representing the return of capital or the satisfaction or
reduction (other than by means of payments by the Issuers or any Subsidiary)
of obligations of other persons which have been guaranteed by the Issuers or
any Guarantor or the release or expiration of any such guarantee; provided
that the amount of anything credited pursuant to this clause shall not exceed
its fair market value at the time of transfer) at any time does not in the
aggregate exceed $85 million (measured by the value attributed to the
Investment at the time made or returned, as applicable), and (2) at the time
of such Investment, the Issuers and the Guarantors are permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio
in the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock"; (h) Investments in one or more persons made by
the Issuers or any Guarantor in connection with a Gaming Facility to be
developed in the Catskill region of New York pursuant to a Native American
Services Agreement with the Stockbridge-Munsee Band of Mohican Indians or in
connection with any Gaming Facility developed with or managed on behalf of any
Native North American tribe or any agency or instrumentality thereof pursuant
to a Native American Services Agreement, provided that (1) after giving pro
forma effect to each such Investment, the aggregate amount of all such
Investments made on and after the Issue Date pursuant to this clause (h) that
are outstanding (less an amount (not to exceed the aggregate amount of
Investments previously made pursuant to this clause (h)) equal to the net
reduction in such investments resulting from any dividends, repayment of loans
or advances or other transfers of assets to the Issuers or any Guarantor or
the proceeds realized on sale of such Investments or representing the return
of capital or the satisfaction or reduction (other than by means of payments
by the Issuers or any Subsidiary) of obligations of other persons which have
been guaranteed by the Issuers or any Guarantor or the release or expiration
of any such guarantee; provided that the amount of anything credited pursuant
to this clause shall not exceed its fair market value at the time of transfer)
at any time does not in the aggregate exceed $50 million (measured by the
value attributed to the Investment at the time made or returned, as
applicable), and (2) at the time of such Investment, the Issuers and the
Guarantors are permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio in the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock"; and (i)
any Investments solely in exchange for the issuance of Qualified Capital
Stock.
"Permitted Joint Venture" means a person primarily engaged or preparing
to engage in a Related Business as to which one of the Issuers or a Guarantor
owns at least 35% of the shares of Capital Stock (including at least 35% of
the total voting power thereof) of such Person.
"Permitted Lien" means (a) any Lien securing the Notes; (b) any Lien
securing Indebtedness of a Person existing at the time such Person becomes a
Subsidiary or is merged with or into either of the Issuers or a Subsidiary of
either of the Issuers or Liens securing Indebtedness incurred in connection
with an Acquisition, provided that such Liens were in existence prior to the
date of such acquisition, merger or consolidation, were not incurred in
anticipation thereof, and do not extend to any other assets; (c) any Lien in
favor of either of the Issuers or any Guarantor; and (d) any Lien arising from
FF&E Indebtedness permitted to be incurred under clause (c) of the definition
of "Permitted Indebtedness," provided such Lien relates solely to the property
which is subject to such FF&E Indebtedness.
"Qualified Capital Stock" means any Capital Stock of Kerzner
International that is not Disqualified Capital Stock.
"Qualified Equity Offering" means (1) an underwritten registered public
offering of Ordinary Shares of Kerzner International for cash, other than
pursuant to Form S-8 (or any successor thereto) and other than Ordinary Shares
of Kerzner International issued pursuant to employee benefit plans or as
compensation to employees, and (2) an unregistered offering of Ordinary Shares
of Kerzner International for cash resulting in net proceeds to Kerzner
International in excess of $50 million.
"Qualified Exchange" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of Kerzner
International issued on or after the Issue Date with the Net Cash Proceeds
received by Kerzner International from the substantially concurrent sale of
Qualified Capital Stock or any exchange of Qualified Capital Stock for any
Capital Stock or Indebtedness of Kerzner International outstanding on or
issued on or after the Issue Date.
87
"Rating Agencies" means S&P and Moody's or any successor to the
respective rating agency businesses thereof.
"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination
is to be made pursuant to the terms of the Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale
of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in
part, or (b) constituting an amendment, modification or supplement to, or a
deferral or renewal of ((a) and (b) above are, collectively, a "Refinancing"),
any Indebtedness or Disqualified Capital Stock in a principal amount or, in
the case of Disqualified Capital Stock, liquidation preference, not to exceed
(after deduction of reasonable and customary fees and expenses, including any
premium and defeasance costs, incurred in connection with the Refinancing) the
lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital
Stock so Refinanced and (ii) if such Indebtedness being Refinanced was issued
with an original issue discount, the accreted value thereof (as determined in
accordance with GAAP) at the time of such Refinancing; provided that (A) such
Refinancing Indebtedness of any Subsidiary of Kerzner International shall only
be used to Refinance outstanding Indebtedness or Disqualified Capital Stock of
such Subsidiary, (B) such Refinancing Indebtedness shall (x) not have an
Average Life shorter than the Indebtedness or Disqualified Capital Stock to be
so refinanced at the time of such Refinancing and (y) in all respects, be no
less subordinated or junior, if applicable, to the rights of Holders of the
Notes than was the Indebtedness or Disqualified Capital Stock to be refinanced
and (C) such Refinancing Indebtedness shall have a final stated maturity or
redemption date, as applicable, no earlier than the final stated maturity or
redemption date, as applicable, of the Indebtedness or Disqualified Capital
Stock to be so refinanced.
"Related Business" means the gaming or hotel business and other
businesses necessary for, or in the good faith judgment of the Board of
Directors of Kerzner International, incident to, connected with, arising out
of, or developed or operated to permit or facilitate the conduct or pursuit of
the gaming or hotel business (including developing or operating sports or
entertainment facilities, retail facilities, restaurants, night clubs,
transportation and communications services or other related activities or
enterprises and any additions or improvements thereto) and potential
opportunities in the gaming or hotel business.
"Representative" means the agent or representative in respect of the
lenders party to the Credit Agreement.
"Restricted Payment" means, with respect to any person, (a) the
declaration or payment of any dividend or other distribution in respect of
Equity Interests of such person or any parent or Subsidiary of such person,
(b) any payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such person or any parent or
Subsidiary of such person, (c) other than with the proceeds from the
substantially concurrent sale of, or in exchange for, Refinancing
Indebtedness, any purchase, redemption, or other acquisition or retirement for
value of, any payment in respect of any amendment of the terms of or any
defeasance of, any Subordinated Indebtedness, directly or indirectly, by such
person or a Subsidiary of such person prior to the scheduled maturity, any
scheduled repayment of principal, or scheduled sinking fund payment, as the
case may be, of such Indebtedness and (d) any Investment by such person, other
than a Permitted Investment; provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution or other payment on
or with respect to Equity Interests of an Issuer to the extent payable solely
in shares of Qualified Capital Stock of such Issuer; or (ii) any dividend,
distribution or other payment to the Issuers, or to any Guarantors, by Kerzner
International or any of its Subsidiaries.
"S&P" means Standard and Poor's Ratings Group, a division of the
McGraw-Hill Companies, Inc.
"Senior Debt" of Kerzner International, KINA or any Guarantor means
Indebtedness (including and together with all monetary obligations in respect
of the Credit Agreement, and interest, whether or not allowable, accruing on
Indebtedness incurred pursuant to the Credit Agreement after the filing of a
petition initiating any proceeding under any bankruptcy, insolvency or similar
law or which would have accrued but for such filing) of Kerzner International,
KINA or such Guarantor arising under the Credit Agreement or that, by the
terms of the instrument creating or evidencing such Indebtedness, is expressly
designated Senior Debt and made senior in right of payment to the Notes or the
applicable Guarantee; provided that in no event shall Senior Debt include (a)
Indebtedness to any Subsidiary of Kerzner International or any officer,
director or employee of Kerzner International or any Subsidiary of Kerzner
International (other than Indebtedness that is required to be pledged to the
lenders under the Credit Agreement), (b) Indebtedness incurred in violation
88
of the terms of the Indenture including, without limitation, Indebtedness
claiming to be subordinated to any other Indebtedness and senior to the Notes,
(c) Indebtedness to trade creditors, (d) Disqualified Capital Stock, and (e)
any liability for taxes owed or owing by Kerzner International, KINA or such
Guarantor.
"Significant Subsidiary" shall have the meaning provided under Regulation
S-X under the Securities Act, as in effect on the Issue Date.
"Stated Maturity," when used with respect to any Note, means August 15,
2011.
"Subordinated Indebtedness" means Indebtedness of Kerzner International,
KINA or a Guarantor that is subordinated in right of payment to the Notes or
such Guarantee, as applicable, in any respect or, for purposes of the
definition of Restricted Payments only, has a stated maturity on (except for
the Notes) or after the Stated Maturity.
"Subsidiary," with respect to any person, means (i) a corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by such person and one or more Subsidiaries of such
person or by one or more Subsidiaries of such person, (ii) any other person
(other than a corporation) in which such person, one or more Subsidiaries of
such person, or such person and one or more Subsidiaries of such person,
directly or indirectly, at the date of determination thereof has at least
majority ownership interest, or (iii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner. Notwithstanding
the foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of Kerzner
International or any Subsidiary of Kerzner International. Unless the context
requires otherwise, Subsidiary means each direct and indirect Subsidiary of
Kerzner International.
"TCA" means Trading Cove Associates, a Connecticut general partnership
and its majority owned subsidiaries, so long as the Issuers and the Guarantors
maintain at least their ownership interest in the partnership (including
priorities, preferences and privileges with respect to distributions or any
other payments or voting power) owned on the Issue Date.
"Unrestricted Subsidiary" means any subsidiary of Kerzner International
(other than KINA), that does not own any Capital Stock of, or own or hold any
Lien on any property of, Kerzner International or any other Subsidiary of
Kerzner International, including KINA, and that shall be designated an
Unrestricted Subsidiary by the Board of Directors of Kerzner International;
provided that (i) such subsidiary shall not engage, to any substantial extent,
in any line or lines of business activity other than a Related Business, (ii)
neither immediately prior thereto nor after giving pro forma effect to such
designation would there exist a Default or Event of Default, (iii) immediately
after giving pro forma effect thereto, Kerzner International could incur at
least $1.00 of Indebtedness pursuant to the Debt Incurrence Ratio in the
covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock" and (iv) at the time of such designation, such Subsidiary has
no Indebtedness other than Allowed Non-Recourse Indebtedness. The Board of
Directors of Kerzner International may designate any Unrestricted Subsidiary
to be a Subsidiary, provided that (i) no Default or Event of Default is
existing or will occur as a consequence thereof and (ii) immediately after
giving effect to such designation, on a pro forma basis, Kerzner International
could incur at least $1.00 of Indebtedness pursuant to the Debt Incurrence
Ratio in the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock." Each such designation shall be evidenced by
filing with the Trustee a certified copy of the resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"wholly owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by Kerzner International or one or more wholly owned
Subsidiaries of Kerzner International, except for directors' qualifying
shares.
89
DESCRIPTION OF OTHER INDEBTEDNESS
Revolving Credit Facility
We have a revolving credit facility with a syndicate of banks that
currently provides for aggregate borrowings at any one time of up to $300.0
million, with the option to increase such amount by an additional $50.0
million if certain conditions are satisfied. See "Summary--Recent
Developments--Revolving Credit Facility." As of May 31, 2002, there were no
borrowings under the revolving credit facility.
Loans under the revolving credit facility bear interest at (i) the higher
of (a) the administrative agent's base rate or (b) the federal funds rate plus
one half of one percent, in either case plus an additional 0.25% to 1.75%
based on a debt to earnings ratio during the period, which we refer to as the
debt ratio, or (ii) the LIBO Rate (as defined) plus 1.25% to 2.75% based on
the debt ratio. For loans based on the LIBO Rate, interest is payable on the
last day of each applicable interest period, or the date of any payment or
prepayment of such loans. For loans based on the Alternate Base Rate (as
defined), interest is payable quarterly. Loans under the revolving credit
facility may be prepaid and reborrowed at any time and are due in full on
November 8, 2006. Commitment fees are calculated at per year rates ranging
from 0.375% to 0.500%, based on the debt ratio, applied to the undrawn amount
of the revolving credit facility and are payable quarterly.
The revolving credit facility contains restrictive covenants that
include:
o restrictions on the payment of dividends;
o a minimum consolidated net worth; and
o a minimum relationship between EBITDA and (i) interest expense,
(ii) total debt and (iii) senior debt.
The revolving credit facility is secured by a pledge of substantially all
of our assets.
Overdraft Loan Facility
We have a revolving overdraft loan facility with The Bank of Nova Scotia
in the amount of Bahamian $5.0 million (which is equal to U.S. $5.0 million).
The overdraft facility bears interest at The Bank of Nova Scotia's base rate
for Bahamian dollar loans plus 1.5% with repayment, subject to annual review.
The overdraft facility is secured by substantially all of our Bahamian assets
and ranks pari passu with our revolving credit facility. As of April 30, 2002,
no amounts were outstanding under the overdraft facility.
Debt Securities
8-5/8% Senior Subordinated Notes
In December 1997, we and KINA co-issued $100.0 million of 8-5/8% senior
subordinated notes due December 2007. Interest on the 8-5/8% senior
subordinated notes is payable semi-annually.
The tender offer and consent solicitation with respect to the 9% senior
subordinated notes had no effect on the 8-5/8% senior subordinated notes or the
covenants contained in the indenture governing the 8-5/8% senior subordinated
notes.
8-7/8% Senior Subordinated Notes
In August 2001, we and KINA co-issued $200.0 million of 8-7/8% senior
subordinated notes due August 2011. Interest on the 8-7/8% senior subordinated
notes is payable semi-annually. The indenture for the 8-7/8% senior
subordinated notes contains the same covenants and restrictions described
under "Description of New Notes." Other than with respect to transfer
restrictions, the notes offered hereby will have the same terms as the 8-7/8%
senior subordinated notes issued in August 2001. See "Description of New
Notes."
The tender offer and consent solicitation with respect to the 9% senior
subordinated notes had no effect on the 8-5/8% senior subordinated notes or the
covenants contained in the indenture governing the 8-5/8% senior subordinated
notes.
90
Derivative Financial Instruments
We have interest rate swap agreements designated as fair value hedges of
our outstanding 8-7/8% senior subordinated notes. As of December 31, 2001, the
aggregate notional principal amount of the swap agreements was $200.0 million.
The fair value of the swap agreements as of December 31, 2001 was $5.5 million
and was classified as other long-term liabilities on our consolidated balance
sheet. This represents the principal amount we would have been required to pay
had the swap agreements terminated on that date.
91
CERTAIN TAX CONSIDERATIONS
The statements herein regarding taxation are based on the laws of The
Bahamas and the United States in force as of the date of this Prospectus and
are subject to any changes in law occurring after such date, which changes
could be made on a retroactive basis. Holders of the Old Notes contemplating
acceptance of the exchange offer are advised to consult their tax advisors
regarding the tax consequences of the exchange offer.
Certain Bahamian Tax Considerations
The following is a brief and general summary of certain Bahamian tax
matters as they may relate to the Issuers and the Holders of the New Notes.
The discussion is not exhaustive and is based on Bahamian law currently in
effect. The Bahamas does not impose any income, capital gains or withholding
taxes. Therefore, the Company is not subject to income tax in The Bahamas on
an ongoing basis, although the Company is subject to gaming taxes and other
governmental fees and charges. See "Business--Certain Matters Affecting Our
Bahamanian Operations." In addition, payments of interest with respect to the
New Notes will not be subject to any withholding tax. Any capital gains
realized on the sale or exchange of the New Notes will not be subject to
Bahamian taxes, and no Bahamian stamp duty will be due with respect to such
disposition. Any capital gains realized on the sale or exchange of Ordinary
Shares of Kerzner International will not be subject to Bahamian taxes, and no
Bahamian stamp duty will be due with respect to such disposition.
Certain United States Tax Considerations
The following summary describes the material U.S. federal income tax
consequences to initial holders of the New Notes who are subject to U.S. net
income tax with respect to the New Notes ("U.S. persons") and who hold the New
Notes as capital assets. There can be no assurance that the U.S. Internal
Revenue Service (the "IRS") will take a similar view of the purchase,
ownership or disposition of the Notes. This discussion is based upon the
provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations, rulings and judicial decisions now in effect, all of which are
subject to change. It does not include any description of the tax laws of any
state, local or foreign governments or any estate or gift tax considerations
that may be applicable to the New Notes or holders thereof. It does not
discuss all aspects of U.S. federal income taxation that may be relevant to a
particular investor in light of his particular investment circumstances or to
certain types of investors subject to special treatment under the U.S. federal
income tax laws (for example, dealers in securities or currencies, S
corporations, life insurance companies, tax-exempt organizations, taxpayers
subject to the alternative minimum tax and non-U.S. persons) and also does not
discuss New Notes held as a hedge against currency risks or as part of a
straddle with other investments or part of a "synthetic security" or other
integrated investment (including a "conversion transaction") comprised of a
New Note and one or more other investments, or situations in which the
functional currency of the holder is not the U.S. dollar. The exchange of an
Old Note by a holder for an New Note should not constitute a taxable exchange.
The exchange will not result in income, gain or loss to holders of Old Notes
who participate in the exchange offer, or to the Issuers. Such holders shall
have the same adjusted basis and holding period in New Notes immediately after
the exchange as the holders had in the Old Notes immediately prior to the
exchange.
92
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
expiration date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the expiration date we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal. We agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the Holders of the Old Notes) other
than commissions or concessions of any brokers or dealers and will indemnify
the Holders of the Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
93
LEGAL MATTERS
Legal matters in connection with the exchange offer will be passed upon
for us by Giselle Pyfrom, Esq., our associate general counsel, with respect to
matters of the laws of the Commonwealth of The Bahamas, by Charles D. Adamo,
Esq., our general counsel, with respect to matters of United States federal
law and New York law.
EXPERTS
The consolidated financial statements of Kerzner International Limited
(formerly Sun International Hotels Limited) as of December 31, 2000 and 2001
and for each of the three years in the period ended December 31, 2001 included
in this prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as stated in their report included herein in reliance upon
such firm in giving said reports. The consolidated financial statements of
Kerzner International Limited (formerly Sun International North America, Inc.)
as of December 31, 2000 and 2001 and for each of the three years in the period
ended December 31, 2001 are incorporated by reference in this prospectus and
have been audited by Arthur Andersen LLP, independent public accountants, as
stated in their report incorporated by reference herein in reliance upon such
firm in giving said reports. Arthur Andersen LLP has not consented to the
inclusion of their report in this prospectus, and we have dispensed with the
requirement to file their consent in reliance upon Rule 437a of the Securities
Act. Because Arthur Andersen LLP has not consented to the inclusion of their
report in this prospectus, you may not be able to recover against Arthur
Andersen LLP under Section 11 of the Securities Act for any untrue statements
of a material fact contained in the financial statements audited by Arthur
Andersen LLP or any omissions to state a material fact required to be stated
therein.
On June 24, 2002, we appointed Deloitte & Touche LLP to succeed Arthur
Andersen LLP.
94
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of December 31, 2000 and 2001............. F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 2000 and 2001....................................... F-4
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1999, 2000 and 2001................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 2000 and 2001....................................... F-6
Notes to Consolidated Financial Statements............................... F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Sun International Hotels Limited:
We have audited the accompanying consolidated balance sheets of Sun
International Hotels Limited and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Sun
International Hotels Limited and subsidiaries as of December 31, 2001 and
2000 and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 25, 2002
F-2
SUN INTERNATIONAL HOTELS LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share data)
December 31,
-----------------------------------
2001 2000
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents........................ $30,471 $22,497
Restricted cash.................................. 4,518 1,651
Trade receivables, net........................... 37,454 40,612
Due from affiliates.............................. 28,364 34,140
Inventories...................................... 8,807 10,417
Prepaid expenses and other assets................ 5,226 9,849
Net assets held for sale......................... -- 138,350
------------ ------------
Total current assets................................. 114,840 257,516
Property and equipment, net 1,155,192 1,155,509
Note receivable.................................. 18,018 -
Due from affiliates-non-current.................. 15,888 5,069
Deferred tax asset, net.......................... 3,874 -
Deferred charges and other assets, net............... 18,692 13,120
Investment in associated companies................... 30,527 29,577
------------ ------------
Total assets................................ $1,357,031 $1,460,791
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............. $261 $230
Accounts payable and accrued liabilities.......... 148,063 136,872
Capital creditors................................. 6,570 12,954
------------ ------------
Total current liabilities............................. 154,894 150,056
Other long-term liabilities........................... 5,503 -
Long-term debt, net of current maturities............. 518,231 668,908
------------ ------------
Total liabilities 678,628 818,964
------------ ------------
Commitments and contingencies (Notes 9 and 17) Shareholders' equity:
Ordinary shares, $.001 par value.................. 34 34
Capital in excess of par.......................... 688,714 680,784
Retained earnings................................. 160,977 129,321
Accumulated other comprehensive loss.............. (8,553) (5,543)
------------ ------------
841,172 804,596
Treasury stock.................................... (162,769) (162,769)
------------ ------------
Total shareholders' equity................... 678,403 641,827
------------ ------------
Total liabilities and shareholders' equity... $1,357,031 $1,460,791
============ ============
The accompanying notes are an integral part of these balance sheets.
F-3
SUN INTERNATIONAL HOTELS LIMITED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands of US dollars, except per share data)
For the Year Ended December 31,
------------------------------------------
2001 2000 1999
------------ ------------ ----------
Revenues:
Gaming.......................................... $116,490 $367,935 $351,545
Rooms........................................... 176,573 194,008 164,831
Food and beverage............................... 121,415 147,718 137,100
Tour operations................................. 36,348 33,192 28,714
Real estate related............................. 9,771 108,650 -
Management and other fees....................... 36,806 35,763 46,898
Other revenues.................................. 56,416 49,208 45,910
Insurance recovery.............................. 2,000 -- 14,209
----------- ----------- -----------
Gross revenues............................ 555,819 936,474 789,207
Less: promotional allowances............................. (22,778) (51,779) (50,240)
----------- ----------- -----------
Net revenues.............................. 533,041 884,695 738,967
----------- ----------- -----------
Cost and expenses:
Gaming.......................................... 60,444 224,765 209,177
Rooms........................................... 29,625 33,915 30,448
Food and beverage............................... 82,856 98,288 91,539
Other operating expenses........................ 80,094 96,605 92,705
Real estate related............................. 2,865 32,272 -
Selling, general and administrative............. 80,206 103,465 93,962
Tour operations................................. 32,041 29,626 27,816
Corporate expenses.............................. 25,106 25,340 16,260
Depreciation and amortization................... 51,490 60,223 57,230
Purchase termination costs...................... - 11,202 -
Transaction costs............................... - 7,014 -
Restructuring costs............................. 5,732 - -
Pre-opening expenses............................ 6,904 7,616 5,398
Write-down of net assets held for sale.......... -- 229,208 --
----------- ----------- -----------
Cost and expenses......................... 457,363 959,539 624,535
----------- ----------- -----------
Income (loss) from operations............................ 75,678 (74,844) 114,432
----------- ----------- -----------
Other income (expense):
Interest income................................. 7,471 4,194 12,725
Interest expense, net of capitalization......... (52,702) (45,678) (50,699)
Equity in earnings of associated companies 3,059 4,225 2,628
Other, net...................................... (760) (688) 60
----------- ----------- -----------
Other expense, net........................ (42,932) (37,947) (35,286)
----------- ----------- -----------
Income (loss) before provision for income taxes.......... 32,746 (112,791) 79,146
Provision for income taxes...................... (1,090) (6,313) (9,324)
----------- ----------- -----------
Net income (loss)......................... $ 31,656 $ (119,104) $ 69,822
=========== ============ ===========
Earnings (loss) per share:
Basic........................................... $ 1.18 $ (3.86) $ 2.09
=========== ============ ===========
Diluted......................................... $ 1.14 $ (3.86) $ 2.05
=========== ============ ===========
The accompanying notes are an integral part of these statements.
F-4
SUN INTERNATIONAL HOTELS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2001, 2000 and 1999
(In thousands)
Retained Earnings
------------------------
Accumulated Comprehensive
Ordinary Shares Capital Other Income
--------------- in Excess Retained Comprehensive Treasury Total (Loss) for
Shares Amount of Par Earnings Loss Stock Equity the Period
------ ------ --------- --------- ------------- --------- --------- -------------
Balance at December 31, 1998....... 33,577 $ 34 $675,595 $ 178,603 $(3,611) $ -- $ 850,621
Translation reserves............... -- -- -- -- (1,958) -- (1,958) $ (1,958)
Repurchase of 1 million
Ordinary Shares.................. -- -- -- -- -- (20,977) (20,977) --
Exercise of share options.......... 112 -- 2,696 -- -- -- 2,696 --
Shares canceled.................... (7) -- (373) -- -- -- (373) --
Net income......................... -- -- -- 69,822 -- -- 69,822 69,822
------ ----- -------- --------- ------- --------- --------- ---------
Balance at December 31, 1999.... 33,682 34 677,918 248,425 (5,569) (20,977) 899,831 $ 67,864
=========
Translation reserves............... -- -- -- -- 26 -- 26 $ 26
Repurchase of 6.1 million
Ordinary Shares.................. -- -- -- -- -- (141,792) (141,792) --
Exercise of share options.......... 192 -- 2,866 -- -- -- 2,866 --
Net loss........................... -- -- -- (119,104) -- -- (119,104) (119,104
Balance at December 31, 2000.... 33,874 34 680,784 129,321 (5,543) (162,769) 641,827 $(119,078
------ ----- -------- --------- --------- ---------
Translation reserves............... -- -- -- -- (3,010) -- (3,010) (3,010)
Exercise of share options.......... 531 -- 7,930 -- -- -- 7,930 --
Net income......................... -- -- -- 31,656 -- -- 31,656 31,656
------ ----- -------- --------- ------- --------- --------- ---------
Balance at December 31, 2001.... 34,405 $ 34 $688,714 $ 160,977 $(8,553) $(162,769) $ 678,403 $ 28,646
====== ===== ======== ========= ======= ========= ========= =========
The accompanying notes are an integral part of these statements.
F-5
SUN INTERNATIONAL HOTELS LIMITED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
For the Year Ended December 31,
-----------------------------------------
2001 2000 1999
------ -------- --------
Cash flows from operating activities:
Net income (loss)............................................. $31,656 $ (119,104) $69,822
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization................................. 55,692 64,340 60,147
Write-down of net assets held for sale.. ..................... - 229,208 -
Purchase termination costs.................................... - 11,202 -
(Gain) loss on disposition of other assets 760 688 (60)
Equity in earnings of associated companies, net of
dividends received.......................................... (187) (1,377) 23
Provision for doubtful receivables............................ 6,355 6,492 6,466
Provision for discount on CRDA obligations, net............... - 799 587
Deferred income tax benefit................................... (3,874) - -
Net change in deferred tax liability.......................... - 205 (30)
Net change in deferred charges and other assets............... (1,398) (1,668) 4,548
Net change in working capital accounts:
Receivables................................................. (3,722) (9,179) (20,440)
Due from affiliates......................................... 1,377 (4,658) (7,150)
Inventories and prepaid expenses............................ 5,098 (2,052) (8,129)
Accounts payable and accrued liabilities.................... 1,676 26,490 4,198
Other......................................................... 5,900 23,912 -
--------- ---------- ----------
Net cash provided by operating activities................... 99,333 225,298 109,982
--------- ---------- ----------
Cash flows from investing activities:
Payments for property and equipment, net of insurance
proceeds received........................................... (67,590) (155,892) (205,046)
Net proceeds from the sale of other assets.................... 2,547 501 5,186
Proceeds received from sale of Resorts Atlantic City, net..... 120,850 - -
Proceeds received for repayment of note receivable............ 12,000 - -
Proceeds from redemption of subordinated notes................ - - 94,126
Deposit refunded (paid) for proposed Desert Inn
acquisition................................................. - 7,750 (16,117)
Advances to associated companies, net......................... (6,420) (18,663) (600)
Acquisition of equity interest in associated company.......... (3,768) - -
Sale of subordinated notes.................................... - - 2,798
Reclassification of cash to net assets held for sale.......... - (21,453) -
CRDA deposits and other....................................... - (2,695) (2,746)
--------- ---------- ----------
Net cash provided by (used in) investing activities........... 57,619 (190,452) (122,399)
--------- ---------- ----------
Cash flows from financing activities:
Proceeds from exercise of share options....................... 7,930 2,866 2,696
Borrowings.................................................... 274,500 202,000 129,000
Repurchase of Ordinary Shares................................. - (141,792) (20,977)
Debt issuance and modification costs.......................... (8,805) (919) (2,361)
Repayment of borrowings....................................... (419,736) (113,063) (118,854)
--------- ---------- ----------
Net cash used in financing activities......................... (146,111) (50,908) (10,496)
--------- ---------- ----------
Increase (decrease) in cash and cash equivalents.............. 10,841 (16,062) (22,913)
Cash and cash equivalents at beginning of period................. 24,148 40,210 63,123
Cash and cash equivalents at end of period....................... $34,989 $24,148 $40,210
======= ======= =======
The accompanying notes are an integral part of these statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1-- Organization and Basis of Presentation
Sun International Hotels Limited ("SIHL"), an international resort and
gaming company, was incorporated in 1993 under the laws of the Commonwealth
of The Bahamas. In these notes to consolidated financial statements, the
words "Company," "we," "our" and "us" refer to SIHL together with its
subsidiaries as the context may require.
We are a leading developer and operator of premier destination casino
resorts and luxury hotels. In our destination casino resort business, we
own and operate the Atlantis Paradise Island resort and casino complex
("Atlantis") located in The Bahamas. We also developed and receive certain
revenue from the Mohegan Sun Casino in Uncasville, Connecticut. In our
luxury resort hotel business, we operate eight beach resorts at locations
in Mauritius, Dubai, the Maldives and The Bahamas. We are in the early
stages of an internet gaming venture, which was in the testing phase
through the end of 2001 and commenced operations effective January 2002.
Prior to 2001, we owned and operated a resort and casino property in
Atlantic City, New Jersey ("Resorts Atlantic City"), which we sold to an
unaffiliated entity.
Majority Shareholder Reorganization
In July 2001, we announced the restructuring of our majority shareholder,
Sun International Investments Limited ("SIIL"), and the resolution of certain
matters with SIIL and certain of its shareholders (collectively the
"Reorganization"). At the time of the Reorganization, SIIL and its
shareholders beneficially owned approximately 67% of our issued and
outstanding ordinary shares (the "Ordinary Shares"). SIIL is itself owned in
equal thirds by Kersaf Investments Limited ("Kersaf"), Caledonia Investments
PLC and World Leisure Group Limited, a company controlled by a Kerzner family
trust. SIIL previously was governed by a shareholders' agreement pursuant to
which all major decisions of SIIL required the unanimous consent of its
shareholders. In connection with the Reorganization, among other things, SIIL
is being dissolved and the shareholders' agreement governing SIIL was
terminated. Accordingly, SIIL's shareholders will obtain direct ownership of
their Ordinary Shares. In addition, SIIL's shareholders have agreed to, among
other things, certain standstill provisions in effect through June 2006,
pursuant to which each of them will refrain from proposing or consummating
certain extraordinary corporate transactions involving the Company, including
any merger or the sale of substantially all of the Company's assets. Pursuant
to a registration rights and governance agreement, we granted certain
registration rights to SIIL's shareholders in respect of the Ordinary Shares
held by them, and Kersaf has agreed to sell not less than two million of its
Ordinary Shares in a registered public offering before June 30, 2002, subject
to certain extensions. Kersaf operates a number of hotel, casino and resort
properties in southern Africa under the Sun International name and there has
been some confusion regarding the use of the Sun International name by both
Kersaf and the Company. We agreed that, after a transition period not to
exceed one year from June 30, 2001, we will cease using the names "Sun" and
"Sun International." In connection with the Reorganization, Kersaf agreed to
pay us $15.5 million. This was settled by a one time cash payment of $3.5
million and the issuance of a 5 year, $12 million note, bearing interest at 9%
per annum. In December 2001, the principal amount of the note and accrued
interest thereon was repaid in full.
The Bahamas
Through certain Bahamian subsidiaries, we own and operate Atlantis,
our flagship property. Atlantis is a 2,317-room, ocean-themed destination
casino resort located on Paradise Island, The Bahamas. Atlantis features
three interconnected hotel towers, the Royal Tower, the Coral Tower and the
Beach Tower, all built around a 7-acre lagoon and a 34-acre marine
environment that includes the world's largest open-air aquarium. Atlantis
also features a 100,000 square foot entertainment complex containing
approximately 1,000 slot machines and 80 table games, 17 restaurants,
approximately 100,000 square feet of convention space, a sports center,
over 30,000 square feet of high-end retail space and a 63-slip, full
service marina. We also own and operate the Ocean Club Resort, a high-end
luxury resort hotel with 106 rooms and suites located on Paradise Island,
as well as the Ocean Club Golf Course, a water plant, and other
improvements on Paradise Island. We own approximately 100 acres of
undeveloped land, which is available for sale or development.
During 1999, we completed construction of a new 100,000 square foot
convention facility. In 2000, we completed construction of an addition to
the Ocean Club Resort comprising 40 luxurious rooms and ten
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
deluxe suites, as well as a new beachfront restaurant operated by
well-known restaurateur Jean-Georges Vongerichten. In addition, we
completed the Tom Weiskopf-designed championship Ocean Club Golf Course and
Clubhouse which opened to the public in January 2001. Also in 2000, we
completed the infrastructure of the Ocean Club Estates, with 121 luxury
homesites set around the golf course. Of the homesites available for sale,
102 were closed on during 2000 and nine more were closed on during 2001. As
of December 31, 2001, there are no remaining homesites available for sale,
although eight of them are pending final closing, and two will be retained
by the Company.
In 1999, through one of our Bahamian subsidiaries, we formed a joint
venture with Vistana, Inc. ("Vistana"), a subsidiary of Starwood Hotels and
Resorts Worldwide Inc. ("Starwood"), to develop a timeshare project on
Paradise Island adjacent to Atlantis ("Harborside at Atlantis"). Vistana
and the Company each have a 50% interest in the joint venture. Construction
of 82 two bedroom lock-off units was completed by February 2001 and sales
of the timeshare units began in May 2000. Our share of earnings from
Harborside at Atlantis is included in equity in earnings of associated
companies in the accompanying consolidated statements of operations. In
addition, we earn fees for marketing, administrative and development
services provided to Harborside at Atlantis.
Connecticut
We have a 50% interest in, and are a managing partner of, Trading Cove
Associates ("TCA"), a Connecticut general partnership that developed and
until December 31, 1999, had a management agreement (the "Management
Agreement") with the Mohegan Tribal Gaming Authority, an instrumentality of
the Mohegan Tribe of Indians of Connecticut (the "Mohegan Tribe") to
operate a casino resort and entertainment complex situated in the town of
Uncasville, Connecticut (the "Mohegan Sun Casino"). The Management
Agreement which covered management, marketing and administrative services,
provided that TCA was entitled to receive between 30% and 40% of the net
profits, as defined, of the Mohegan Sun Casino. TCA is obligated to pay
certain amounts to its partners and certain of their affiliates, as
priority payments. These amounts are paid as TCA receives sufficient cash
to meet those priority payments.
In 1998, the Mohegan Tribe retained TCA to develop its $960 million
expansion of the Mohegan Sun Casino for a fee of $14 million. In addition,
TCA and the Mohegan Tribe entered into an agreement (the "Relinquishment
Agreement") whereby it was agreed that effective January 1, 2000, TCA would
turn over management of the Mohegan Sun Resort Complex, including its
expansion, to the Mohegan Tribe. The term of the Management Agreement was
seven years beginning in October 1996, the date the Mohegan Sun Casino
opened. Pursuant to the Relinquishment Agreement, the Management Agreement
was terminated and, effective January 1, 2000, TCA receives payments of
five percent of the gross revenues of the Mohegan Sun Resort Complex for a
15-year period. For the years 2001 and 2000, we recorded payments received
from TCA pursuant to the Relinquishment Agreement of $27.4 million and
$19.8 million, respectively, and for the year 1999 we recorded payments
received pursuant to the Management Agreement of $32.6 million. Development
fees earned for the years 2001, 2000 and 1999 were $0, $3.8 million and
$6.7 million, respectively.
In connection with the development of the Mohegan Sun Casino in 1996,
we held subordinated notes issued by the Mohegan Tribe, for which interest
payments were satisfied by the issuance of additional notes. The aggregate
principal balance on these notes, including accrued interest, was $94.1
million at December 31, 1999 when they were repaid in full. Interest earned
in 1999 on the subordinated notes amounted to $9.9 million.
Mauritius, Maldives and Dubai
In Mauritius, we manage and own interests in five beach resorts
("Indian Ocean Resorts") including the 175-room Le Saint Geran Hotel, the
200-room Le Touessrok Hotel, the 248-room La Pirogue Hotel, the 333-room Le
CoCo Beach and the 238-room Sugar Beach Resort Hotel. Through June 16,
2000, we owned a 22.8% interest in Indian Ocean Resorts. Effective June 16,
2000, Indian Ocean Resorts issued additional shares of stock under a rights
issue in which we did not take up our rights, effectively reducing our
ownership interest to 20.4%.
In the Maldives, located approximately 600 miles southeast of the
southern tip of India, we manage the Kanuhura Resort & Spa ("Kanuhura"), a
110-room luxury resort located on Kanuhura Island. Effective August 1,
2001, we acquired a 25% ownership interest in Kanuhura for approximately
$3.8 million.
In Dubai, we manage the Royal Mirage Hotel, a 258-room hotel that
opened in August 1999. In 2001, we entered into negotiations to manage a
new 225-room luxury hotel that is to be constructed adjacent
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the existing property.
We manage these resorts under long-term management contracts and
receive management fees based upon a percentage of the revenues and
adjusted gross operating profits of these properties. Our share of earnings
from the properties in Mauritius and the Maldives are included in equity in
earnings of associated companies in the accompanying consolidated
statements of operations.
Internet Gaming
In February 2001, we entered into an agreement with Boss Media AB to
develop an internet gaming software solution. Through a wholly owned
subsidiary, we designed our website and developed and implemented systems
and procedures to exclude play from jurisdictions where internet gaming is
illegal, such as the United States. From August to December 2001, we
operated the site on a test basis without live wagering to determine the
viability of the business and the effectiveness of our systems to maintain
compliance with all applicable laws. Costs incurred during 2001 in
connection with internet gaming are included in pre-opening expenses in the
accompanying consolidated statements of operations. In September 2001, we
were awarded one of the first three internet gaming licenses granted by the
Isle of Man. In December 2001, our internet gaming subsidiary became the
first Isle of Man licensee to commence live gaming operations when it
launched www.CasinoAtlantis.com, our internet wagering site.
Sale of Resorts Atlantic City
Through a wholly owned subsidiary, we previously owned and operated
Resorts Atlantic City, a 644-room casino and hotel property. On April 25,
2001, we completed the sale of Resorts Atlantic City to an affiliate of
Colony Capital LLC ("Colony") for a purchase price of approximately $144
million, including accrued interest (the "Resorts Atlantic City Sale"). The
proceeds received from Colony consisted of approximately $127 million in
cash and an unsecured $17.5 million note (the "Promissory Note"). The
Promissory Note accrues interest at a rate of 12.5% per annum, and interest
is payable semi-annually, with the option to pay one-half of the interest
through the issuance of additional notes. The net cash proceeds were used
to permanently reduce borrowings outstanding by us under a bank credit
facility (the "Revolving Credit Facility"). The cash proceeds received from
Colony were partially offset by approximately $6 million in costs paid by
us after closing, which included employee termination costs and legal fees.
We entered into a definitive agreement to sell Resorts Atlantic City
in the fourth quarter of 2000, and as of December 31, 2000, we accounted
for Resorts Atlantic City as an investment held for sale. The carrying
value of the net assets to be disposed of was reclassified to net assets
held for sale on our consolidated balance sheet and, in the fourth quarter
of 2000, we recorded a loss of $229.2 million resulting from the write-down
of net assets held for sale to their realizable value. Therefore, the net
proceeds received at closing equaled the carrying value of the net assets
disposed of, and accordingly, except for interest income earned during 2001
on the proceeds, there was no further gain or loss recorded as a result of
the closing. As of January 1, 2001, the operations of Resorts Atlantic City
are no longer included in our consolidated financial statements.
Summary operating results of Resorts Atlantic City for the year ended
December 31 were as follows (in thousands of US dollars):
2000 1999
---- ----
Revenues.................. $257,963 $243,131
Net loss.................. $(22,406) $(33,363)
Components of net assets held for sale as of December 31, 2000 were as
follows (in thousands of US dollars):
Current assets............. $34,534
Non-current assets......... 173,233
Current liabilities........ (26,989)
Non-current liabilities.... (42,428)
---------
$138,350
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pursuant to the terms of the Resorts Atlantic City Sale, we granted
Colony a two-year option (the "Atlantic City Option") to acquire certain
undeveloped real estate which we own, adjacent to Resorts Atlantic City,
for a purchase price of $40 million, which option can be extended for an
additional two years under certain circumstances. The net carrying value of
the land included in the Atlantic City Option is included in property and
equipment in the accompanying consolidated balance sheets. Effective April
25, 2001, the closing date of the Resorts Atlantic City Sale, Colony leases
from us certain of the property included in the Atlantic City Option for
$100,000 per month.
Trading Cove New York
Through a wholly-owned subsidiary, we own 50% of Trading Cove New
York, LLC ("TCNY"), a Delaware limited liability company. In March 2001,
TCNY entered into a development services agreement (the "Development
Agreement") with the Stockbridge-Munsee Band of Mohican Indians (the
"Stockbridge-Munsee Tribe") for the development of a casino project (the
"Project") in the Catskill region of the State of New York (the "State").
The Development Agreement was amended and restated in February 2002. The
Stockbridge- Munsee Tribe does not currently have reservation land in the
State, but is federally recognized and operates a casino on its reservation
in Wisconsin and has a land claim pending in the U. S. District Court for
the Northern District of New York against the State.
Pursuant to the Development Agreement, as amended, TCNY will provide
preliminary funding, certain financing and exclusive development services
to the Stockbridge-Munsee Tribe in conjunction with the Project. As
compensation for these services, TCNY will earn a fee of 5% of revenues, as
defined in the Development Agreement, beginning with the opening of the
Project and continuing for a period of twenty years. TCNY has secured land
and/or options on approximately 400 acres of property in the Town of
Thompson, County of Sullivan (the "County"), of which approximately 333
acres are currently designated for the Project. In February 2002, the Tribe
filed a Land to Trust Application with the U.S. Department of the Interior,
Bureau of Indian Affairs (the "BIA"), for the Project site properties.
Should the BIA approve the Land to Trust Application and the
Stockbridge-Munsee Tribe obtain other required approvals, the land could be
taken into trust by the Federal Government on behalf of the
Stockbridge-Munsee Tribe for the purpose of conducting Class III Gaming.
In October 2001, the State enacted legislation authorizing up to three
Class III Native American casinos in the counties of Sullivan and Ulster
and three Native American casinos in western New York pursuant to Tribal
State Gaming Compacts to be entered into by the State and applicable Native
American tribes.
In January 2002, the Stockbridge-Munsee Tribe entered into an
agreement with the County pursuant to which the Stockbridge-Munsee Tribe
will make certain payments to the County to mitigate any potential impacts
the Project may have on the County and other local government subdivisions
within the County. The payments will not commence until after the opening
of the Project.
The Project is contingent upon the receipt of numerous federal, state
and local approvals to be obtained by the Stockbridge-Munsee Tribe,
including the execution of a Class III Gaming Compact with the State, which
approvals are beyond the control of TCNY. We can make no representation as
to whether any of the required approvals will be obtained by the
Stockbridge-Munsee Tribe.
Proposed Acquisition of SIHL Ordinary Shares and Self-Tender Offer
In January 2000, we had received a proposal from SIIL, at that time,
the majority shareholder of SIHL, to acquire in a merger transaction all of
the Ordinary Shares not already owned by SIIL or its shareholders for $24
per share in cash. To consider the proposal, we formed a committee of
independent members of the Board of Directors (the "Special Committee")
that retained its own financial and legal advisers. The proposed
transaction was subject to various conditions, including approval by the
Special Committee. On June 16, 2000, we announced that SIIL was not able to
negotiate a mutually satisfactory transaction with the Special Committee
and that SIIL had advised us that its proposal had been withdrawn.
In order to allow our shareholders to elect to sell at least a portion
of their Ordinary Shares at the price formerly proposed by SIIL, in June
2000, our Board of Directors approved a self-tender offer for up to
5,000,000 Ordinary Shares at a $24 per share cash price. The self-tender
offer commenced on June 25, 2000 and on August 2, 2000, we announced that
13,554,651, of the then outstanding 32,682,350 Ordinary Shares, were
tendered. Because the self-tender offer was oversubscribed, a pro-ration
factor of 36.89% was applied, and pursuant to the self-tender offer, we
purchased 5,000,000 Ordinary Shares at $24 per share. In
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2000, transaction costs reflected in the accompanying consolidated
statements of operations related to SIIL's proposed acquisition of Ordinary
Shares as well as the completion of the self-tender offer.
Termination of Desert Inn Acquisition Agreement
In March 2000, Starwood and the Company agreed to terminate our
agreement (the "Termination Agreement") under which we were to acquire the
Desert Inn Hotel and Casino in Las Vegas (the "Desert Inn") for $275
million. In connection with the proposed acquisition of the Desert Inn, we
had previously placed a $15 million deposit with Starwood (the "Deposit").
Pursuant to the Termination Agreement, the amount, if any, that the Company
would be required to pay from the Deposit was based on the ultimate sales
price of the Desert Inn to another party.
In June 2000, Starwood closed on the sale of the Desert Inn for
approximately $270 million to an unrelated party, subject to certain
post-closing adjustments. As a result, we were required to pay to Starwood
$7.2 million from the Deposit. The remaining $7.8 million of the Deposit
was refunded to us in August 2000. Purchase termination costs in the
accompanying consolidated statements of operations included the $7.2
million paid to Starwood and $4.0 million of further costs related to the
Desert Inn transaction.
Note 2-Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of SIHL and our subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Investments in associated companies, which are less than or equal to 50%
and more than 20% owned, are accounted for under the equity method of
accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
costs and expenses during the reporting period. Actual results could differ
from those estimates.
We provide allowances for doubtful accounts arising from casino, hotel
and other services, which are based upon a specific review of certain
outstanding receivables. In determining the amounts of the allowances, we
are required to make certain estimates and assumptions. Accruals for
potential liabilities related to any lawsuits or claims brought against us,
calculation of inventory reserves, calculation of income tax liabilities,
valuation allowance on deferred tax assets and other liabilities require
that we apply significant judgment in determining the appropriate
assumptions for use in the calculation of financial estimates. Actual
results may differ from these estimates and assumptions.
Revenue Recognition
We recognize the net win from casino gaming activities (the difference
between gaming wins and losses) as gaming revenues. Revenues from hotel and
related services are recognized at the time the related service is
performed. Revenues from tour operations include commissions on the sale of
travel reservations and are recognized at the time of departure. Real
estate related revenues and profits on residential lot sales are recognized
upon delivery of the completed lots to the purchasers at closing. Deposits
collected in advance of closing are deferred and are included in current
liabilities. Management fees and other operating revenues include fees
charged to unconsolidated affiliates for casino hotel management, executive
management and project consulting. Revenues are recorded at the time the
service is provided.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Promotional Allowances
The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenues and
deducted as promotional allowances. The estimated departmental costs of
providing such promotional allowances are included in gaming costs and
expenses as follows:
For the Year Ended December 31,
------------------------------------------
2001 2000 1999
------ ---- ------
(In thousands of US dollars)
Rooms......................... $2,449 $11,441 $7,894
Food and beverage............. 6,243 23,587 21,692
Other......................... 410 3,727 7,762
$9,102 $38,755 $37,348
The total costs of providing promotional allowances in the years 2000
and 1999 included $27.1 million and $26.9 million, respectively, at Resorts
Atlantic City.
Advertising Expense
We expense advertising costs as incurred. Advertising expense was
$11.2 million, $7.6 million and $7.3 million for the years ended December
31, 2001, 2000 and 1999, respectively and is included in selling, general
and administrative expenses in the accompanying statements of operations.
Prepaid advertising for each of the periods presented was not material.
Pre-Opening Expenses
Pre-opening costs are charged to expense as incurred. In 1999,
pre-opening expenses were related to the opening of the newly renovated
casino at Resorts Atlantic City. In 2000, pre-opening expenses were related
to the expansion of the Ocean Club Golf Course on Paradise Island. In 2001,
pre-opening expenses were related to internet gaming and the Ocean Club
Golf Course in the amount of $4.6 million and $2.3 million, respectively.
Foreign Currency
Transactions denominated in foreign currencies are recorded in local
currency at actual exchange rates at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the balance
sheet dates are reported at the rates of exchange prevailing at those
dates. Any gains or losses arising on monetary assets and liabilities from
a change in exchange rates subsequent to the date of the transaction have
been included in corporate expenses in the accompanying consolidated
financial statements. These amounts were not significant for the years
ended December 31, 2001, 2000 and 1999.
The financial statements of our equity method investees and certain
subsidiaries are translated from their local currencies into US dollars
using current and historical exchange rates. Translation adjustments
resulting from this process are reported separately and accumulated as a
component of other comprehensive loss in the accompanying balance sheets.
Upon sale or liquidation of our investments, the translation adjustment
would be reported as part of the gain or loss on sale or liquidation.
Derivative Financial Instruments
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133,
as amended, is effective for fiscal years beginning after June 15, 2000.
SFAS 133 requires that every derivative instrument be recorded in the
balance sheet as either an asset or liability measured at its fair value.
Changes in the derivative's fair values will be recognized in income unless
specific hedge accounting criteria are met. We have adopted SFAS 133 as of
January 1, 2001.
We utilize interest rate protection agreements to manage the impact of
interest rate changes on our long-term debt obligations. These agreements
are accounted for in accordance with SFAS 133. See Note 9 herein for a
description of our long-term debt and related derivative financial
instruments.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash Equivalents
We consider all of our short-term money market securities purchased
with original maturities of three months or less to be cash equivalents.
Inventories
Inventories of provisions and supplies are carried at the lower of
cost (first-in, first-out) or market value. Provisions have been made to
reduce excess or obsolete inventories to their estimated net realizable
value.
Property and Equipment
Property and equipment are stated at cost and are depreciated over the
estimated useful lives reported below using the straight-line method.
Land improvements and utilities............... 14 - 40 years
Hotels and other buildings.................... 15 - 40 years
Furniture, machinery and equipment............ 2 - 15 years
Interest costs incurred during the construction period are capitalized.
Deferred Charges and Other Assets
Deferred charges related to the Mohegan Sun Casino are being amortized
over a seven year period through the end of 2003. Debt issuance costs are
amortized over the terms of the related indebtedness.
Goodwill
Prior to January 1, 2002, our goodwill was amortized on a
straight-line basis over 40 years. Amortization expense included in the
accompanying consolidated statements of operations related to goodwill was
$-0-, $2.6 million and $2.6 million for the years ended December 31, 2001,
2000 and 1999, respectively.
Goodwill related to the investment in associated companies is included
therein in the accompanying consolidated balance sheets. Equity earnings of
associated companies for each of the years ended December 31, 2001, 2000
and 1999 is net of $264,000 of amortization expense related to such
goodwill.
We will account for goodwill under SFAS 142 effective January 1, 2002.
Capitalized Interest
Interest is capitalized on construction expenditures and land under
development at the weighted average interest rate of our long-term debt.
Interest costs of $1.1 million, $11.1 million and $4.9 million were
capitalized in 2001, 2000 and 1999, respectively.
Stock Option Compensation
We have elected to apply Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" and as interpreted in FASB
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation" in accounting for compensation under our stock option plans
in lieu of the alternative fair value accounting provided for under SFAS
No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"). Certain pro
forma disclosures required by SFAS 123 are included in Note 11.
Long Lived Assets
We review our long-lived assets and certain related intangibles for
impairment whenever changes in circumstances indicate that the carrying
amount of an asset may not be fully recoverable. If changes in
circumstances indicate that the carrying amount of an asset that we expect
to hold and use may not be recoverable, future cash flows expected to
result from the use of the asset and its disposition must be estimated. If
the undiscounted value of the future cash flows is less than the carrying
value of the asset, the carrying value of the long-lived asset will be
reduced by the amount which the carrying value exceeds fair
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
value. We do not believe that any such changes have occurred except as
previously described as a result of the Resorts Atlantic City Sale and the
Atlantic City Option.
Income Taxes
We are subject to income taxes in certain jurisdictions. Accordingly,
the accompanying consolidated statements of operations include a provision
for income taxes based on prevailing tax laws of those jurisdictions.
We account for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes." Under this standard, deferred tax assets and
liabilities are determined based on the difference between the financial
reporting and tax bases of assets and liabilities at enacted tax rates. A
valuation allowance is recognized based on an estimate of the likelihood
that some portion or all of the deferred tax asset will not be realized.
Other Comprehensive Loss
Other comprehensive loss items are not reported net of tax as they
relate to translation reserves on investments owned by foreign entities
that are not subject to taxation.
Per Share Data
We calculate earnings (loss) per share in accordance with SFAS No. 128
"Earnings per Share." The following is a reconciliation of the shares used
in the per share computations:
For the Year Ended December 31,
2001 2000 1999
------ -------- --------
(In thousands)
Weighted average shares used in basic computations................... 26,885 30,849 33,465
Dilutive stock options, warrants and restricted shares 941 - 540
outstanding..........................................................
Weighted average shares used in diluated computations................ 27,826 30,849 34,005
The net income (loss) amount used as the numerator in calculating
basic and diluted earnings per share is the net income in the accompanying
consolidated statements of operations. The effect of certain options,
warrants and restricted shares was not included in the computation of
diluted earnings per share in 2001 and 1999 because the effect would have
been anti-dilutive. In the year 2000, we incurred a net loss, and
therefore, the effect of all options, warrants and restricted shares was
excluded in the computation. The number of options not included in the
computation for the years 2001, 2000 and 1999 were 2.0 million, 6.0 million
and 2.1 million respectively.
Reclassifications
Certain balances in the accompanying consolidated financial statements
for 1999 have been reclassified to conform to the current year
presentation.
Recent Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 141, "Business Combinations"
("SFAS 141") and SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 requires all business combinations initiated after June 30,
2001 to be accounted for using the purchase method. SFAS 142 is effective
for fiscal years beginning after December 15, 2001 with respect to goodwill
recognized on an entity's balance sheet as of the beginning of that fiscal
year. Under SFAS 142 goodwill and certain other intangible assets with
indefinite lives will no longer be amortized, but rather tested at least
annually for impairment using a fair value based test. A loss resulting
from impairment of such goodwill should be recognized as the effect of a
change in accounting principal in the initial period of adopting SFAS 142.
In subsequent reporting periods, goodwill impairment losses are to be
recognized on a separate line item on the income statement included in
income from operations. As a result of the Resorts Atlantic City Sale, all
of
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the goodwill previously amortized to expense was written off in its
entirety in the fourth quarter of 2000. Goodwill related to our investment
in associated companies, and included therein in the accompanying
consolidated financial statements, relates to our ownership interest in
Indian Ocean Resorts. We believe that such goodwill is not impaired and
therefore, this new pronouncement is not expected to have a material impact
on our consolidated financial statements upon adoption.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). This pronouncement addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement costs. SFAS 143 is effective for financial statements issued for
fiscal years beginning after June 15, 2002. We believe the adoption of SFAS
143 will not have a material impact on our consolidated financial
statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), effective for
fiscal years beginning after December 15, 2001. For long-lived assets to be
held and used, SFAS 144 retains the existing requirements to (a) recognize
an impairment loss only if the carrying amount of a long-lived asset is not
recoverable from its undiscounted cash flows and (b) measure an impairment
loss as the difference between the carrying amount and the fair value of
the asset. SFAS 144 establishes one accounting model to be used for
long-lived assets to be disposed of by sale. We believe the adoption of
SFAS 144 will not have a material effect on our consolidated financial
statements.
Note 3-Cash and Cash Equivalents
Cash equivalents at December 31, 2001 and 2000 included reverse
repurchase agreements (federal government securities purchased under
agreements to resell those securities) under which we had not taken
delivery of the underlying securities and investments in a money market
fund that invests exclusively in US Treasury obligations. At December 31,
2001, we held reverse repurchase agreements of $10.2 million, all of which
matured in the first week of January 2002.
At December 31, 2001, restricted cash primarily includes $2.9 million
on deposit in the Isle of Man related to our internet gaming operation, a
$1.0 million certificate of deposit as security on a bank credit facility
and customer deposits related to the sale of homesites at Ocean Club
Estates.
Note 4-Trade Receivables
Components of trade receivables were as follows:
December 31,
---------------------
2001 2000
------ ------
(In thousands of US Dollars)
Gaming............................................. $21,832 $25,283
Less: allowance for doubtful accounts.............. (11,141) (11,176)
10,691 14,107
Non-gaming:
Hotel and related.............................. 16,372 19,747
Other.......................................... 12,729 8,026
29,101 27,773
Less: allowance for doubtful accounts.............. (2,338) (1,268)
26,763 26,505
$37,454 $40,612
Note 5-Property and Equipment
Components of property and equipment were as follows:
December 31,
-------------------------
2001 2000
------ ------
Land and land rights......................... $237,817 $210,247
Land improvements and utilities.............. 227,635 197,201
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Hotels and other buildings................... 638,232 575,019
Furniture, machinery and equipment........... 212,029 162,913
Construction in progress..................... 18,119 135,409
1,333,832 1,280,789
Less: accumulated depreciation............... (178,640) (125,280)
------------ ------------
$1,155,192 $1,155,509
============ ============
Note 6-Deferred Charges and Other Assets
December 31,
-------------------------
2001 2000
------ ------
(In thousands of US dollars)
Debt issuance costs........................... $14,887 $10,277
Mohegan Sun Casino............................ 1,739 1,669
Trading Cove New York......................... 1,523 -
Other......................................... 543 1,174
$18,692 $13,120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7-Accounts Payable and Accrued Liabilities
Components of accounts payable and accrued liabilities were as
follows:
December 31,
--------------------
2001 2000
------ ------
(In thousands of US dollars)
Customer deposits and unearned revenues.............. $34,891 $37,007
Accrued payroll and related taxes and benefits....... 15,532 13,688
Deferred income...................................... 13,714 -
Accrued interest..................................... 11,796 5,228
Trade payables....................................... 11,535 34,540
Other accrued liabilities............................ 60,595
--------
46,409
--------
$148,063 $136,872
======== ========
Note 8-Other long-term liabilities
Other long-term liabilities at December 31, 2001 represents the fair
value of our derivative instruments. See "Derivative Financial Instruments"
described in Note 9 below.
Note 9-Long Term Debt
Long-term debt consisted of the following:
December 31,
--------------------
2001 2000
------ ------
(In thousands of US dollars)
Revolving Credit Facility............................. $24,000 $369,000
$200 million 9% senior subordinated notes due
2007 ("9% Senior Subordinated Notes")............. 199,419 199,337
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$100 million 8-5/8% senior subordinated notes due
2007 ("8-5/8% Senior Subordinated Notes").......... 100,000 100,000
$200 million 8-7/8% senior subordinated notes due 2011
("8-7/8% Senior Subordinated Notes").............. 194,497 -
Other................................................. 576 801
518,492 669,138
Less: amounts due within one year..................... (261) (230)
$518,231 $668,908
Amended Revolving Credit Facility
Through November 13, 2001, we had available borrowings under our
Revolving Credit Facility, for which the maximum borrowing capacity was
$500 million prior to 2001. In January 2001, the Revolving Credit Facility
was amended. In accordance with the amendment, the maximum borrowing
capacity was reduced by the amount of cash proceeds received pursuant to
the Resorts Atlantic City Sale, which upon closing of that sale, reduced
the maximum borrowing capacity to $373 million. This limitation of
borrowings was to be further reduced by the cash proceeds received from
Colony if they exercised the Atlantic City Option. The term of the
Revolving Credit Facility was through August 12, 2002, at which time we
would have been required to pay in full any borrowings outstanding under
that facility.
On November 13, 2001, we entered into an amended credit facility (the
"Amended Revolving Credit Facility") with a syndicate of banks (the
"Lenders"), with Canadian Imperial Bank of Commerce ("CIBC") acting as
administrative agent. The borrowings then outstanding under the previous
Revolving Credit Facility were paid in full. Under the Amended Revolving
Credit Facility, the maximum amount of borrowings that may be outstanding
is $200 million. An additional $150 million of borrowings may be available
under certain circumstances.
Loans under the Amended Revolving Credit Facility bear interest at (i)
the higher of (a) CIBC's base rate or (b) the Federal Funds rate plus 1-2
of one percent, in either case plus an additional 0.25% to 1.75% based on a
debt to earnings ratio during the period, as defined (the "Leverage Ratio")
or (ii) LIBO rate plus 1.25% to 2.75% based on the Leverage Ratio. After
each drawdown on the Amended Revolving Credit Facility, interest is due
every three months for the first six months and is due monthly thereafter.
At December 31, 2001, the weighted average interest rate on amounts
outstanding under the Amended Revolving Credit Facility was 4.23%. Loans
under the Amended Revolving Credit Facility may be prepaid and reborrowed
at any time and are due in full in November 2006. Commitment fees are
calculated at per annum rates ranging from 0.25% to 0.50%, based on the
Leverage Ratio, applied to the undrawn amount of the Amended Revolving
Credit Facility and are payable quarterly.
The Amended Revolving Credit Facility contains restrictive covenants
that include, among other things: (a) restrictions on the payment of
dividends, (b) minimum levels of earnings before interest expense, income
taxes, depreciation and amortization ("EBITDA"), (c) a minimum relationship
between EBITDA and interest expense and debt and (d) a minimum level of
consolidated net worth, as defined.
Senior Subordinated Notes
The 9% Senior Subordinated Notes, the 8-5/8% Senior Subordinated Notes
and the 8-7/8% Senior Subordinated Notes (collectively the "Senior
Subordinated Notes") are all unconditionally guaranteed by substantially
all of our wholly-owned subsidiaries. Interest on each series of the Senior
Subordinated Notes is paid semi-annually. The indenture for each of the
Senior Subordinated Notes contains various restrictive covenants, including
limitations on the ability of the issuers and the guarantors to, among
other things: (i) incur additional indebtedness, (ii) incur certain liens,
(iii) engage in certain transactions with affiliates and (iv) pay dividends
and make certain other payments.
The Senior Subordinated Notes rank pari passu with each other and are
all subordinated to the Amended Revolving Credit Facility.
Derivative Financial Instruments
Interest Rate Risk Management
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We attempt to limit our exposure to interest rate risk by managing the
mix of our long-term fixed and variable rate borrowings. In August and
December 2001, we entered into fixed-to-variable rate interest rate swap
agreements (the "Swap Agreements") designated as fair value hedges of our
8-7/8% Senior Subordinated Notes. These Swap Agreements qualify for the
"shortcut" method of accounting provided under SFAS 133, which allows the
assumption of no ineffectiveness in our hedging relationship. As such,
there is no income statement impact from changes in the fair value of the
Swap Agreements. Instead, the changes in the fair value of the Swap
Agreements are to be recorded as an asset or liability on our balance
sheet, with an offsetting adjustment to the carrying value of the related
debt. Other long-term liabilities on the accompanying consolidated balance
sheet at December 31, 2001 represent the fair value of the Swap Agreements
as of that date, with a corresponding decrease in the carrying value of our
8-7/8% Senior Subordinated Notes. This represents the principal amount we
would have been required to pay had the Swap Agreements been terminated on
that date. As of December 31, 2001, the aggregate notional principal amount
of the Agreements was $200 million and they mature in August 2011
concurrent with the 8-7/8% Senior Subordinated Notes. As of December 31,
2001, the weighted average variable rate on the Swap Agreements was 6.12%.
As of December 31, 2001, giving effect to the Swap Agreements, our
fixed rate and floating rate borrowings represent approximately 57% and
43%, respectively, of total borrowings.
During the first seven months of 2001 and the years 2000 and 1999, we
were a party to variable-to-fixed rate interest rate swap agreements (the
"Prior Swap Agreements") designated as cash flow hedges of our Revolving
Credit Facility. In July 2001, we terminated the Prior Swap Agreements,
which were scheduled to mature at the end of 2001. The costs of terminating
these agreements early was $2.1 million and is included in interest expense
in the accompanying consolidated statements of operations. At December 31,
2000, notional principal amounts related to the Prior Swap Agreements was
$125.0 million. As of December 31, 2000, the weighted average fixed rate
payment on the Prior Swap Agreements was 6.89%.
Credit Exposure
We are exposed to credit related losses in the event of
non-performance by counterparties to our Swap Agreements. We monitor the
creditworthiness of the counterparties and presently do not expect default
by any of the counterparties. We do not obtain collateral in connection
with our derivative financial instruments. See Note 20, Fair Value of
Financial Instruments, for the fair value of derivatives.
Consent Solicitation of Noteholders
In 2001, we completed a consent solicitation pursuant to which we
obtained the consent of the requisite holders of the 9% Senior Subordinated
Notes and the 8-5/8% Senior Subordinated Notes. The consent solicitation
sought to amend certain provisions of the indentures pursuant to which the
9% Senior Subordinated Notes and the 8-5/8% Senior Subordinated Notes were
issued.
The amendments effectively eliminate (as of December 31, 2000, the
date the charge was recorded) the impact of $199.2 million of the total
$229.2 million loss recorded in connection with the Resorts Atlantic City
Sale, for purposes of determining our ability to make certain investments,
such as certain minority investments in joint ventures under the
indentures. In addition, the amendments increased the Consolidated Coverage
Ratio (consolidated EBITDA to fixed payments, as defined in the indentures)
required in order for us to incur additional indebtedness.
Pursuant to the consent solicitation, we paid a total of $1.5 million
in consent payments to the consenting noteholders. The consent payments
were recorded as deferred debt modification costs, and are being amortized
over the remaining life of the debt. All other costs associated with the
consent solicitation were expensed as incurred.
Overdraft Loan Facility
Pursuant to a letter of commitment dated September 30, 1994, as
amended, between us and The Bank of Nova Scotia, we have a revolving
overdraft loan facility (the "Overdraft Facility") in the amount of
Bahamian $5.0 million which was equal to US $5.0 million as of December 31,
2001 and
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2000. The Overdraft Facility bears interest at The Bank of Nova Scotia's
base rate for Bahamian dollar loans plus 1.5% with repayment subject to
annual review. The Overdraft Facility is secured by substantially all of
our Bahamian assets and ranks pari passu with the Amended Revolving Credit
Facility. At December 31, 2001 and 2000, no amounts were outstanding under
the Overdraft Facility.
Principal Payments
Minimum principal payments of long-term debt outstanding as of
December 31, 2001 for each of the next five years and thereafter are as
follows (in thousands of US dollars):
Year Ending December 31,
2002................................ $261
2003................................ 157
2004................................ 152
2005................................ 6
2006................................ 24,000
Thereafter.......................... 500,000
524,576
Debt discount....................... (581)
Fair value adjustment............... (5,503)
$518,492
Note 10-Shareholders' Equity
Our authorized, issued and outstanding shares were as follows:
December 31,
---------------------
2001 2000
------ -----
(In thousands of US dollars,
except per share data)
Ordinary Shares.........................
Par value per share................. $0.001 $0.001
Authorized.......................... 250,000 250,000
Issued and outstanding(1)........... 34,405 33,874
Preference Shares.......................
Par value per share................. $0.001 $0.001
Authorized.......................... 100,000 100,000
Issued and outstanding..............
- -----------
(1) Includes 7.1 million Ordinary Shares held in treasury at both December
31, 2001 and 2000.
Note 11-Stock-Based Compensation
Stock Options
Our shareholders have approved stock option plans in 1995 ("1995
Plan"), 1997 (the "1997 Plan") and in 2000 (the "2000 Plan," and
collectively the "Plans") that provide for the issuance of options to
acquire an aggregate of 7,500,000 Ordinary Shares. Pursuant to the Plans,
the option prices are equal to the market value per share of the Ordinary
Shares on the date of the grant. The 1995 Plan provided for the options to
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
become exercisable, unless otherwise specified by the Board of Directors
and subject to certain acceleration and termination provisions, after two
years from the date of grant in respect of 20% of such options, and
thereafter in installments of 20% per year over a four-year period. The
1997 Plan provides for the same vesting schedule except that the vesting
period begins one year after the grant date. The 2000 Plan provides for the
vesting period to begin one year after the grant date in respect of one
third of such options, and thereafter in installments of one third per year
over the remaining two year period. Options granted under the Plans have a
term of 10 years from the date of grant. The Plans provide for options with
respect to Ordinary Shares to be granted to our directors, officers and
employees.
A summary of our stock option activity for 2001, 2000 and 1999 is as
follows:
Weighted
Average Weighted Weighted
Exercise Average Average
Price Per Exercise Exercise
(In thousands except per Shares Share Shares Price Per Shares Price Per
- ------------------------ ------ ----- ------ --------- ------ ---------
share data) 2001 2001 2000 2000 1999
December 31,
---------------------------------------------------------------------------
Outstanding at beginning
of year........................ 6,017 $24.59 3,918 $29.60 3,017 $31.38
Granted........................ 665 $25.19 2,660 $18.05 1,140 $25.10
Exercised...................... (531) $14.93 (192) $15.82 (112) $23.56
Terminated and other........... (409) $29.35 (369) $35.55 (127) $37.69
Outstanding at end of year..... 5,742 $25.14 6,017 $24.59 3,918 $29.60
Exercisable at end of year..... 2,965 $26.35 3,459 $25.69 1,014 $22.65
Available for grant............ 239 340 -
Certain of the options granted during 1999 were granted outside of the
Plans.
The weighted average exercise price and weighted average contractual
life of exercisable options at December 31, 2001 is as follows (in
thousands except per share data):
Weighted Average Weighted Average
Exercise Price Per Remaining
Range of Exercise Prices Shares Share Contractual Life
- ------------------------ ------ ------------------ ----------------
$11.69 - $19.25 1,561 $17.94 7.6 years
$20.69 - $25.50 180 $21.79 7.0 years
$30.50 - $38.00 968 $36.51 5.7 years
$40.44 - $45.56 256 $42.45 6.7 years
2,965 $26.35
For purposes of supplemental disclosures required by SFAS 123, the
fair value of options granted during 2001, 2000 and 1999 was estimated as
of the respective dates of grant using a Black-Scholes option pricing model
with the following weighted average assumptions for the periods presented:
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Year Ended December 31,
--------------------------------------
2001 2000 1999
------ ------ ------
Risk-free interest rates................................................ 4.7% 6.0% 5.5%
Volatility factors of the expected market price of Ordinary
Shares.................................................................. 52.0% 43.0% 39.0%
Expected life of options in years....................................... 4-5 6-7 6-7
Expected dividend yields................................................ - - -
Weighted average grant date fair value.................................. $10.05 $5.04 $7.67
Pro forma results based on these assumptions were as follows:
Net income (loss) (000's)............................................... $22,404 $(126,411) $62,001
Diluted earnings (loss) per share....................................... $.81 $(4.10) $1.82
Executive Bonus Plan
In 1998, we created a bonus plan for certain of our executives that
was payable based upon the attainment of specified earnings per share. A
portion of the bonus was payable in Ordinary Shares that vested over a
three-year period. The compensation expense relating to the 1998 bonus plan
amounted to $637,000, $832,000 and $458,000 for the years ended December
31, 2001, 2000 and 1999, respectively. During 1999, we did not attain the
targeted earnings per share as prescribed by the executive bonus plan, and
accordingly, no additional Ordinary Shares were granted under this plan.
The bonus plan in effect for the years 2001 and 2000 does not provide for
the issuance of Ordinary Shares.
Note 12-Related Party Transactions
In the normal course of business, we undertake transactions with a
number of unconsolidated affiliated companies. Certain of our subsidiaries
provide construction funding, project consulting and management services to
such affiliates. Due from affiliates consisted of the following:
December 31,
------------------------
2001 2000
------ -------
(In thousands of US dollars)
Harborside at Atlantis...................... $22,921 $20,307
Trading Cove Associates..................... 11,957 12,588
Indian Ocean Resorts........................ 5,438 5,751
Kanuhura.................................... 3,425 -
Other....................................... 511 563
44,252 39,209
Less: amounts due within one year........... (28,364) (34,140)
$15,888 $5,069
The amounts due from Harborside at Atlantis represent advances made by
us, including accrued interest thereon, to fund our 50% of the cost to
construct the timeshare units on Paradise Island in The Bahamas. We earn
interest on these advances at a rate equal to one-month LIBO rate plus
2.50%. Such rate was 4.62% at December 31, 2001. Of the amount advanced to
Harborside at Atlantis, it is anticipated that all but $12.5 million will
be repaid within the next twelve months. Funds advanced to Kanuhura, which
represented our share of funding for operations, will not be repaid during
the next twelve months.
Restructuring of Relationship with Majority Shareholder
In July 2001, we announced the restructuring of SIIL and the
resolution of certain matters with SIIL and certain of its shareholders. At
the time of the restructuring, SIIL and its shareholders beneficially owned
approximately 67% of our issued and outstanding shares. See "Majority
Shareholder Reorganization" in Note 1 herein.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13-Retirement Plans
Certain of our subsidiaries participate in a defined contribution plan
covering substantially all of their full-time employees. We make
contributions to this plan based on a percentage of eligible employee
contributions. Total expense for this plan was $237,000, $887,000 and
$876,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.
In addition to the plan described above, union and certain other
employees of our subsidiaries in The Bahamas, and formerly Atlantic City,
are covered by multi-employer defined benefit pension plans to which
employers make contributions. In connection with these plans, we paid $5.9
million, $7.4 million and $6.4 million for the years ended December 31,
2001, 2000 and 1999, respectively.
Note 14-Restructuring Expense
Restructuring costs in 2001 were comprised of severance payments made
to employees who were terminated due to lower occupancy levels at Atlantis
subsequent to September 11.
There were a total of 278 employees affected by the restructuring
which included 57 administrative positions, 198 hotel employees and 23
employees on our development staff. Of the total $5.7 expense recorded in
2001, $4.6 million had been paid out to a total of 261 employees by the end
of the year. As of December 31, 2001, $1.1 million is included in accounts
payable and accrued liabilities on the accompanying consolidated balance
sheet and will be paid out during 2002.
Note 15-Income Taxes
A significant portion of our operation is located in The Bahamas where
there are no income taxes. In 2001, 2000 and 1999, the income tax provision
relating to our US operations was as follows:
For the Year Ended December 31,
----------------------------------
2001 2001
---- ----
(In thousands of US dollars)
Current:
Federal.................... $3,502 $4,930 $9,197
State...................... 1,462 1,178 157
4,964 6,108 9,354
Deferred:
Federal.................... (3,874) 205 (30)
$1,090 $6,313 $9,324
The effective tax rate on income varies from the statutory US federal
tax rate as a result of the following factors:
For the Year Ended December 31,
----------------------------------------
2001 2000 1999
------ ---- ------
Statutory US federal income tax rate............................ 35.0% (35.0)% 35.0%
Non US-source income............................................ (29.2) (40.7) (40.3)
NOLs and temporary differences for which a valuation - 76.7 8.7
allowance has been provided.....................................
Reduction of valuation allowance relating to prior years' (14.5) - -
operating loss utilized.........................................
Branch profit taxes and other taxes on US services.............. 8.8 1.7 6.3
Other........................................................... 3.2 2.9 2.1
Effective tax rate.............................................. 3.3% 5.6% 11.8%
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the deferred tax assets and liabilities were as
follows:
December 31,
---------------------
2001 2000
------ ------
(In thousands of US dollars)
Non-current deferred tax liabilities:
Basis differences on land held for investment, development or resale.......... $ - $(2,300)
Basis differences on property and equipment................................... (640) -
Total deferred tax liabilities........................................... (640) (2,300)
Non-current deferred tax assets:..................................................
NOL carryforwards............................................................. 224,220 202,000
Assets held for sale.......................................................... - 26,700
Basis differences on land held for investment, development or resale.......... 4,291 -
Basis differences on property and equipment................................... - 800
Book reserves not yet deductible for tax return purposes...................... 3,104 2,100
Tax credit carryforwards...................................................... 2,676 2,700
Other.................................................................... 2,349 4,000
Total deferred tax assets....................................... 236,640 238,300
Valuation allowance for deferred tax assets................................... (232,126) (236,000)
Deferred tax assets, net of valuation allowance............................... 4,514 2,300
Non-current net deferred tax assets............................................... $3,874 $ -
Realization of future tax benefits related to deferred tax assets is
dependent on many factors, including our ability to generate future taxable
income. The valuation allowance is adjusted in the period we determine it
is more likely than not that deferred tax assets will or will not be
realized. We considered these factors in reaching our conclusion to reduce
the valuation allowance by approximately $3.9 million during the fourth
quarter of 2001, which resulted in a reduction to our provision for income
taxes.
For federal income tax purposes, Sun International North America, Inc.
("SINA"), our wholly-owned subsidiary, had net operating loss ("NOL")
carryforwards of approximately $630 million at December 31, 2001, of which
$226 million are unrestricted as to use. However, due to the change of
ownership of SINA in 1996, $404 million of these NOL carryforwards (the
"Pre-Change NOLs") are limited in their availability to offset our future
taxable income. As a result of these limitations, approximately $11.3
million of Pre-Change NOLs will become available for use each year through
the year 2008, an additional $8.4 million will be available in 2009. The
remaining Pre-Change NOLs are expected to expire unutilized.
Our restricted NOL carryforwards expire as follows: $49.0 million in
2005, $23.0 million in 2006, $15.0 million in 2007 and $1.0 million in
2009. Our unrestricted NOLs expire as follows: $6.0 million in 2005, $10.0
million in 2007, $57.0 million in 2008, $8.0 million in 2011, $57.0 million
in 2012, $33.0 million in 2019, $18.0 million in 2020 and $37.0 million in
2021.
Note 16-Supplemental Cash Flow Disclosures
Supplemental disclosures required by SFAS No. 95 "Statement of Cash
Flows" are presented below.
For the Year Ended December 31,
------------------------------------
2001 2000 1999
------ ------ ------
(In thousands of US dollars)
Interest paid, net of capitalization.................................... $43,644 $42,538 $48,680
Income taxes paid....................................................... 5,166 5,012 6,688
Non-cash investing and financing activities:
Promissory Note issued to Colony in connection with the Resorts
Atlantic City Sale.................................................. 17,500 - -
Accrued Interest Note issued to Colony.............................. 518 - -
Property and equipment acquired under capital lease
obligations......................................................... 16 1,574 938
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Refinancing of capital lease obligation.......... - - 1,144
Note 17 - Commitments and Contingencies
Lease Obligations
We lease office space in numerous locations throughout the United States
for sales and marketing, public relations, tour operations and travel
reservation services and other administrative services. These offices support
our operations in The Bahamas. In addition, we have obligations under certain
operating leases related to equipment acquired for our operations in The
Bahamas.
Future minimum lease obligations under various noncancellable operating
leases with terms in excess of one year at December 31, 2001 are as follows
(in thousands of US dollars):
Year Ending December 31,
2002................................ $4,625
2003................................ 4,340
2004................................ 1,532
2005................................ 670
2006................................ 670
Thereafter.......................... 395
------------
$12,232
Casino License
The operations of casinos in The Bahamas are subject to regulatory
controls. A casino license must be obtained by the operator and the license
must be periodically renewed and is subject to revocation at any time. In the
event that we are not able to maintain our license, management believes that
we would still realize the carrying value of our related assets.
Heads of Agreement
We have an agreement with the Bahamian Government, as amended in 1997,
that provides for certain investment incentives to encourage us to undertake
an expansion program at Atlantis. This agreement provides for a minimum annual
casino win tax of $4.3 million on gaming win up to $20 million as well as a
10% gaming tax to be paid on gaming win over $20 million. The agreement also
provides for a $5 million reduction of annual casino license fees and a 50%
credit against all win tax to be paid until 2009. The tax structure became
effective January 1, 1998.
In order to secure the tax incentives, we were obligated to begin
construction of at least 562 rooms on Paradise Island in place of the Pirate's
Cove Beach Resort (a 562-room hotel on Paradise Island) which we demolished
during the fourth quarter of 1998. We had plans for an additional 700-room
Phase III hotel project at Atlantis which would have satisfied this condition.
However, considering our available development resources and alternative uses
of capital, we postponed this project. As a result, in June 2000, we were
notified by the Bahamian Government that these additional incentives would not
be currently realized. Effective July 1, 2000, the casino win tax reverted
back to the structure in place prior to January 1, 1998, as follows: There is
no change in win tax on gaming win up to $20 million, however, we incur 12.5%
win tax on gaming win between $20 million and $120 million, and a 10% win tax
on gaming win in excess of $120 million. The $5 million annual reduction of
fees still applies, however, in lieu of the 50% credit on win tax to be paid
on gaming win over $20 million, we receive a 45% credit on win tax to be paid
on gaming win between $20 million and $120 million. Under our agreement with
the Bahamian Government, the additional tax incentives will be prospectively
reinstated in the event we begin construction of these additional rooms.
The agreement also provides for a five-year joint marketing agreement,
pursuant to which the
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Bahamian Government shall match our contribution, up to $4.0 million annually,
toward the direct costs related to staging certain marketing events, public
relations activities and the production and placement of advertisements in all
media.
Litigation, Claims and Assessments
We are a defendant in certain litigation and are aware of certain claims
and assessments incurred in the normal course of business. In the opinion of
management, based on the advice of counsel, the aggregate liability, if any,
arising from such matters will not have a material adverse effect on the
accompanying consolidated financial statements.
Note 18 - Segment Information
SFAS No.131 "Disclosures about Segments of an Enterprise and Related
Information" requires the disclosure of information regarding our operations
based upon how management makes operating decisions and assesses performance
of such segments. We operate in five geographical segments in one industry,
the development, operation and management of premier resort and casino
properties. We evaluate the performance of our segments based primarily on
operating profit before corporate expenses, interest expense, interest income,
income taxes and non-recurring items. The following is an analysis of net
revenues, contribution to consolidated income (loss) before provision for
income taxes and total assets, depreciation and amortization of goodwill and
capital additions by geographical location:
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net Revenues
For The Year Ended December 31,
-------------------------------------
(In thousands of US dollars) 2001 2000 1999
- ---------------------------- ----- ------ ------
Casino/hotel:
Atlantic City, New Jersey(a)
Gaming..................................... $- $235,827 $221,015
Rooms...................................... - 16,412 15,160
Food and beverage.......................... - 26,039 25,512
Other...................................... - 4,973 8,075
Less: promotional allowances............... - (25,288) (26,632)
- 257,963 243,130
Paradise Island, The Bahamas:
Gaming..................................... 116,490 132,108 130,529
Rooms...................................... 176,573 177,596 149,671
Food and beverage.......................... 121,415 121,679 111,588
Other(b)................................... 78,552 66,280 58,732
Insurance recovery......................... 2,000 - 14,209
Less: promotional allowances............... (22,778) (26,491) (23,608)
472,252 471,172 441,121
Total casino/hotel............................. 472,252 729,135 684,251
Real estate related-Ocean Club Estates......... 9,771 108,650 -
Management and other fees:
Connecticut................................ 27,396 23,575 39,282
Indian Ocean............................... 6,841 7,539 6,477
Dubai...................................... 1,123 1,221 538
Harborside at Atlantis(c).................. 1,408 3,428 -
Maldives(d)................................ 38 - -
Other segments................................. 14,212 11,147 8,419
Net revenues............................... $533,041 $884,695 $738,967
Contribution to Consolidated Income (Loss) before Provision for Income Taxes
For The Year Ended December 31,
----------------------------------------
(In thousands of US dollars) 2001 2000 1999
- ---------------------------- ------ ------ ------
Casino/hotel:
Atlantic City, New Jersey(a).................. $- $7,593 $(253)
Paradise Island, The Bahamas(b)............... 68,183 85,666 93,609
68,183 93,259 93,356
Real estate related-Ocean Club Estates............ 6,906 76,378 -
Management and other fees, net of amortization
Connecticut................................... 26,916 23,096 38,802
Indian Ocean 6,841 7,539 6,477
Dubai......................................... 1,123 1,221 538
Harborside at Atlantis(c)..................... 1,408 3,428 -
Maldives(d)................................... 38 - -
General corporate................................. (23,896) (23,330) (16,899)
Pre-opening expenses.............................. (6,904) (7,616) (5,398)
Restructuring costs............................... (5,732) - -
Purchase termination costs........................ - (11,202) -
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Transaction costs................................. - (7,014) -
Write-down of net assets held for sale............ - (229,208) -
Other segments.................................... 3,154 1,694 2,348
Corporate marketing, retail and public relations.. (2,359) (3,089) (4,792)
Income (loss) from operations................. 75,678 (74,844) 114,432
Other income (expense):
Interest income............................... 7,471 4,194 12,725
Interest expense, net of capitalization....... (52,702) (45,678) (50,699)
Equity in earnings of associated companies:
Indian Ocean.................................. 3,302 3,445 2,628
Harborside at Atlantis(c)..................... 472 780 -
Maldives(d)................................... (715) - -
Other, net........................................ (760) (688) 60
Income (loss) before provision for income taxe $32,746 $(112,791) $79,146
Total Assets, Depreciation and Amortization of Goodwill and Capital Additions
As of Year Ended December 31, 2001
December 31, 2001 ----------------------------
-----------------
Depreciation and
Total Amortization Capital
(In thousands of US dollars) Assets of Goodwill Additions
- ---------------------------- ------ ----------- ---------
Casino/hotel:
Paradise Island, The Bahamas....................... $1,165,711 $50,035 $65,882
Real estate related:
Atlantic City, New Jersey.......................... 53,575 - -
Paradise Island, The Bahamas....................... 13,946 - -
67,521 - -
Equity investment in Indian Ocean...................... 22,891 - -
Equity investment in Maldives(d)....................... 3,053 - -
General corporate...................................... 93,417 1,161 1,708
Trading Cove New York.................................. 1,523 - -
Corporate marketing, and public relations.............. 1,311 287 -
Other segments......................................... 1,604 7 -
$1,357,031 $51,490 $67,590
As of
December 31, 2000 Year Ended December 31, 2000
----------------- ----------------------------
(In thousands of US dollars) Depreciation and
- ---------------------------- Total Amortization Capital
Assets of Goodwill Additions
------ ----------------- ---------
Casino/hotel:
Atlantic City, New Jersey.......................... $- $16,236 $11,316
Paradise Island, The Bahamas(e) 1,162,060 42,422 137,987
1,162,060 58,658 149,303
Real estate related:
Atlantic City, New Jersey.......................... 56,176 - -
Paradise Island, The Bahamas....................... 17,538 - -
73,714 - -
Net assets held for sale(a)............................ 138,350 - -
Equity investment in Indian Ocean...................... 25,467 - -
General corporate...................................... 58,632 1,257 6,589
Corporate marketing, and public relations.............. 1,404 304 -
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other segments......................................... 1,164 4 -
As of
December 31, 1999 Year Ended December 31, 1999
----------------- ----------------------------------
Depreciation and
Total Amortization Capital
Assets of Goodwill Additions
------ ----------------- ---------
(In thousands of US dollars)
Casino/hotel:
Atlantic City, New Jersey.......................... $ 429,854 $16,156 $42,574
Paradise Island, The Bahamas 1,054,708 39,631 24,200
Paradise Island expansion, opened December - - 117,808
1998(f)........................................
1,484,562 55,787 184,582
Real estate related:
Atlantic City, New Jersey.......................... 61,307 - 9,433
Paradise Island, The Bahamas 30,022 - 4
91,329 - 9,437
Equity investment in Indian Ocean...................... 24,871 - -
General corporate...................................... 68,222 1,120 10,828
Corporate marketing, retail and public relations....... 1,729 321 199
Other segments......................................... 758 2 -
$1,671,471 $57,230 $205,046
- -----------
(a) See discussion of the Resorts Atlantic City Sale in Note 1 herein.
(b) Includes tour operations.
(c) The construction of timeshare units at Harborside at Atlantis was
completed in February 2001. Sales of these units began in May 2000.
(d) We acquired a 25% interest in Kanuhura effective August 1, 2001.
(e) In 2000, capital additions in Paradise Island, The Bahamas included
$113.8 million of costs for the Ocean Club addition and newly renovated
golf course, including a new club house.
(f) Capital additions related to a 1998 expansion of Atlantis on Paradise
Island are included in total assets under Paradise Island, The Bahamas.
Note 19 - Equity in Earnings of Associated Companies
The accompanying consolidated financial statements include equity in
earnings of associated companies as a result of our 20.4% interest in Indian
Ocean Resorts, our 50% interest in Harborside at Atlantis and our 25% interest
in Kanuhura.
Through June 16, 2000, we owned a 22.8% interest in Indian Ocean Resorts.
Effective June 16, 2000, Indian Ocean Resorts issued additional shares of
stock under a rights issue in which we did not participate, effectively
reducing our ownership interest to 20.4%. The following unaudited summarized
financial information of Indian Ocean Resorts has been prepared under
accounting principals generally accepted in the United States at and for the
years ended December 31, 2001, 2000 and 1999; converted to thousands of US
dollars at the appropriate exchange rate.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Year Ended December 31,
--------------------------------
2001 2000 1999
---- ---- ----
Revenues.......................... $93,398 $106,151 $84,007
Income from operations............ 25,277 28,310 15,630
Income before income taxes........ 20,136 20,480 13,171
As of December 31,
--------------------------------
2001 2000 1999
---- ---- ----
Current assets.................... $27,413 $24,424 $21,075
Total assets...................... 225,835 238,286 264,345
Current liabilities............... 32,950 35,173 61,595
Shareholders' equity.............. 119,635 127,379 140,865
Harborside at Atlantis constructs, sells and manages time-share units
in Paradise Island, The Bahamas. Construction of 82 units was completed in
February 2001 and sales of time-share units began in May 2000. The
following unaudited summarized financial information of Harborside at
Atlantis has been prepared under accounting principals generally accepted
in the United States at and for the years ended December 31, 2001 and 2000.
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Year Ended
December 31,
------------------
2001 2000
---- ----
Revenues................................... $35,371 $18,446
Income from operations..................... 1,372 1,561
Income before income taxes................. 1,372 1,561
For the Year Ended
December 31,
------------------
2001 2000
---- ----
Current assets............................. $99,832 $27,306
Total assets............................... 109,357 79,175
Current liabilities........................ 88,700 57,830
Shareholders' equity....................... 20,657 17,305
Effective August 1, 2001, we acquired our 25% interest in Kanuhura.
The following unaudited summarized financial information of Kanuhura has
been prepared under accounting principals generally accepted in the United
States at and for the year ended December 31, 2001.
For the Year Ended
December 31, 2001
------------------
Revenues...................................... $3,809
Loss from operations.......................... (1,261)
Loss before income taxes...................... (2,564)
As of
December 31, 2001
------------------
Current assets................................ $3,215
Total assets.................................. 33,048
Current liabilities........................... 4,724
Shareholders' equity.......................... 2,091
Note 20 - Fair Value of Financial Instruments
The fair value of a financial instrument represents the amount at
which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced sale or liquidation.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates
are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. The
assumptions used have a significant effect on the estimated amounts
reported.
We used the following methods and assumptions in estimating fair value
disclosures for financial instruments: (a) Cash and cash equivalents,
receivables, other current assets, accounts payable, accrued liabilities
and variable rate debt: the amounts reported in the accompanying
consolidated balance sheets approximate fair value; (b) Fixed-rate debt:
fixed rate debt is valued based upon published market quotations, as
applicable. The fair value of our fixed rate debt at December 31, 2001 was
approximately $486.6 million as compared to its carrying value of $493.9
million; (c) swap agreements: the fair value of our swap agreements was
determined from the representations of financial institutions. The fair
value of our swap agreements at December 31, 2001 equal their carrying
value, and are reflected as other long-term liabilities on the accompanying
consolidated balance sheet. The carrying value and negative fair value of
our Prior Swap Agreements at December 31, 2000 was $0 and $454,000,
respectively.
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 21 - Supplemental Condensed Consolidating Financial Information
Our payment obligations under the Senior Subordinated Notes were
co-issued by SIHL and SINA. The Senior Subordinated Notes are guaranteed by
substantially all of our wholly-owned subsidiaries (the "Subsidiary
Guarantors") and are jointly and severally irrevocably and unconditionally
guaranteed. Separate financial statements of the Subsidiary Guarantors are
not presented because we have determined that they would not be material to
investors. The following supplemental financial information sets forth
balance sheets, statements of operations and statements of cash flows for
each of the co-issuers of the Senior Subordinated Notes, SIHL and SINA and,
on a combined basis, for the Subsidiary Guarantors. SIHL's non-guarantor
subsidiaries are minor and, therefore, are not separately presented.
F-31
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Balance Sheet at December 31, 2001
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................... $4,065 $1,242 $18,003 $7,161 $30,471
Restricted cash............................. - - 4,518 - 4,518
Trade receivables, net...................... 82 1,102 36,270 - 37,454
Due from affiliates......................... 336,351 237,801 (547,185) 1,397 28,364
Inventories................................. - 91 8,716 - 8,807
Prepaid expenses............................ 5 188 5,033 - 5,226
Total current assets.................... 340,503 240,424 (474,645) 8,558 114,840
Property and equipment, net - 54,221 1,077,060 23,911 1,155,192
Note receivable - 18,018 - - 18,018
Due from affiliates-non-current 3,250 - 12,638 - 15,888
Deferred tax asset, net - 3,874 - - 3,874
Deferred charges and other assets, net 2,477 9,898 6,317 - 18,692
Investment in subsidiaries 356,567 10 280,049 (636,626) -
Investment in associated companies 3,053 - 34,425 (6,951) 30,527
Total assets............................ $705,850 $326,445 $935,844 $(611,108) $1,357,031
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $- $70 $191 $- $261
Accounts payable and accrued 23,054 18,629 97,718 8,662 148,063
liabilities.............................
Due to affiliates-current................... - - (1,397) 1,397 -
Capital creditors........................... - - 6,570 - 6,570
Total current liabilities............... 23,054 18,699 103,082 10,059 154,894
Other long-term liabilities..................... 5,503 - - - 5,503
Long-term debt, net of current maturities....... 94,497 399,438 24,296 - 518,231
Total liabilities........................... 123,054 418,137 127,378 10,059 678,628
Shareholders' equity............................ 582,796 (91,692) 808,466 (621,167) 678,403
Total liabilities and shareholders' $705,850 $326,445 $935,844 $(611,108) $1,357,031
equity..................................
F-32
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Balance Sheet at December 31, 2000
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................. $106 $(725) $16,690 $6,426 $22,497
Restricted cash........................... - - 1,651 - 1,651
Trade receivables, net.................... 90 631 39,831 60 40,612
Due from affiliates....................... 456,471 (160,760) (255,995) (5,576) 34,140
Inventories............................... - 71 10,346 - 10,417
Prepaid expenses.......................... 261 155 9,433 - 9,849
Net assets held for sale.................. - (5,889) 144,395 (156) 138,350
Total current assets.................. 456,928 (166,517) (33,649) 754 257,516
Property and equipment, net............... - 58,720 1,072,881 23,908 1,155,509
Due from affiliates, non-current.......... - 199,337 5,069 (199,337) 5,069
Deferred charges and other assets, 2,239 24 10,857 - 13,120
net...................................
Investment in subsidiaries................ 350,947 511,712 804,317 (1,666,976) -
Investment in associated companies........ - - 33,952 (4,375) 29,577
Total assets.......................... $810,114 $603,276 $1,893,427 $(1,846,026) $1,460,791
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...... $- $58 $172 $- $230
Accounts payable and accrued 7,610 12,985 111,353 4,924 136,872
liabilities...........................
Due to affiliates......................... - - 5,300 (5,300) -
Capital creditors......................... - - 12,954 - 12,954
Total current liabilities............. 7,610 13,043 129,779 (376) 150,056
Long-term debt, net of current maturities..... 225,000 199,420 244,488 - 668,908
Due to affiliates, non-current................ - - 199,337 (199,337) -
Total liabilities......................... 232,610 212,463 573,604 (199,713) 818,964
Shareholders' equity.......................... 577,504 390,813 1,319,823 (1,646,313) 641,827
Total liabilities and shareholders' $810,114 $603,276 $1,893,427 $(1,846,026) $1,460,791
equity................................
F-33
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Statement of Operations for the Year Ended December 31, 2001
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
Revenues:
Casino and resort revenues............... $- $- $477,183 $(6,289) $470,894
Less: promotional allowances............. - - (22,778) - (22,778)
- - 454,405 (6,289) 448,116
Tour operations.......................... - - 36,348 - 36,348
Management and other fees - 15,087 36,806 (15,087) 36,806
Real estate related - - 9,771 - 9,771
Insurance recovery - - 2,000 - 2,000
Other - 893 (893) - -
Affiliated sales - - 9,742 (9,742) -
- 15,980 548,179 (31,118) 533,041
Expenses:
Casino and resort expenses............... - - 267,396 (14,377) 253,019
Tour operations.......................... - - 32,061 (20) 32,041
Selling, general and administrative...... - - 81,840 (1,634) 80,206
Management fee .................. 634 - 14,453 (15,087) -
Real estate related...................... - - 3,044 (179) 2,865
Corporate expenses .................. 1,506 8,802 13,456 1,342 25,106
Depreciation and amortization ......... - 124 51,366 - 51,490
Restructuring costs...................... - - 5,732 - 5,732
Pre-opening expenses......................... - - 6,904 - 6,904
2,140 8,926 476,252 (29,955) 457,363
Income (loss) from operations................ (2,140) 7,054 71,927 (1,163) 75,678
Other income and expenses:
Interest income.......................... 742 4,296 2,433 - 7,471
Interest expense, net of (10,938) (27,736) (14,028) - (52,702)
capitalization.......................
Affiliated interest income............... 7,575 6,931 (1) (14,505) -
Affiliated interest expense.............. - - (14,505) 14,505 -
Equity in earnings (loss) of (714) - 471 3,302 3,059
associated companies.................
Dividend income.......................... 2,836 - 2,872 (5,708) -
Other, net............................... - (664) (96) - (760)
Income (loss) before income taxes............ (2,639) (10,119) 49,073 (3,569) 32,746
Benefit (provision) for income taxes......... - 4,597 (4,065) (1,622) (1,090)
Net income (loss)........................ $(2,639) $(5,522) $45,008 $(5,191) $31,656
F-34
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Statement of Operations for the Year Ended December
31, 2000
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
Revenues:
Casino and resort revenues.............. $- $- $762,496 $(6,630) $755,866
Less: promotional allowances............ - - (51,779) - (51,779)
- - 710,717 (6,630) 704,087
Tour operations......................... - - 33,192 - 33,192
Management and other fees............... 2,070 21,846 33,693 (21,846) 35,763
Real estate related..................... - - 108,650 - 108,650
Other................................... - 38 2,965 - 3,003
Affiliated sales........................ - 244 8,692 (8,936) -
2,070 22,128 897,909 (37,412) 884,695
Expenses:
Casino and resort expenses.............. - - 471,780 (18,207) 453,573
Tour operations......................... - - 29,637 (11) 29,626
Selling, general and - - 100,396 3,069 103,465
administrative......................
Management fee.......................... 634 - 21,212 (21,846) -
Real estate related..................... - - 32,272 - 32,272
Corporate expenses...................... 1,684 11,694 12,379 (417) 25,340
Depreciation and amortization........... - 258 59,965 - 60,223
Write-off of Desert Inn costs........... - 11,202 - - 11,202
Transaction costs....................... 7,014 - - - 7,014
Pre-opening expenses.................... - - 7,616 - 7,616
Write down of assets to be sold......... - 233,085 - (3,877) 229,208
9,332 256,239 735,257 (41,289) 959,539
Income (loss) from operations............... (7,262) (234,111) 162,652 3,877 (74,844)
Other income and expenses:
Interest income......................... 144 234 3,816 - 4,194
Affiliated interest income.............. 8,810 (18,076) 36,152 (26,886) -
Affiliated interest expense............. - - (26,886) 26,886 -
Interest expense, net of (13,163) 18,075 (50,590) - (45,678)
capitalization......................
Equity in earnings of associated - - 780 3,445 4,225
companies...........................
Dividend income 2,839 - 2,848 (5,687) -
Other, net.............................. - 11 (699) - (688)
Income (loss) before income taxes........... (8,632) (233,867) 128,073 1,635 (112,791)
Benefit (provision) for income taxes........ 27 (4) (6,336) - (6,313)
Net income (loss)....................... $(8,605) $(233,871) $121,737 $1,635 $(119,104)
F-35
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Statement of Operations for the Year Ended December
31, 1999
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
Revenues:
Casino and resort revenues..................... $- $- $703,074 $(6,557) $696,517
Less: promotional allowances................... - - (50,240) - (50,240)
- - 652,834 (6,557) 646,277
Tour operations................................ - - 28,714 - 28,714
Management and other fees...................... 14,610 22,183 32,288 (22,183) 46,898
Insurance recovery............................. - - 14,209 - 14,209
Other.......................................... - - 2,869 - 2,869
Affiliated sales............................... - 325 8,665 (8,990) -
14,610 22,508 739,579 (37,730) 738,967
Expenses:
Casino and resort expenses..................... - - 436,777 (12,908) 423,869
Tour operations................................ - - 27,816 - 27,816
Selling, general and administrative............ - - 95,942 (1,980) 93,962
Management fee................................. 634 21,549 (22,183) -
Corporate expenses............................. 1,457 6,845 8,679 (721) 16,260
Depreciation and amortization.................. - 284 56,946 - 57,230
Pre-opening expenses........................... - - 5,398 - 5,398
2,091 7,129 653,107 (37,792) 624,535
Income from operations............................. 12,519 15,379 86,472 62 114,432
Other income and expenses:
Interest income................................ 9,930 408 2,387 - 12,725
Affiliated interest income..................... 8,798 (18,069) 36,532 (27,261) -
Affiliated interest expense.................... - - (27,261) 27,261 -
Interest expense, net of capitalization........ (8,798) 18,069 (59,970) - (50,699)
Equity in earnings of associated..... companies - - - 2,628 2,628
Dividend income................................ 3,232 - 2,651 (5,883) -
Other, net..................................... - 277 (217) - 60
Income (loss) before income taxes.................. 25,681 16,064 40,594 (3,193) 79,146
Provision for income taxes......................... (6,479) (50) (2,795) - (9,324)
Net income (loss).............................. $19,202 $16,014 $37,799 $(3,193) $69,822
F-36
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Statement of Cash Flows for the Year Ended December
31, 2001
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
Cash flows from operating activities:
Net income (loss).................................. $(2,639) $(5,522) $45,008 $(5,191) $31,656
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization.................. 263 1,160 54,269 - 55,692
Deferred income tax benefit.................... - (3,874) - - (3,874)
Provision for doubtful receivables............. - - 6,355 - 6,355
(Gain) loss on disposition of other assets..... - 664 96 - 760
Equity in earnings of associated 714 - (471) (430) (187)
companies, net of dividends received.......
Dividends to parent............................ - - (2,836) 2,836 -
Net change in deferred charges and other - 108 (1,506) - (1,398)
assets.....................................
Net change in working capital accounts:
Receivables ........................ 8 (6,289) 2,559 - (3,722)
Due from affiliates ........................ 1,100 - 277 - 1,377
Inventories and prepaid expenses............... 256 (53) 4,895 - 5,098
Accounts payable and accrued liabilities....... 3,445 5,143 (9,697) 2,785 1,676
Other.......................................... - - 5,900 - 5,900
Net cash provided by (used in) operating 3,147 (8,663) 104,849 - 99,333
activities.................................
Cash flows from investing activities:
Payments for property and equipment, net - (399) (67,191) - (67,590)
of insurance proceeds received.............
Proceeds received from the sale of - 120,850 - - 120,850
Resorts Atlantic City, net.................
Proceeds received from repayment of note 12,000 - - - 12,000
receivable.................................
Proceeds from the sale of assets............... - 2,196 351 - 2,547
Acquisition of equity interest in (3,768) - - - (3,768)
associated companies.......................
Advances to associated companies ....... (3,250) - (3,170) - (6,420)
Net cash provided by (used in) investing 4,982 122,647 (70,010) - 57,619
activities.................................
Cash flows from financing activities:
Proceeds from the exercise of share 7,930 - - - 7,930
options....................................
Borrowings..................................... - 200,000 74,500 - 274,500
Repayment of borrowings........................ (68,270) (79,063) (272,403) - (419,736)
Debt issuance and modification costs........... (500) (6,250) (2,055) - (8,805)
Advances from (repayments to) affiliates....... 56,670 (226,704) 170,034 - -
Net cash used in financing activities.......... (4,170) (112,017) (29,924) - (146,111)
Increase in cash and cash equivalents.............. 3,959 1,967 4,915 - 10,841
Cash and cash equivalents at beginning of 106 (725) 24,767 - 24,148
period.............................................
Cash and cash equivalents at end of period......... $4,065 $1,242 $29,682 $- $34,989
F-37
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Statement of Cash Flows for the Year Ended December
31, 2000
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
Cash flows from operating activities:
Net income (loss)......................... $(8,605) $(233,871) $121,737 $1,635 $(119,104)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization......... 185 333 63,822 - 64,340
Write-down of net assets held for - 233,085 - (3,877) 229,208
sale..............................
Purchase termination costs............ - 11,202 - - 11,202
(Gain) loss on disposition of - (24) 712 - 688
other assets......................
Equity in earnings of associated - - (780) (597) (1,377)
companies, net of dividends
received..........................
Dividends to parent................... - - (2,839) 2,839 -
Provision for doubtful receivables.... - - 6,492 - 6,492
Provision for discount on CRDA - - 799 - 799
obligations, net..................
Net change in deferred tax - 205 - - 205
liability.........................
Net change in deferred charges - (899) (769) - (1,668)
and other assets..................
Net change in working capital accounts:
Receivables........................... 10 603 (9,792) - (9,179)
Due from affiliates................... - - (4,658) - (4,658)
Inventories and prepaid expenses...... 289 (171) (2,170) - (2,052)
Accounts payable and accrued 1,463 (114) 25,141 - 26,490
liabilities.......................
Other................................. - - 23,912 - 23,912
Net cash provided by (used in) (6,658) 10,349 221,607 - 225,298
operating activities..............
Cash flows from investing activities:
Payments for property and - (6,099) (149,793) - (155,892)
equipment, net of insurance
proceeds received.................
Net proceeds from the sale of - 170 331 - 501
other assets......................
Deposit refunded for proposed - 7,750 - - 7,750
Desert Inn acquisition............
Advances to associated - - (18,663) - (18,663)
companies.........................
Reclassification of cash to net - - (21,453) - (21,453)
assets held for sale..............
CRDA deposits and other............... - (361) (2,334) - (2,695)
Net cash provided by (used in) - 1,460 (191,912) - (190,452)
investing activities..............
F-38
Cash flows from financing activities:
Proceeds from the exercise of 2,866 - - - 2,866
share options.....................
Borrowings ........................ 125,000 - 77,000 - 202,000
Repayment of borrowings............... - (16) (113,047) - (113,063)
Repurchase of Ordinary Shares......... (141,792) - - - (141,792)
Debt issuance and modification - - (919) - (919)
costs.............................
Advances from (repayments to) 20,536 (18,958) (1,578) - -
affiliates................................
Net cash provided by (used in) 6,610 (18,974) (38,544) - (50,908)
financing activities..............
Decrease in cash and cash (48) (7,165) (8,849) - (16,062)
equivalents.......................
Cash and cash equivalents at 154 6,440 33,616 - 40,210
beginning of period...............
Cash and cash equivalents at end $106 $(725) $24,767 $- $24,148
of period.........................
F-39
Sun International Hotels Limited
Condensed Consolidated Financial Statements
(In thousands of US dollars)
Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 1999
Guarantor
SIHL SINA Subsidiaries Eliminations Consolidated
---- ---- ------------ ------------ ------------
Cash flows from operating activities:
Net income (loss)........................... $19,202 $16,014 $37,799 $(3,193) $69,822
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization........... 173 353 59,621 - 60,147
Gain on disposition of other assets..... - (3) (57) - (60)
Equity in earnings of associated - - - 23 23
companies, net of dividends
received............................
Dividends to parent..................... - - (3,232) 3,232 -
Provision for doubtful receivables...... - - 6,466 - 6,466
Provision for discount on CRDA - - 587 - 587
obligations, net....................
Net change in deferred tax liability.... - (30) - - (30)
Net change in deferred charges - (146) 4,694 - 4,548
and other assets....................
Net change in working capital
accounts:
Receivables............................. (9,639) 1,230 (12,031) - (20,440)
Due from affiliates..................... - - (7,150) - (7,150)
Inventories and prepaid expenses........ (260) (52) (7,817) - (8,129)
Accounts payable and accrued (5,519) (2,362) 12,141 (62) 4,198
liabilities.........................
Net cash provided by operating 3,957 15,004 91,021 - 109,982
activities..........................
Cash flows from investing activities:
Payments for property and - (10,066) (194,980) - (205,046)
equipment, net of insurance
proceeds received...................
Net proceeds from the sale of - 5,050 136 - 5,186
non-operating land and other
assets..............................
Proceeds from redemption of 94,126 - - - 94,126
subordinated notes..................
Deposit paid for proposed Desert - (16,117) - - (16,117)
Inn acquisition.....................
Payments for investment in - - (600) - (600)
associated company..................
Sale of subordinated notes ........ 2,798 - - - 2,798
CRDA deposits........................... - - (2,746) - (2,746)
Net cash provided by (used in) 96,924 (21,133) (198,190) - (122,399)
investing activities....................
Cash flows from financing activities:
Proceeds from the exercise of 2,696 - - - 2,696
share options.......................
Borrowings.............................. - - 129,000 - 129,000
Repayment of borrowings................. - - (118,854) - (118,854)
Repurchase of Ordinary Shares........... (20,977) - - - (20,977)
F-40
Debt issuance and modification - - (2,361) - (2,361)
costs...............................
Advances from (repayments to) (82,551) 12,541 70,010 - -
affiliates..........................
Net cash provided by (used in) (100,832) 12,541 77,795 - (10,496)
financing activities................
Increase (decrease) in cash and 49 6,412 (29,374) - (22,913)
cash equivalents....................
Cash and cash equivalents at 105 28 62,990 - 63,123
beginning of period.................
Cash and cash equivalents at end $154 $6,440 $33,616 $- $40,210
of period...........................
F-41
$200,000,000 8-7/8% Senior Subordinated Notes due 2011
[LOGO]
--------------
KERZNER INTERNATIONAL LIMITED
KERZNER INTERNATIONAL NORTH AMERICA, INC.
Offer to Exchange
all outstanding unregistered 8-7/8% Senior Subordinated Notes due 2011
($200,000,000 aggregate principal amount)
for
8-7/8% Senior Subordinated Notes due 2011
($200,000,000 aggregate principal amount)
which have been registered under the Securities Act of 1933
---------------------------
Prospectus
, 2002
---------------------------
PART II
INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
Item 20. Indemnification
Section 56 of the International Business Companies Act of the
Commonwealth of The Bahamas (the "IBCA") empowers a company incorporated under
the IBCA to indemnify against all expenses, including legal fees, and against
all judgements, fines and amounts paid in settlement and reasonably incurred
in connection with legal, administrative or investigative proceedings any
person who (a) is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that the person is or
was a director, an officer or a liquidator of the company; or (b) is or was,
at the request of the company, serving as a director, officer or liquidator
of, or in any other capacity is or was acting for, another company or a
partnership, joint venture, trust or other enterprise, provided, however, that
such indemnification may only be provided to a person if the person acted
honestly and in good faith with a view to the best interests of the company
and, in the case of criminal proceedings, the person had no reasonable cause
to believe that his conduct was unlawful. The decision of the directors as to
whether the person acted honestly and in good faith and with a view to the
best interests of the company and as to whether the person had no reasonable
cause to believe that his conduct was unlawful is, in the absence of fraud,
sufficient for the purposes of the IBCA unless a question of law is involved.
Kerzner International provides for indemnification of its directors and
officers pursuant to Article 85 of its Articles of Association as amended,
which provides that, net of any indemnification an officer or director of
Kerzner International receives from another source, Kerzner International will
indemnify its officers and directors to the fullest extent permitted by the
IBCA.
Kerzner International has purchased directors' and officers' liability
insurance policies insuring its officers and directors and the officers and
directors of its subsidiaries against claims and liabilities (with stated
exceptions) to which they may become subject by reason of their positions with
Kerzner International or its subsidiaries as directors and officers.
II-1
Item 21. Exhibits and Financial Statement Schedules.
a. Exhibits (1)
Exhibit
Numbers Description Incorporation by Reference to
------- ----------- -----------------------------
1.1 Purchase Agreement dated May 9, 2002, among Sun Exhibit 2.3(b) to Form 20-F
International and SINA, as issuers, the subsidiary Annual Report of Sun International
guarantors party thereto and Bear, Stearns & Co. for the year ended December 31,
Inc., Deutsche Bank Securities Inc., CIBC World 2001, filed on May 30, 2002, File
Markets Corp., Banc of America Securities LLC, No. 001-04226
Wells Fargo Brokerage Services, LLC and J.P. Morgan
Securities Inc., as purchasers
1.2 Purchase Agreement dated August 9, 2001, among Exhibit 2.3(a) to Form 20-F
Sun International and SINA, as issuers, the Annual Report of Sun International
subsidiary guarantors party thereto and Deutsche for the year ended December 31,
Banc Alex. Brown Inc., Bear, Stearns & Co. Inc., 2001, filed on May 30, 2002, File
CIBC World Markets Corp., Banc of America No. 001-04226
Securities LLC, Wells Fargo Brokerage Services,
LLC, Fleet Securities, Inc. and The Royal Bank of
Scotland plc, as purchasers
1.3 Purchase Agreement dated March 5, 1997, among Exhibit 4(e)(1) to Form 10-K405
Sun International and SINA, as issuers, the Annual Report of SINA for the
subsidiary guarantors party thereto and Bear, fiscal year ended December 31,
Stearns & Co. Inc., Societe Generale Securities 1996, filed on March 20, 1997, File
Corporation and Scotia Capital Markets (USA) Inc., No. 001-04748
as purchasers
3.1 Amended and Restated Memorandum of Association Exhibit 3.1 to Registration
of Sun International Statement on Form F-4, filed on
November 7, 1996, File No. 333-15409
3.2 Restated Articles of Association of Sun International Exhibit 1 to Form 20-F Annual
dated as of June 26, 2001 Report of Sun International for the
year ended December 31, 2000,
filed on July 2, 2001, File No. 001-04226
3.3 Amendment to Restated Articles of Association of Filed herewith
Sun International dated as of September 24, 2001
3.4 Restated Certificate of Incorporation, as amended, of Exhibit 3.3 to Registration
Sun International North America, Inc. Statement on Form F-4, File No. 33-23665,
filed on March 20, 1997
3.5 Amended and Restated By-Laws of Sun International Exhibit 3.4 to Registration
North America, Inc. Statement on Form F-4, filed on
March 20, 1997, File No. 33-23665
4.1 Indenture dated as of August 14, 2001, among Sun Exhibit 2(c) to Form 6-K of Sun
International and SINA as Issuers, the Guarantors International, filed on August 24, 2001,
party thereto and The Bank of New York, as Trustee File No. 001-04226 thereto and The Bank
- ----------------
(1) Sun International Hotels Limited changed its name to Kerzner International Limited effective July 1,
2002. Sun International North America, Inc. changed its name to Kerzner International North America,
Inc. effective July 1, 2002.
II-2
4.2 Supplemental Indenture dated as of September 19, Exhibit 99(a) to Form 6-K of Sun
2001 to Indenture dated as of August 14, 2001 International, filed on August 24,
2001, File No. 001-04226
4.3 Second Supplemental Indenture dated as of May 20, Filed herewith
2002 to Indenture dated as of August 14, 2001
4.4 Form of 8-7/8% Senior Subordinated Note due 2011 Exhibit 2(c) to Form 6-K of Sun
International, filed on August 24,
2001, File No. 001-04226
4.5 Form of Guarantee with respect to 8-7/8% Senior Exhibit 2(c) to Form 6-K of Sun
Subordinated Note due 2011 International, filed on August 24,
2001, File No. 001-04226
4.6 Registration Rights Agreement, dated as of May 20, Exhibit 2.3(f) to Form 20-F Annual
2002, among Sun International and SINA as Issuers, Report of Sun International for the
the Guarantors party thereto and Bear, Stearns & Co. year ended December 31, 2001,
Inc., Deutsche Banc Alex. Brown Inc., CIBC World filed on May 30, 2002, File No. 001-04226
Markets Corp., Banc of America Securities LLC,
Wells Fargo Brokerage Services, LLC and J.P.
Morgan Securities, Inc., as initial purchasers
4.7 Registration Rights Agreement, dated as of August Exhibit 2(b) to Form 6-K of Sun
4, 2001, among Sun International and SINA as International, filed on August 24,
ssuers, the Guarantors party thereto and Deutsche 2001, File No. 001-04226
anc Alex. Brown Inc., Bear, Stearns & Co. Inc.,
IBC World Markets Corp., Banc of America
ecurities LLC, Wells Fargo Brokerage Services,
LC, Fleet Securities, Inc. and The Royal Bank of
cotland plc, as initial purchasers
4.8 Form of Indenture dated as of March 10, 1997, Exhibit 4(e)(2) to Form 10-K405
among Sun International and SINA as Issuers, the Annual Report of SINA for the
Guarantors party thereto and the Bank of New York, fiscal year ended December 31,
as Trustee 1996, filed on March 20, 1997,
File No. 001-04748
4.9 Form of 9.000% Senior Subordinated Note due 2007 Exhibit 4(e)(2) to Form 10-K405
Annual Report of SINA for the fiscal year
ended December 31, 1996, filed on March 20,
1997, File No. 001-04748
4.10 Form of Exchange Note with respect to 9.000% Exhibit 4.6 to Registration
Senior Subordinated Note due 2007 Statement on Form F-4, filed on
March 20, 1997, File No. 333-23665
4.11 Form of Guarantee with respect to 9.000% Senior Exhibit 4(e)(2) to Form 10-K405
Subordinated Note due 2007 Annual Report of SINA for the fiscal
year ended December 31, 1996, filed
on March 20, 1997, File No.001-04748
4.12 Supplemental Indenture dated as of July 23, 2001 to Exhibit 99(a) to Form 6-K of Sun
Indenture dated as of March 10, 1997 International, filed on August 3,
2001, File No. 001-04226
II-3
4.13 Second Supplemental Indenture dated as of Exhibit 99(b) to Form 6-K of Sun
September 19, 2001 to Indenture dated as of March 10, International, filed on September 20,
1997 2001, File No. 001-04226
4.14 Registration Rights Agreement dated as of March 10, Exhibit 4(e)(3) to Form 10-K405 1997
among Sun International and SINA, as Issuers, Annual Report of SINA for the the
Guarantors party thereto and the Initial fiscal year ended December 31,
Purchasers party thereto 1996, filed on March 20, 1997, File
No. 001-04748
4.15 Form of Indenture dated as of December 10, 1997, Exhibit 4.1 to Registration
among Sun International and SINA, as Issuers, the Statement on Form F-3, filed on
Guarantors party thereto and the Bank of New York, November 26, 1997, File No. 333-41127
as Trustee
4.16 Form of 8-5/8% Senior Subordinated Note due 2007 Exhibit 4.1 to Registration
Statement on Form F-3, filed on
November 26, 1997, File No. 333-
41127
4.17 Form of Guarantee with respect to 8-5/8% Senior Exhibit 4.1 to Registration
Subordinated Note due 2007 Statement on Form F-3, filed on
November 26, 1997, File No. 333-41127
4.18 Supplemental Indenture dated as of July 23, 2001 to Exhibit 99(b) to Form 6-K of Sun
Indenture dated as of December 10, 1997 International, filed on August 3,
2001, File No. 001-04226
4.19 Second Supplemental Indenture dated as of Exhibit 99(b) to Form 6-K of Sun
September 19, 2001 to Indenture dated as of International, filed on September
December 10, 1997 20, 2001, File No. 001-04226
4.20 Fourth Amended and Restated Revolving Credit Exhibit 10 to Form 10-Q Quarterly
Agreement dated as of November 13, 1999, among Report of SINA for the quarter
Sun International, SINA, Sun International Bahamas ended September 30, 2001, filed on
Limited, Canadian Imperial Bank of Commerce, as November 14, 2001, File No. 001-
administrative agent and various financial 04748
institutions, as the lenders
4.21 First Amendment to the Fourth Amended and Filed herewith
Restated Revolving Credit Agreement dated as of
May 8, 2002
5.1 Opinion of Charles D. Adamo, Esq. Filed herewith
5.2 Opinion of Giselle M. Pyfrom, Esq. Filed herewith
10.1 Purchase Agreement dated as of October 30, 2000, Exhibit 10 to Form 10-Q of SINA
among SINA, as parent, GGRI, Inc., as Seller, and for the quarter ended September 30,
Colony Capital LLC ("Colony"), as Buyer 2000, filed on November 14, 2000,
File No. 001-04748
10.2 Promissory Note between Colony and SINA dated Exhibit 2 to Form 6-K of Sun
as of April 25, 2001 International, filed on May 8,
2001, File No. 001-04226
II-4
10.3 Second Amended and Restated Development Services Exhibit 10 to Form 10-Q Quarterly
Agreement dated as of February 6, 2002 among the Report of SINA for the quarter
Stockbridge-Munsee Tribe, the Stockbridge-Munsee ended March 31, 2002, filed on
Tribal Gaming Authority, Trading Cove New York, May 15, 2002, File No. 001-04748
LLC ("TCNY"), SINA and Waterford Gaming Group, LLC
10.4 Management Agreement between the Government of Exhibit 3.2 to Form 20-F Annual
Dubai, Sun International Management Limited and Report of Sun International for the
Sun International dated as of June 5, 1998 year ended December 31, 1998,
filed on June 30, 1999, File No.
001-04226
10.5 Development Services Agreement dated February 7, Exhibit 2.1 to Form 20-F/A of Sun
1998 between the Mohegan Tribal Gaming Authority International for the year ended
and Trading Cove Associates December 31, 1997, filed on
September 3, 1998, File No. 001-
04226
10.6 Relinquishment Agreement dated February 7, 1998, Exhibit 2.2 to Form 20-F/A of Sun
between the Mohegan Tribal Gaming Authority and International for the year ended
Trading Cove Associates December 31, 1997, filed on
September 3, 1998, File No. 001-
04226
10.7 Registration Rights and Governance Agreement dated Exhibit 10.8 to Registration
as of July 3, 2001, by and among Sun International, Statement on Form F-4, filed on
Sun International Investments Limited, World Leisure October 5, 2001, File No. 333-
Group Limited, Kersaf Investments Limited, 69780
Caledonia Investments PLC, Mangalitsa Limited,
Cement Merchants SA, Rosegrove Limited, Royale
Resorts Holdings Limited and Sun International Inc.
10.8 Omnibus Agreement dated as of July 3, 2001, by and Exhibit 10.9 to Registration
among Sun International, Sun International Statement on Form F-4, filed on
Investments Limited, World Leisure Group Limited, October 5, 2001, File No. 333-
Kersaf Investments Limited, Caledonia Investments 69780
PLC, Rosegrove Limited, Royale Resorts Holdings
Limited, Royale Resorts International Limited, Sun
International Inc., Sun Hotels International, Sun
Hotels Limited, World Leisure Investments Limited, Solomon
Kerzner, Peter Buckley, Derek Aubrey Hawton, Sun
International Management Limited (a British Virgin Islands
company), Cement Merchants SA, Sun International Management
Limited (a Swiss company), Sun International Management (UK)
Limited, Hog Island Holdings Limited and Mangalitsa Limited
II-5
10.9 Supplemental Agreement to the Original Exhibit 10.10 to Registration
Shareholders' Agreement and to the Rosegrove Statement on Form F-4, filed on
Shareholders Agreement dated as of July 3, 2001, by October 5, 2001, File No. 333-
and among Kersaf Investments Limited, Sun 69780
International Inc., Sun Hotels International, Royale
Resorts Holdings Limited, World Leisure Investments
Limited, Sun Hotels Limited, World Leisure Group
Limited, Royale Resorts International Limited, Caledonia
Investments PLC, Solomon Kerzner, Sun International
Management Limited (a British Virgin Islands company),
Rosegrove Limited, Sun International Management Limited (a
Swiss company), Mangalitsa Limited and Hog Island Holdings
Limited
10.10 Irrevocable Proxy Agreement dated as of July 3, Exhibit 10.11 to Registration
2001, by and among Sun International, Sun Statement on Form F-4, filed on
International Investments Limited, World Leisure October 5, 2001, File No. 333-
Group Limited, Kersaf Investments Limited, 69780
Caledonia Investments PLC, Mangalitsa Limited,
Cement Merchants SA, Rosegrove Limited, Royale
Resorts Holdings Limited and Sun International Inc.
10.11 Trade Name and Trademark Agreement dated as of Exhibit 10.12 to Registration
July 3, 2001, by and among Sun International, Sun Statement on Form F-4, filed on
International Investments Limited and World Leisure October 5, 2001, File No. 333-
Group Limited, as Assignors, and Sun International 69780
Management Limited, as Assignee
10.12 Promissory Note dated July 3, 2001 between Royale Exhibit 10.13 to Registration
Resorts Holdings Limited, as Maker, and Sun Statement on Form F-4, filed on
International, as Payee October 5, 2001, File No. 333-
69780
10.13 Stock Pledge Agreement dated as of July 3, 2001, Exhibit 10.14 to Registration
between Royale Resorts Holdings Limited, as Statement on Form F-4, filed on
Pledgor, and Sun International October 5, 2001, File No. 333-
69780
10.14 Stock Purchase Agreement dated as of February 14, Exhibit 4.8 to Form 20-F Annual
2002, by and among Station Casinos, Inc., Station Report of Sun International for the
Online, Inc., Sun International and SunOnline year ended December 31, 2001,
Limited filed on May 30, 2002, File No.
001-04226
10.15 Sun International North America, Inc. Retirement Exhibit 10(c) to Form 10-K Annual
Savings Plan dated January 1, 2000 Report of SINA for the year ended
December 2000, filed on April 17,
2001, File No. 001-04748
10.16 Sun International Audit Committee Charter Exhibit 3.4 to Form 20-F Annual
Report of Sun International for the
year ended December 31, 1999,
filed on June 30, 2000, File No.001-
04226
II-6
11.1 Statement regarding computation of earnings per Note 2 of the Notes to the Consolidated
share Financial Statements to Form 20-F of
Sun International Annual Report for
the year ended December 31, 2000,
filed on July 2, 2001
12.1 Statement regarding computation of ratios Filed herewith
21.1 Subsidiaries of Sun International Exhibit 8 to Form 20-F Annual Report
of Sun International for the year
ended December 31, 2001, filed on
May 30, 2002, File No. 001-04226
23.2 Consent of Charles D. Adamo, Esq. (contained in Filed herewith
Exhibit 5.1)
23.2 Consent of Giselle M. Pyfrom, Esq. (contained in Filed herewith
Exhibit 5.1)
24 Powers of Attorney (included on the signature pages Filed herewith
hereto)
25.1 Statement of Eligibility and Qualification under the Filed herewith
Trust Indenture Act of 1939 of The Bank of New
York, as Trustee, on Form T-1, relating to the 8-7/8% Senior
Subordinated Notes due 2011 (including
Exhibit 7 to Form T-1)
99.1 Form of Letter of Transmittal Filed herewith
99.2 Form of Notice of Guaranteed Delivery Filed herewith
99.3 Form of Letter to Clients Filed herewith
99.4 Form of Letter to Brokers, Dealers, Commercial Filed herewith
Banks, Trust Companies and Other Nominees
99.5 Form of Guidelines for Certification of Taxpayer Filed herewith
Identification Number on Substitute Form W-9
II-7
Item 22. Undertakings
(a) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each filing of the Registrants' annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned Registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrants
pursuant to the foregoing provisions, or otherwise, the Registrants have
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of
expenses incurred or paid by a director, officer or controlling person of
the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrants hereby undertake (i) to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means; and (ii) to
arrange or provide for a facility in the U.S. for the purpose of responding
to such requests.
(d) The undersigned Registrants hereby undertake to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL LIMITED
By: /s/ Solomon Kerzner
------------------------------------
Name: Solomon Kerzner
Title: Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
Chairman of the Board of
/s/ Solomon Kerzner Directors and Chief
------------------------------------------ Executive Officer July 18, 2002
Solomon Kerzner (Principal Executive
Officer)
/s/ Peter Buckley Director July 18, 2002
-------------------------------------------
Peter Buckley
/s/ Howards Marks Director July 18, 2002
------------------------------------------
Howard Marks
II-9
Name Title Date
---- ----- ----
/s/ Eric Siegel Director July 18, 2002
------------------------------------------
Eric Siegel
/s/ Heinrich von Rantzau Director July 18, 2002
------------------------------------------
Heinrich von Rantzau
Executive Vice President, July 18, 2002
/s/ John R. Allison Chief Financial Officer
------------------------------------------ and Secretary (Principal
John R. Allison Financial and Accounting
Officer)
/s/ Charles D. Adamo Executive Vice President and July 18, 2002
------------------------------------------ General Counsel
Charles D. Adamo
/s/ Giselle M. Pyfrom Senior Vice President, July 18, 2002
------------------------------------------ Assistant Secretary and
Giselle M. Pyfrom General Counsel
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL NORTH AMERICA, INC.
By: /s/ Charles D. Adamo
--------------------------------------
Name: Charles D. Adamo
Title: Executive Vice President,
Secretary and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
/s/ Charles D. Adamo Executive Vice President, July 18, 2002
------------------------------------------ Secretary and Director
Charles D. Adamo (Principal Executive
Officer)
/s/ John R. Allison Executive Vice President, July 18, 2002
------------------------------------------ Chief Financial Officer,
John R. Allison Treasurer and Director
(Principal Financial and
Accounting Officer)
/s/ William C. Murtha Senior Vice President,
------------------------------------------ Corporate Counsel and
William C. Murtha Assistant Secretary July 18, 2002
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL BAHAMAS LIMITED
By: /s/ Solomon Kerzner
-----------------------------------
Name: Solomon Kerzner
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Solomon Kerzner President (Principal
------------------------------------------ Executive, Financial and July 18, 2002
Solomon Kerzner Accounting Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ J. Barrie Farrington Senior Vice President, July 18, 2002
------------------------------------------ Secretary and Director
J. Barrie Farrington
/s/ Alan Leibman Senior Vice President July 18, 2002
------------------------------------------
Alan Leibman
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Gene Albury Vice President and Assistant July 18, 2002
------------------------------------------ Secretary
Gene Albury
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
PARADISE ACQUISITIONS LIMITED
By: /s/ J. Barrie Farrington
--------------------------------
Name: J. Barrie Farrington
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ J. Barrie Farrington President and Director July 18, 2002
------------------------------------------ (Principal Executive,
J. Barrie Farrington Financial and Accounting
Officer)
/s/ Charles D. Adamo Assistant Secretary and July 18, 2002
------------------------------------------ Director
Charles D. Adamo
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
PARADISE ISLAND LIMITED
By: /s/ J. Barrie Farrington
------------------------------
Name: J. Barrie Farrington
Title: Senior Vice President,
Secretary and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ J. Barrie Farrington Senior Vice President, July 18, 2002
------------------------------------------ Secretary and Director
J. Barrie Farrington (Principal Executive,
Financial and Accounting
Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Gene Albury Assistant Secretary July 18, 2002
------------------------------------------
Gene Albury
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
PARADISE ENTERPRISES LIMITED
By: /s/ Solomon Kerzner
------------------------------------
Name: Solomon Kerzner
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Solomon Kerzner President (Principal) July 18, 2002
------------------------------------------ Executive, Financial and
Solomon Kerzner Accounting Officer)
/s/ J. Barrie Farrington Vice President, Secretary and July 18, 2002
------------------------------------------ Director
J. Barrie Farrington
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Gene Albury Assistant Secretary July 18, 2002
------------------------------------------
Gene Albury
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
ISLAND HOTEL COMPANY LIMITED
By: /s/ J. Barrie Farrington
----------------------------------
Name: J. Barrie Farrington
Title: Senior Vice President and
Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ J. Barrie Farrington Senior Vice President and July 18, 2002
------------------------------------------ Director (Principal)
J. Barrie Farrington Executive, Financial and
Accounting Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Gene Albury Assistant Secretary July 18, 2002
------------------------------------------
Gene Albury
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
PARADISE BEACH INN LIMITED
By: /s/ J. Barrie Farrington
-------------------------------
Name: J. Barrie Farrington
Title: Vice President, Secretary
and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ J. Barrie Farrington Vice President, Secretary and July 18, 2001
------------------------------------------ Director (Principal)
J. Barrie Farrington Executive, Financial and
Accounting Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Gene Albury Assistant Secretary July 18, 2002
------------------------------------------
Gene Albury
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL MANAGEMENT
LIMITED
By: /s/ Solomon Kerzner
-------------------------------------
Name: Solomon Kerzner
Title: Chariman of the Board of
Directors and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
Chairman of the Board of July 18, 2002
/s/ Solomon Kerzner Directors and Chief
------------------------------------------ Executive Officer
Solomon Kerzner (Principal Executive
Officer)
/s/ Howard B. Kerzner Director (Principal Financial July 18, 2002
------------------------------------------ and Accounting Officer)
Howard B. Kerzner
/s/ Charles D. Adamo Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Linwood, New Jersey, on the 18th day of July, 2002.
KERZNER INVESTMENTS CONNECTICUT, INC.
By: /s/ William C. Murtha
--------------------------------------
Name: William C. Murtha
Title: Assistant Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Howard B. Kerzner President and Director July 18, 2002
------------------------------------------ (Principal Executive,
Howard B. Kerzner Financial and Accounting
Officer)
/s/ William C. Murtha Assistant Secretary July 18, 2002
------------------------------------------
William C. Murtha
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lauderdale, Florida, on the 18th day of July, 2002.
KERZNER INTERNATIONAL NEVADA, INC.
By: /s/ John R. Allison
---------------------------------
Name: John R. Allison
Title: Secretary, Treasurer and
Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
Secretary, Treasurer and July 18, 2002
/s/ John R. Allison Director (Principal
------------------------------------------ Executive, Financial and
John R. Allison Accounting Officer)
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lauderdale, Florida, on the 18th day of July, 2002.
KERZNER INTERNATIONAL RESORTS, INC.
By: /s/ John R. Allison
------------------------------------
Name: John R. Allison
Title: Executive Vice President and
Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ John R. Allison Executive Vice President and July 18, 2002
------------------------------------------ Director (Principal
John R. Allison Executive, Financial and
Accounting Officer)
/s/ William C. Murtha Senior Vice President, July 18, 2002
------------------------------------------ Corporate Counsel and
William C. Murtha Secretary
/s/ Howard Karawan Vice President and Assistant July 18, 2002
------------------------------------------ Secretary
Howard Karawan
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lauderdale, Florida, on the 18th day of July, 2002.
PIV, INC.
By: /s/ John R. Allison
------------------------------
Name: John R. Allison
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ John R. Allison President and Director July 18, 2002
------------------------------------------ (Principal Executive,
John R. Allison Financial and Accounting
Officer)
/s/ Howard Karawan Vice President and Assistant July 18, 2002
------------------------------------------ Secretary
Howard Karawan
/s/ William C. Murtha Secretary July 18, 2002
------------------------------------------
William C. Murtha
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lauderdale, Florida, on the 18th day of July, 2002.
ISS, INC.
By: /s/ John R. Allison
--------------------------------
Name: John R. Allison
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ John R. Allison President and Director July 18, 2002
------------------------------------------ (Principal Executive,
John R. Allison Financial and Accounting
Officer)
/s/ Howard Karawan Vice President and Assistant July 18, 2002
------------------------------------------ Secretary
Howard Karawan
/s/ William C. Murtha Secretary July 18, 2002
------------------------------------------
William C. Murtha
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lauderdale, Florida, on the 18th day of July, 2002.
KERZNER INTERNATIONAL MARKETING, INC.
By: /s/ John R. Allison
--------------------------------------
Name: John R. Allison
Title: Executive Vice President, Chief
Financial Officer, Treasurer and
Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ John R. Allison Executive Vice President, July 18, 2002
------------------------------------------ Chief Financial Officer,
John R. Allison Treasurer and Director
(Principal Executive,
Financial and Accounting
Officer)
/s/ William C. Murtha Secretary July 18, 2002
------------------------------------------
William C. Murtha
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INVESTMENTS CALIFORNIA, INC.
By: /s/ Howard B. Kerzner
-----------------------------------
Name: Howard B. Kerzner
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Howard B. Kerzner President (Principal July 18, 2002
------------------------------------------ Executive Officer)
Howard B. Kerzner
/s/ John R. Allison Executive Vice President, July 18, 2002
------------------------------------------ Chief Financial Officer,
John R. Allison Treasurer and Director
(Principal Financial and
Accounting Officer)
/s/ Charles D. Adamo Executive Vice President, July 18, 2002
------------------------------------------ Secretary and Director
Charles D. Adamo
/s/ William C. Murtha Secretary July 18, 2002
------------------------------------------
William C. Murtha
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INVESTMENTS NEW YORK, INC.
By: /s/ Howard B. Kerzner
----------------------------------
Name: Howard B. Kerzner
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Howard B. Kerzner President and Director July 18, 2002
------------------------------------------ (Principal Executive
Howard B. Kerzner Officer)
/s/ John R. Allison Executive Vice President, July 18, 2002
------------------------------------------ Chief Financial Officer,
John R. Allison Treasurer and Director
(Principal Financial and
Accounting Officer)
/s/ William C. Murtha Senior Vice President and July 18, 2002
------------------------------------------ Secretary
William C. Murtha
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lauderdale, Florida, on the 18th day of July, 2002.
KERZNER INTERNATIONAL NEW YORK, INC.
By: /s/ John R. Allison
---------------------------------
Name: John R. Allison
Title: Executive Vice President,
Chief Financial Officer,
Treasurer and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Name Title Date
---- ----- ----
Executive Vice President,
/s/ John R. Allison Chief Financial Officer,
------------------------------------------ Treasurer and Director
John R. Allison (Principal Executive, July 18, 2002
Financial and Accounting
Officer)
/s/ William C. Murtha Secretary July 18, 2002
------------------------------------------
William C. Murtha
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL DEVELOPMENT
GROUP, INC.
By: /s/ James Boocher
--------------------------------
Name: James Boocher
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
President (Principal
/s/ James Boocher Executive, Financial and July 18, 2002
------------------------------------------ Accounting Officer)
James Boocher
/s/ Charles D. Adamo Executive Vice President and
------------------------------------------ Director July 18, 2002
Charles D. Adamo
/s/ John R. Allison Executive Vice President-
------------------------------------------ Finance, Chief Financial July 18, 2002
John R. Allison Officer and Treasurer
/s/ William C. Murtha Secretary July 18, 2002
------------------------------------------
William C. Murtha
II-28
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL TIMESHARE LIMITED
By: /s/ Giselle M. Pyfrom
------------------------------
Name: Giselle M. Pyfrom
Title: Secretary and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Giselle M. Pyfrom Secretary and Director
------------------------------------------ (Principal Executive,
Giselle M. Pyfrom Financial and Accounting July 18, 2002
Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Tanya A. Nunez Assistant Secretary July 18, 2002
------------------------------------------
Tanya A. Nunez
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-29
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
PARADISE ISLAND FUTURES LIMITED
By: /s/ J. Barrie Farrington
------------------------------
Name: J. Barrie Farrington
Title: Secretary and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ J. Barrie Farrington Secretary and Director
------------------------------------------ Principal Executive,
J. Barrie Farrington Financial and Accounting July 18, 2002
Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Assistant Secretary and July 18, 2002
------------------------------------------ Director
Charles D. Adamo
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-30
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL DEVELOPMENT
LIMITED
By: /s/ James Boocher
-------------------------------
Name: James Boocher
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ James Boocher President and Director
------------------------------------------ (Principal Executive,
James Boocher Financial and Accounting July 18, 2002
Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Secretary and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-31
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
PARADISE SECURITY SERVICES LIMITED
By: /s/ J. Barrie Farrington
--------------------------------------
Name: J. Barrie Farrington
Title: Senior Vice President, Assistant
Secretary and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ J. Barrie Farrington Senior Vice President,
------------------------------------------ Assistant Secretary
J. Barrie Farrington and Director (Principal July 18, 2002
Executive, Financial and
Accounting Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Gene Albury Treasurer July 18, 2002
------------------------------------------
Gene Albury
/s/ Cleomi Parker Secretary July 18, 2002
------------------------------------------
Cleomi Parker
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-32
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in London, England, on the 18th day of July, 2002.
KERZNER INTERACTIVE LIMITED
By: /s/ Tobin B. Prior
--------------------------------------
Name: Tobin B. Prior
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Name Title Date
---- ----- ----
/s/ Tobin B. Prior President and Director
------------------------------------------ (Principal Executive,
J. Barrie Farrington Financial and Accounting July 18, 2002
Officer)
/s/ Howard B. Kerzner Vice Persident and Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-33
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in London, England, on the 18th day of July, 2002.
BAHAMAS E-TRADING LIMITED
By: /s/ Tobin B. Prior
--------------------------------------
Name: Tobin B. Prior
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Tobin B. Prior President and Director
------------------------------------------ (Principal Executive,
Tobin B. Prior Financial and Accounting July 18, 2002
Officer)
/s/ Howard B. Kerzner Vice Persident and Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-34
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in London, England, on the 18th day of July, 2002.
KERZNER INTERACTIVE DATA LIMITED
By: /s/ Tobin B. Prior
--------------------------------------
Name: Tobin B. Prior
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Tobin B. Prior President and Director
------------------------------------------ (Principal Executive,
Tobin B. Prior Financial and Accounting July 18, 2002
Officer)
/s/ Howard B. Kerzner Vice Persident and Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-35
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL (DEVELOPMENT)
TIMESHARE LIMITED
By: /s/ James Boocher
-------------------------------------
Name: James Boocher
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ James Boocher President and Director
------------------------------------------ (Principal Executive,
James Boocher Financial and Accounting July 18, 2002
Officer)
/s/ Howard B. Kerzner Vice Persident and Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ Charles D. Adamo Vice President and Director July 18, 2002
------------------------------------------
Charles D. Adamo
/s/ Giselle M. Pyfrom Assistant Secretary July 18, 2002
------------------------------------------
Giselle M. Pyfrom
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-36
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Douglas, Isle of Man, on the 18th day of July, 2002.
KERZNER INTERACTIVE (IOM) LIMITED
By: /s/ Miles Benham
--------------------------------------
Name: Miles Benham
Title: Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Miles Benham Secretary July 18, 2002
------------------------------------------
Miles Benham
/s/ Tobin B. Prior Director (Principal July 18, 2002
------------------------------------------ Executive, Financial
Tobin B. Prior and Accounting Officer)
/s/ Howard B. Kerzner Director July 18, 2002
------------------------------------------
Howard B. Kerzner
/s/ C. Larson Director July 18, 2002
------------------------------------------
C. Larson
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-37
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Hamilton, Bermuda, on the 18th day of July, 2002.
KERZNER HOTELS INTERNATIONAL (BERMUDA)
LIMITED
By: /s/ Donald H. Malcolm
-------------------------------------
Name: Donald H. Malcolm
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Donald H. Malcolm President and Director July 18, 2002
------------------------------------------
Donald H. Malcolm
/s/ Nicolas Trollope Vice Persident and Director July 18, 2002
------------------------------------------
Nicolas Trollope
/s/ Howard B. Kerzner Director (Principal July 18, 2002
------------------------------------------ Executive, Financial and
Howard B. Kerzner Accounting Officer)
/s/ Wayne Morgan Secretary July 18, 2002
------------------------------------------
Wayne Morgan
/s/ L. S. Outerbridge Assistant Secretary July 18, 2002
-------------------------------------------
L. S. Outerbridge
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-38
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paradise Island, The Bahamas, on the 18th day of July, 2002.
KERZNER INTERNATIONAL FINANCE (BVI)
LIMITED
By: /s/ Solomon Kerzner
------------------------------------
Name: Solomon Kerzner
Title: Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Solomon Kerzner Director (Principal
------------------------------------------ Executive Financial and
Tobin B. Prior Accounting Officer) July 18, 2002
/s/ STC International Limited Secretary July 18, 2002
------------------------------------------
STC International Limited
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-39
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lauderdale, Florida, on the 18th day of July, 2002.
ABERDEEN MANAGEMENT LIMITED
By: /s/ John R. Allison
--------------------------------------
Name: John R. Allison
Title: Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ John R. Allison Director (Principal
------------------------------------------ Executive, Financial and
John R. Allison Accounting Officer) July 18, 2002
/s/ P. F. Griffin Director July 18, 2002
------------------------------------------
P. F. Griffin
/s/ J. E. Thomas Director July 18, 2002
------------------------------------------
J. E. Thomas
/s/ Cosign Limited Secretary July 18, 2002
------------------------------------------
Cosign Limited
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-40
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Paris, France, on the 18th day of July, 2002.
KERZNER INTERNATIONAL VACANCES SA
By: /s/ Roger H. Wharton
-------------------------------------
Name: Roger H. Wharton
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Roger H. Wharton President and Director
------------------------------------------ (Principal Executive,
Roger H. Wharton Financial and Accounting July 18, 2002
Officer)
/s/ Guy Zekri Director Generale and July 18, 2002
------------------------------------------ Director
Guy Zekri
/s/ Roger Damon Director July 18, 2002
------------------------------------------
Roger Damon
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
/s/ David Higham Director July 18, 2002
------------------------------------------
David Higham
II-41
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Curacao, Netherlands Antilles, on the 18th day of July, 2002.
BIRBO NV
By: TMF (Netherlands Antilles) N.V.
By: /s/ R. A. Boelens
------------------------------------
Name: R. A. Boelens
Title: Managing Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ R. A. Boelens Managing Director
------------------------------------------ (Principal Executive,
R. A. Boelens Financial and Accounting July 18, 2002
Officer)
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-42
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Willemstad, Curacao, N. Antilles, on the 18th day of July,
2002.
KERZNER HOTELS INTERNATIONAL
MANAGEMENT NV
By: Curacao Corporation Company NV
By: /s/ W.F. van den Stoom/M.L.M. de Rooy
---------------------------------------
Name: W.F. van den Stoom/M.L.M. de Rooy
Title: Attorney-in-Fact A/Attorney-in-Fact B
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ W.F. van den Stoom/M.L.M. de Roov Sole Managing Director
------------------------------------------ (Principal Executive,
W.F. van den Stoom/M.L.M. de Roov Financial and Accounting July 18, 2002
Officer)
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-43
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Amsterdam, The Netherlands, on the 18th day of July, 2002.
PURPOSEFUL BV
By: CITCO Trust International Management
(TIM) BV
By: /s/ M. Rosenkotter/T. Cannedieber
----------------------------------------
Name: M. Rosenkotter/T. Cannedieber
Title: Attorneys-in-Fact
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ M. Rosenkotter / T. Cannedieber Sole Director (Principal
------------------------------------------ Executive, Financial and
W.F. van den Stoom/M.L.M. de Roov Financial and Accounting July 18, 2002
Officer)
/s/ William C. Murtha Authorized Representative in
------------------------------------------ the United States July 18, 2002
William C. Murtha
II-44
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in London, England, on the 18th day of July, 2002.
KERZNER INTERNATIONAL MARKETING (UK)
LIMITED
By: /s/ Roger H. Wharton
--------------------------------------
Name: Roger H. Wharton
Title: Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Roger H. Wharton Director (Principal
------------------------------------------ Executive, Financial
Roger H. Wharton and Accounting Officer) July 18, 2002
/s/ David Higham Finance Director July 18, 2002
------------------------------------------
David Higham
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-45
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in London, England, on the 18th day of July, 2002.
KERZNER INTERACTIVE SERVICES LIMITED
By: /s/ Tobin B. Prior
----------------------------------
Name: Tobin B. Prior
Title: Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John R. Allison, Charles D. Adamo and William C. Murtha, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all (1) amendments (including post-effective
amendments) and additions to this Registration Statement and (2) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in- fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Tobin B. Prior Director (Principal
------------------------------------------ Executive, Financial
Roger H. Wharton and Accounting Officer) July 18, 2002
/s/ Mark Biegel Director July 18, 2002
------------------------------------------
Mark Biegel
/s/ William C. Murtha Authorized Representative in July 18, 2002
------------------------------------------ the United States
William C. Murtha
II-46
Exhibit Index 2
Exhibit
Numbers Description Incorporation by Reference to
- ------- ----------- -----------------------------
1.1 Purchase Agreement dated May 9, Exhibit 2.3(b) to Form
2002, among Sun International and 20-F Annual Report of
SINA, as issuers, the subsidiary Sun International for
guarantors party thereto and Bear, the year ended
Stearns & Co. Inc., Deutsche Bank December 31, 2001,
Securitiies Inc., CIBC World filed on May 30, 2002,
Markets Corp., Banc of America File No. 001-04226
Securities LLC, Wells Fargo
Brokerage Services, LLC and J.P.
Morgan Securities Inc., as
purchasers
1.2 Purchase Agreement dated August Exhibit 2.3(a) to Form
9, 2001, among Sun International 20-F Annual Report of
and SINA, as issuers, the Sun International for
subsidiary guarantors party thereto the year ended
and Deutsche Banc Alex. Brown December 31, 2001,
Inc., Bear, Stearns & Co. Inc., filed on May 30, 2002,
CIBC World Markets Corp., Banc File No. 001-04226
of America Securities LLC, Wells
Fargo Brokerage Services, LLC,
Fleet Securities, Inc. and The
Royal Bank of Scotland plc, as
purchasers
1.3 Purchase Agreement dated March Exhibit 4(e)(1) to Form
5, 1997, among Sun International 10-K405 Annual
and SINA, as issuers, the Report of SINA for the
subsidiary guarantors party thereto fiscal year ended
and Bear, Stearns & Co. Inc., December 31, 1996,
Societe Generale Securities filed on March 20,
Corporation and Scotia Capital 1997, File No. 001-04748
Markets (USA) Inc., as purchasers
3.1 Amended and Restated Exhibit 3.1 to
Memorandum of Association of Registration Statement
Sun International on Form F-4, filed on
November 7, 1996,
File No. 333-15409
3.2 Restated Articles of Association of Exhibit 1 to Form 20-F Sun
International dated as of Annual Report of Sun
June 26, 2001 International for the
year ended December
31, 2000, filed on July 2,
2001, File No. 001-04226
3.3 Amendment to Restated Articles of Filed herewith
Association of Sun International
dated as of September 24, 2001
3.4 Restated Certificate of Exhibit 3.3 to
Incorporation, as amended, of Sun Registration Statement
International North America, Inc. on Form F-4, File No.
33-23665, filed on
March 20, 1997
3.5 Amended and Restated By-Laws of Exhibit 3.4 to
Sun International North America, Registration Statement
Inc. on Form F-4, filed on
March 20, 1997, File
No. 33-23665
4.1 Indenture dated as of August 14, Exhibit 2(c) to Form 6-
2001, among Sun International and K of Sun International,
SINA as Issuers, the Guarantors filed on August 24,
party thereto and The Bank of New 2001, File No. 001-04226
York, as Trustee
- -------------------
2 Sun International Hotels Limited changed its name to Kerzner
International Limited effective July 1, 2002. Sun International North America,
Inc. changed its name to Kerzner International North America, Inc. effective
July 1, 2002.
II-47
4.2 Supplemental Indenture dated as of Exhibit 99(a) to Form
September 19, 2001 to Indenture 6-K of Sun
dated as of August 14, 2001 International, filed on
August 24, 2001, File
No. 001-04226
4.3 Second Supplemental Indenture Filed herewith
dated as of May 20, 2002 to
Indenture dated as of August 14,
2001
4.4 Form of 8-7/8% Senior Exhibit 2(c) to Form 6-K
Subordinated Note due 2011 K of Sun International,
filed on August 24,
2001, File No. 001-04226
4.5 Form of Guarantee with respect to Exhibit 2(c) to Form 6-
8-7/8% Senior Subordinated Note K of Sun International,
due 2011 filed on August 24,
2001, File No. 001-04226
4.6 Registration Rights Agreement, Exhibit 2.3(f) to Form
dated as of May 20, 2002, among 20-F Annual Report of
Sun International and SINA as Sun International for
Issuers, the Guarantors party the year ended
thereto and Bear, Stearns & Co. December 31, 2001,
Inc., Deutsche Banc Alex. Brown filed on May 30, 2002,
Inc., CIBC World Markets Corp., File No. 001-04226
Banc of America Securities LLC,
Wells Fargo Brokerage Services,
LLC and J.P. Morgan Securities,
Inc., as initial purchasers
4.7 Registration Rights Agreement, Exhibit 2(b) to Form 6-K
dated as of August 14, 2001, of Sun International,
among Sun International and SINA filed on August 24,
as Issuers, the Guarantors party 2001, File No. 001-04226
thereto and Deutsche Banc Alex.
Brown Inc., Bear, Stearns & Co.
Inc., CIBC World Markets Corp.,
Banc of America Securities LLC,
Wells Fargo Brokerage Services,
LLC, Fleet Securities, Inc. and The
Royal Bank of Scotland plc, as
initial purchasers
4.8 Form of Indenture dated as of Exhibit 4(e)(2) to Form
March 10, 1997, among Sun 10-K405 Annual Report of SINA
International and SINA as Issuers, for the fiscal year ended
the Guarantors party thereto and December 31, 1996, filed on
the Bank of New York, as Trustee March 20, 1997, File
No. 001-04748
4.9 Form of 9.000% Senior Exhibit 4(e)(2) to Form
Subordinated Note due 2007 10-K405 Annual
Report of SINA for the
fiscal year ended
December 31, 1996,
filed on March 20,
1997, File No. 001-04748
4.10 Form of Exchange Note with Exhibit 4.6 to
respect to 9.000% Senior Registration Statement
Subordinated Note due 2007 on Form F-4, filed on
March 20, 1997, File
No. 333-23665
4.11 Form of Guarantee with respect to Exhibit 4(e)(2) to Form
9.000% Senior Subordinated Note 10-K405 Annual
due 2007 Report of SINA for the
fiscal year ended
December 31, 1996,
filed on March 20,
1997, File No. 001-04748
4.12 Supplemental Indenture dated as of Exhibit 99(a) to Form 6-K
July 23, 2001 to Indenture dated of Sun International, filed
as of March 10, 1997 on August 3, 2001, File
No. 001-04226
4.13 Second Supplemental Indenture Exhibit 99(b) to Form
dated as of September 19, 2001 to 6-K of Sun
Indenture dated as of March 10, International, filed on
1997 September 20, 2001,
File No. 001-04226
II-48
4.14 Registration Rights Agreement Exhibit 4(e)(3) to Form
dated as of March 10, 1997 among 10-K405 Annual Report of
Sun International and SINA, as SINA for the fiscal year
Issuers, the Guarantors party ended December 31, 1996,
thereto and the Initial Purchasers filed on March 20, 1997,
party thereto File No. 001-04748
4.15 Form of Indenture dated as of Exhibit 4.1 to Registration
December 10, 1997, among Sun Statement on Form-3, filed
International and SINA, as Issuers, on November 26, 1997, File
the Guarantors party thereto and No. 333-41127
the Bank of New York, as Trustee
4.16 Form of 8-5/8% Senior Exhibit 4.1 to
Subordinated Note due 2007 Registration Statement
on Form F-3, filed on
November 26, 1997,
File No. 333-41127
4.17 Form of Guarantee with respect to Exhibit 4.1 to
8-5/8% Senior Subordinated Note Registration Statement
due 2007 on Form F-3, filed on
November 26, 1997,
File No. 333-41127
4.18 Supplemental Indenture dated as of Exhibit 99(b) to Form 6-K
July 23, 2001 to Indenture dated as of Sun International, filed
December 10, 1997 on August 3, 2001, File
No. 001-04226
4.19 Second Supplemental Indenture Exhibit 99(b) to Form
dated as of September 19, 2001 to 6-K of Sun
Indenture dated as of December 10, International, filed on
1997 September 20, 2001,
File No. 001-04226
4.20 Fourth Amended and Restated Exhibit 10 to Form 10-
Revolving Credit Agreement dated Q Quarterly Report of
as of November 13, 1999, among SINA for the quarter
Sun International, SINA, Sun ended September 30,
International Bahamas Limited, 2001, filed on
Canadian Imperial Bank of November 14, 2001,
Commerce, as administrative agent File No. 001-04748
and various financial institutions,
as the lenders
4.21 First Amendment to the Fourth Filed herewith
Amended and Restated Revolving
Credit Agreement dated as of May
8, 2002
5.1 Opinion of Charles D. Adamo, Esq. Filed herewith
5.2 Opinion of Giselle M. Pyfrom, Esq. Filed herewith
10.1 Purchase Agreement dated as of Exhibit 10 to Form 10-
October 30, 2000, among SINA, as Q of SINA for the
parent, GGRI, Inc., as Seller, and quarter ended
Colony Capital LLC ("Colony"), as September 30, 2000,
Buyer filed on November 14,
2000, File No. 001-
04748
10.2 Promissory Note between Colony Exhibit 2 to Form 6-K
and SINA dated as of April 25, of Sun International,
2001 filed on May 8, 2001,
File No. 001-04226
10.3 Second Amended and Restated Exhibit 10 to Form 10-
Development Services Agreement Q Quarterly Report of
dated as of February 6, 2002 SINA for the quarter
among the Stockbridge-Munsee ended March 31, 2002,
Tribe, the Stockbridge-Munsee filed on May 15, 2002,
Tribal Gaming Authority, Trading File No. 001-04748
Cove New York, LLC ("TCNY"),
SINA and Waterford Gaming
Group, LLC
II-49
10.4 Management Agreement between the Exhibit 3.2 to Form 20-F
Government of Dubai, Sun Annual Report of Sun
International Management Limited International for the
and Sun International dated as of year ended December 31,
June 5, 1998 1998, filed on June 30,
1999, File No. 001-04226
10.5 Development Services Agreement dated Exhibit 2.1 to Form 20-F/A
February 7, 1998 between the Mohegan of Sun International for
Tribal Gaming Authority and Trading the year ended December 31,
Cove Associates 1997, filed on September 3,
1998, File No. 001-04226
10.6 Relinquishment dated February 7, 1998, Exhibit 2.2 to Form 20-F/A
between the Mohegan Tribal Graming of Sun International for
Authority and Trading Cove Associates the year ended December 31,
1997, filed on September 3,
1998, File No. 001-04226
10.7 Registration Rights and Governance Exhibit 10.8 to
Agreement dated as of July 3, Registration Statement
2001, by and among Sun International on Form F-4, filed on
Sun International Investments October 5, 2001, File
Limited, World Leisure Group No. 333-69780
Limited, Kersaf Investments
Limited, Caledonia Investments
PLC, Mangalitsa Limited, Cement
Merchants SA, Rosegrove Limited,
Royale Resorts Holdings Limited and
Sun International Inc.
10.8 Omnibus Agreement dated as of Exhibit 10.9 to
July 3, 2001, by and among Sun Registration Statement
International, Sun International on Form F-4, filed on
Investments Limited, World October 5, 2001, File
Leisure Group Limited, Kersaf No. 333-69780
Investments Limited, Caledonia
Investments PLC, Rosegrove
Limited, Royale Resorts Holdings
Limited, Royale Resorts
International Limited, Sun
International Inc., Sun Hotels
International, Sun Hotels Limited,
World Leisure Investments
Limited, Solomon Kerzner, Peter
Buckley, Derek Aubrey Hawton, Sun
International Management Limited
(a British Virgin Islands company),
Cement Merchants SA, Sun International
Management Limited (a Swiss company),
Sun International Management (UK)
Limited, Hog Island Holdings Limited
and Mangalitsa Limited
10.9 Supplemental Agreement to the Exhibit 10.10 to
Original Shareholders' Agreement Registration Statement
and to the Rosegrove Shareholders on Form F-4, filed on
Agreement dated as of July 3, October 5, 2001, File
2001, by and among Kersaf No. 333-69780
Investments Limited, Sun
International Inc., Sun Hotels
International, Royale Resorts
Holdings Limited, World Leisure
Investments Limited, Sun Hotels
Limited, World Leisure Group
Limited, Royale Resorts
International Limited, Caledonia
Investments PLC, Solomon
Kerzner, Sun International
Management Limited (a British
Virgin Islands company),
Rosegrove Limited, Sun
International Management Limited
(a Swiss company), Mangalitsa
Limited and Hog Island Holdings
Limited
10.10 Irrevocable Proxy Agreement dated Exhibit 10.11 to
as of July 3, 2001, by and among Registration Statement
Sun International, Sun International on Form F-4, filed on
Investments Limited, World October 5, 2001, File
Leisure Group Limited, Kersaf No. 333-69780
Investments Limited, Caledonia
Investments PLC, Mangalitsa
Limited, Cement Merchants SA,
Rosegrove Limited, Royale Resorts
Holdings Limited and Sun
International Inc.
II-50
10.11 Trade Name and Trademark Exhibit 10.12 to
Agreement dated as of July 3, Registration Statement
2001, by and among Sun on Form F-4, filed on
International, Sun International October 5, 2001, File
Investments Limited and World No. 333-69780
Leisure Group Limited, as
Assignors, and Sun International
Management Limited, as Assignee
10.12 Promissory Note dated July 3, Exhibit 10.13 to 2001
between Royale Resorts Limited, as Registration Statement on
and Sun International, as Payee Form F-4, filed on
October 5, 2001, File
No. 333-69780
10.13 Stock Pledge Agreement dated as of Exhibit 10.13 to 2001
July 3, 2001, between Royale Resorts Registration Statement on
Holdings Limited, as Pledgor, and Form F-4, filed on
Sun International October 5, 2001, File
No. 333-69780
10.14 Stock Purchase Agreement dated as Exhibit 4.8 to Form 20-
of February 14, 2002, by and F Annual Report of
among Station Casinos, Inc., Sun International for
Station Online, Inc., Sun the year ended
International and SunOnline December 31, 2001,
Limited filed on May 30, 2002,
File No. 001-04226
10.15 Sun International North America, Exhibit 10(c) to Form
Inc. Retirement Savings Plan dated 10-K Annual Report of
January 1, 2000 SINA for the year
ended December 31,
2000, filed on April 17,
2001, File No. 001-
04748
10.16 Sun International Audit Committee Exhibit 3.4 to Form 20-
Charter F Annual Report of
Sun International for the
year ended December 31,
1999, filed on June 30,
200, File No.001-04226
11.1 Statement regarding computation Note 2 of the Notes to
of earnings per share the Consolidated
Financial Statements to
Form 20-F of Sun
International Annual
Report for the year ended
December 31, 2000, filed
on July 2, 2001
12.1 Statement regarding computation Filed herewith
of ratios
21.1 Subsidiaries of Sun International Exhibit 8 to Form 20-F
Annual Report of Sun
International for the
year ended December
31, 2001, filed on May
30, 2002, File No. 001-
04226
23.2 Consent of Charles D. Adamo, Esq. Filed herewith
(contained in Exhibit 5.1)
23.2 Consent of Giselle M. Pyfrom, Esq. Filed herewith
(contained in Exhibit 5.1)
24 Powers of Attorney (included on Filed herewith
the signature pages hereto)
25.1 Statement of Eligibility and Filed herewith
Qualification under the Trust
Indenture Act of 1939 of The Bank of
New York, as Trustee, on Form T-1,
relating to the 8-7/8% Senior
Subordinated Notes due 2011
(including Exhibit 7 to Form T-1)
II-51
99.1 Form of Letter of Transmittal Filed herewith
99.2 Form of Notice of Guaranteed Filed herewith
Delivery
99.3 Form of Letter to Clients Filed herewith
99.4 Form of Letter to Brokers, Dealers, Filed herewith
Commercial Banks, Trust
Companies and Other Nominees
99.5 Form of Guidelines for Filed herewith
Certification of Taxpayer
Identification Number on
Substitute Form W-9
II-52