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As filed with the Securities and Exchange Commission on
October 17, 2007
Registration No. 333-144239
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
Amendment No. 1
to
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Tropicana Entertainment,
LLC
and the guarantors listed below
(Exact Name of Registrant as
Specified in Its Charter)
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Delaware
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7990
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20-5319263
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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740 Centre View Blvd., Crestview Hills, Kentucky 41017
(859) 669-1500
(Address, Including Zip Code,
and Telephone Number, Including Area Code, of Registrants
Principal Executive Offices)
Tropicana Finance
Corp.
and the guarantors listed below
(Exact Name of Registrant as
Specified in Its Charter)
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Delaware
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7990
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20-5654040
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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740 Centre View Blvd., Crestview Hills, Kentucky 41017
(859) 669-1500
(Address, Including Zip Code,
and Telephone Number, Including Area Code, of Registrants
Principal Executive Offices)
Donna B. More, Esq.
Vice President, General Counsel and Secretary
Tropicana Entertainment, LLC and Tropicana Finance Corp.
740 Centre View Blvd., Crestview Hills, Kentucky 41017
(859) 669-1500
(Name, Address, Including Zip
Code, and Telephone Number, Including Area Code, of Agent For
Service)
Copies to:
Kenneth J. Baronsky, Esq.
Milbank, Tweed, Hadley & McCloy LLP
601 S. Figueroa Street,
30th
Floor
Los Angeles, California 90017
(213) 892-4000
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
registration statement becomes effective.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
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, as amended, or until the
Registration Statement shall become effective on such date as
the Commission, acting pursuant to such Section 8(a), may
determine.
TABLE OF
ADDITIONAL REGISTRANTS
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Name of Additional
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State or Other Jurisdiction of
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Primary Standard Industrial
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I.R.S. Employee
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Registrant*
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Incorporation or Formation
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Classification Code Number
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Identification Number
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St. Louis Riverboat Entertainment, Inc.
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Missouri
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7990
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61-1243514
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Columbia Properties Laughlin, LLC
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Nevada
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7990
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87-0699651
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CP Laughlin Realty, LLC
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Delaware
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7990
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20-0109621
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Columbia Properties Vicksburg, LLC
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Mississippi
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7990
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38-3680199
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JMBS Casino LLC
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Mississippi
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7990
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01-0586282
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Columbia Properties Tahoe, LLC
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Nevada
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7990
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20-2741611
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CP Baton Rouge Casino, L.L.C.
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Louisiana
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7990
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20-3009608
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Argosy of Louisiana, Inc.
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Louisiana
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7990
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72-1265121
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Jazz Enterprises, Inc.
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Louisiana
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7990
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72-1214771
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Centroplex Centre Convention Hotel, L.L.C.
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Louisiana
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7990
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72-1452613
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Catfish Queen Partnership in Commendam
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Louisiana
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7990
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72-1274791
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Tahoe Horizon, LLC
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Delaware
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7990
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20-5319418
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Aztar Corporation
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Delaware
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7990
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86-0636534
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Aztar Indiana Gaming Corporation
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Indiana
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7990
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86-0741802
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Aztar Riverboat Holding Company, LLC
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Indiana
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7990
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36-4335055
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Aztar Missouri Gaming Corporation
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Missouri
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7990
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86-0738819
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Aztar Indiana Gaming Company, LLC
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Indiana
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7990
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36-4335060
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Aztar Development Corporation
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Delaware
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7990
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86-0740834
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Ramada New Jersey Holdings Corporation
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Delaware
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7990
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86-0494055
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Atlantic-Deauville Inc.
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New Jersey
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7990
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22-1772629
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Adamar Garage Corporation
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Delaware
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7990
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86-1641225
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Ramada New Jersey, Inc.
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New Jersey
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7990
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86-0405687
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Adamar of New Jersey, Inc.
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New Jersey
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7990
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86-0357263
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Manchester Mall, Inc.
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New Jersey
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7990
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86-0381050
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Tropicana Express, Inc.
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Nevada
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7990
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88-0220806
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Address and telephone number of principal executive offices are
the same as those for Tropicana Entertainment, LLC and Tropicana
Finance Corp. |
The
information in this prospectus is not complete and may be
changed. We may not sell the securities described herein until
the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an
offer to sell the securities described herein and it is not
soliciting any offers to buy such securities in any state where
the offer or sale thereof is not permitted.
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SUBJECT TO COMPLETION, DATED OCTOBER 17, 2007
PROSPECTUS
TROPICANA
ENTERTAINMENT, LLC
TROPICANA FINANCE
CORP.
OFFER TO EXCHANGE
ALL OUTSTANDING
95/8%
SENIOR SUBORDINATED
NOTES DUE
2014 FOR
95/8%
SENIOR SUBORDINATED NOTES DUE 2014
The exchange
offer will expire at 5:00 p.m., New York City time,
on ,
2007, the 30th day following the date of this prospectus,
unless we extend the exchange offer in our sole and absolute
discretion.
Tropicana
Entertainment, LLC and Tropicana Finance Corp., or the
co-issuers, are offering to exchange up to $960.0 million
aggregate principal amount of their currently outstanding
95/8% Senior
Subordinated Notes due 2014 issued in a private offering on
December 28, 2006, or the outstanding notes, which are
subject to certain transfer restrictions, for up to
$960.0 million aggregate principal amount of their
registered
95/8% Senior
Subordinated Notes due 2014, or the exchange notes. We refer to
the outstanding notes and the exchange notes collectively as the
notes.
The exchange notes
will be substantially identical to the outstanding notes except
that the exchange notes will be registered under the federal
securities laws, and therefore will not bear any legend
restricting their transfer, and the holders of the exchange
notes will not be entitled to most of the rights under the
registration rights agreement further described herein. The
exchange notes will represent the same debt as the outstanding
notes and will be issued under the same indenture (which we
refer to as the indenture) under which the outstanding notes
were issued.
The exchange notes
will bear interest from the most recent interest payment date
for which interest has been paid on the outstanding notes.
Interest on the exchange notes will be paid on June 15 and
December 15 of each year, commencing on December 15, 2007.
The exchange notes will mature on December 15, 2014. Prior
to December 15, 2010, we may redeem some or all of the
exchange notes at a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, and the
make-whole premium set forth in this prospectus. On
or after December 15, 2010, we may redeem some or all of
the exchange notes at the redemption prices set forth in this
prospectus. We may also redeem up to 35% of the aggregate
principal amount of the exchange notes using net proceeds from
certain equity offerings completed on or prior to
December 15, 2009 at the redemption price set forth in this
prospectus. In addition, the exchange notes are subject to
mandatory disposition and redemption requirements following
certain determinations by gaming authorities.
The exchange notes
will be the co-issuers unsecured senior subordinated
obligations. The obligations of Tropicana Entertainment, LLC and
Tropicana Finance Corp. with respect to the exchange notes will
be joint and several. The exchange notes will be guaranteed by
certain of the co-issuers existing and future domestic
subsidiaries, as well as by (i) CP Laughlin Realty, LLC, a
Delaware limited liability company, and Columbia Properties
Vicksburg, LLC, a Mississippi limited liability company, each of
which is an affiliate of Tropicana Entertainment, LLC but not a
subsidiary of Tropicana Entertainment, LLC, and (ii) JMBS
Casino LLC, a Mississippi limited liability company which is an
affiliate of the Yung family but not a subsidiary of Tropicana
Entertainment, LLC. The exchange notes will not be guaranteed by
Greenville Riverboat, LLC, a Mississippi limited liability
company and a direct subsidiary of Tropicana Entertainment, LLC
that it does not wholly own, although Greenville Riverboat, LLC
is subject to the restrictive covenants contained in the
indenture. In addition, the exchange notes will not be
guaranteed by the subsidiaries of Tropicana Entertainment, LLC
that hold the assets and operations relating to the Tropicana
Resort and Casino Las Vegas.
The exchange notes
and the guarantees will rank junior in right of payment to all
of the co-issuers and the guarantors existing and
future senior indebtedness, including indebtedness under the
senior secured credit facility further described herein. The
exchange notes and the guarantees will rank equally in right of
payment with any of the co-issuers and the
guarantors existing and future unsecured senior
subordinated indebtedness, including the outstanding notes, and
will rank senior in right of payment to all of the
co-issuers and the guarantors existing and future
unsecured subordinated indebtedness. The exchange notes and the
guarantees will be effectively subordinated to all of the
co-issuers and the guarantors secured indebtedness
to the extent of the value of the assets securing such
indebtedness.
We will exchange the
exchange notes for all outstanding notes that are validly
tendered and not withdrawn pursuant to the exchange offer. You
may withdraw tendered outstanding notes at any time prior to the
expiration of the exchange offer. The exchange of outstanding
notes for exchange notes should not be a taxable transaction for
U.S. federal income tax purposes, but you should see the
discussion under the caption Certain U.S. Federal
Income Tax Considerations for more information. We will
not receive any proceeds from the exchange offer. Holders of
outstanding notes will not have any appraisal or
dissenters rights in connection with the exchange offer.
Outstanding notes not exchanged in the exchange offer will
remain outstanding and be entitled to the benefits of the
indenture, but, except under certain circumstances, will have no
further exchange or registration rights under the registration
rights agreement. We do not intend to apply for listing of the
exchange notes on any securities exchange or to arrange for them
to be quoted on any quotation system. There is no established
trading market for the exchange notes.
See the section
entitled Risk Factors for a discussion of risks you
should consider prior to tendering your outstanding notes for
exchange.
Each broker-dealer
that receives exchange 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 exchange notes.
The letter of transmittal states that by so acknowledging 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 of 1933, as amended, or the Securities
Act. 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 exchange notes received in exchange for outstanding
notes where such outstanding notes were acquired by such
broker-dealer as a result of market-making activities or other
trading activities. We have agreed that, for a period of
180 days after the expiration of the exchange offer, we
will make this prospectus available to any broker-dealer for use
in connection with any such resale. See Plan of
Distribution.
NONE OF THE
SECURITIES AND EXCHANGE COMMISSION, ANY GAMING AUTHORITY OR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this
prospectus
is ,
2007.
TABLE OF
CONTENTS
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Page
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iii
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iii
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v
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F-1
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Purchase Agreement |
Articles of Incorporation of Caruthersville Riverboat Entertainment, Inc. |
Amendment to Articles of Incorporation |
Amendment to Articles of Incorporation |
Bylaws of Caruthersville Riverboat Entertainment, Inc. |
Certificate of Amended and Restated Articles of Organization |
Limited Liability Company Agreement |
Certificate of Formation of CP Laughlin Realty, LLC |
Certificate of Amendment to the Certificate of Formation |
Limited Liability Company Agreement |
First Amendment to Limited Liability Company Agreement |
Certificate of Formation of Columbia Properties Vicksburg, LLC |
Limited Liability Company Agreement |
First Amendment to Limited Liability Company Agreement |
Certiciate of Formation of JMBS Casino LLC |
Limited Liability Company Agreement |
First Amendment to Limited Liabilty Company Agreement |
Articles of Organization of Columbia Properties Tahoe, LLC |
Amended and Restated Articles of Organization |
Limited Liability Company Agreement |
First Amendment to Limited Liability Company Agreement |
Articles of Organization of CP Baton Rouge Casino, L.L.C. |
Limited Liability Company Agreement |
Articles of Incorporation of Argosy of Louisiana, Inc. |
Bylaws of Argosy of Louisiana, Inc. |
Articles of Incorporation of Jazz Enterprises, Inc. |
Bylaws of Jazz Enterprises, Inc. |
Articles of Organization of Centroplex Centre Convention Hotel, L.L.C. |
Amended and Restated Articles of Organization |
Amended and Restated Operating Agreement of Centroplex Centre Convention Hotel, L.L.C. |
First Amendment to Amended and Restated Operating Agreement |
Amended and Restated Articles of Partnership |
Certificate of Formation of Tahoe Horizon, LLC |
Certificate of Amendment to the Certificate of Formation |
Limited Liability Company Agreement of Tahoe Horizon, LLC. |
First Amendment of Limited Liabilty Company Agreement |
Restated Certificate of Incorporation |
Restated Certificate of Incorporation |
Second Amended and Restated Bylaws of Aztar Corporation |
Articles of Incorporation of Aztar Indiana Gaming Corporation |
Articles of Amendment to the Articles of Incorporation |
Bylaws of Aztar Indiana Gaming Corporation |
Articles of Incorporation of Aztar Riverboat Holding Company, LLC |
Operating Agreement |
First Amendment to Limited Liability Company Agreement |
Articles of Incorporation of Aztar Missouri Gaming Corporation |
Bylaws of Aztar Missouri Gaming Corporation |
Articles of Organization of Aztar Indiana Gaming Corporation |
Limited Liability Company Agreement |
Amendment No. 1 to Limited Liability Company Agreement |
Amendment No. 2 to Limited Liability Company Agreement |
Certificate of Incorporation of Aztar Development Corporation |
Bylaws of Aztar Development Corporation |
Certificate of Incorporation of Ramada New Jersey Holdings Corporation |
Certificate of Amendment to the Certificate of Incorporation |
Certificate of Amendment to the Certificate of Incorporation |
Certificate of Amendment to the Certificate of Incorporation |
Certificate of Amendment to the Certificate of Incorporation |
Bylaws of Ramada New Jersey Holdings Corporation |
Certificate of Incorporation of Atlantic-Deauville Inc. |
Bylaws of Atlantic-Deauville Inc. |
Certificate of Incorporation of Adamar Garage Corporation |
Bylaws of Adamar Garage Corporation |
Certificate of Incorporation of Ramada New Jersey, Inc. |
Certificate of Amendment to the Certificate of Incorporation |
Bylaws of Ramada New Jersey, Inc. |
Certificate of Incorporation of Adamar of New Jersey, Inc. |
Certificate of Amendment to the Certificate of Incorporation |
Certificate of Amendment to the Certificate of Incorporation |
Certificate of Amendment to the Certificate of Incorporation |
Amended and Restated Bylaws |
Certificate of Incorporation of BNB Mobe-Homes, Inc. |
Certificate of Amendment to the Certificate of Incorporation of BNB Mobe-Homes, Inc. |
Certificate of Amendment to the Certificate of Incorporation of Manchester Mall, Inc. |
Certificate of Amendment to the Certificate of Incorporation of Manchester Mall, Inc. |
Bylaws of Manchester Mall, Inc. |
Articles of Incorporation of Ramada Station, Inc. |
Certificate of Amendment to the Articles of Incorporation |
Certificate of Amendment to the Articles of Incorporation |
Certificate of Amendment to the Articles of Incorporation |
Bylaws of Ramada Station, Inc. |
Second Supplmenetal Indenture |
Opinion of Milbank, Tweed, Hadley & McCloy LLP |
Amendment No. 1, Consent, Waiver and Agreement |
Amendment No. 1 to the Credit Agreement |
Contract of Lease |
First Amendment to Contract of Lease |
Second Amendment to Contract of Lease |
Sale and Assigment of Lease |
Contract of Lease |
Amendment of Lease |
Contract of Lease |
Amendment of Lease |
Sale and Assigment of Leases |
Amended and Restated Lease Agreement |
Assignment and Assumption of Lease |
First Amendment to Amended and Restated Lease Agreement |
Second Amendment to Amended and Restated Lease Agreement |
Sublease Agreement |
First Amendment to Sublease Agreement |
Amended and Restated Master Agreement of Purchase and Sale |
Dockage Agreement |
First Amendment to Dockage Agreement |
Second Amendment to Dockage Agreement |
Third Amendment to Dockage Agreement |
Assignment of Yacht Club Dockage Agreement and License Agreement |
Consent Agreement |
Fourth Amendment to Dockage Agreement |
Lease Agreement |
Agreement Granting Moorage and Other Rights |
Assignment of Agreement Granting Moorage and Other Rights |
Assignment |
Lease Agreement |
Assignment of Agreement Granting Moorage and Other Rights |
Agreement Granting Moorage, Dockage, Berthing and Other Rights |
Assignment of Agreement Granting Moorage, Dockage, Berthing and Other Rights |
Charter Party Agreement |
First Amendment to Charter Party Agreement |
Second Amendment to Charter Party Agreement |
Hotel Lease |
First Amendment to Hotel Lease |
Second Amendment to Hotel Lease |
Evansville Riverboat Landing Lease |
Amendment to Evansville Riverboat Landing Lease |
Second Amendment to Evansville Riverboat Landing Lease |
Memorandum of Understanding |
Memorandum of Understanding |
Memorandum of Understanding |
Memorandum of Understanding |
Third Amendment to Evansville Riverboat Landing Lease |
Fourth Amendment to Evansville Riverboat Landing Lease |
Lease Agreement |
First Amendment to Lease Agreement |
Second Amendment to Lease Agreement |
Third Amendment to Lease Agreement |
Fourth Amendment to Lease Agreement |
Fifth Amendment to Lease Agreement |
Collective Bargaining Agreement |
Labor Agreement |
Labor Agreement |
Collective Bargaining Agreement |
Collective Bargaining Agreement |
Calculation of Ratio of Earnings to Fixed Charges |
Consent of Ernst & Young LLP |
Consent of Ernst & Young LLP |
Consent of Ernst & Young LLP |
Consent of Ernst & Young LLP |
Consent of Ernst & Young LLP |
Consent of Ernst & Young LLP |
Consent of PricewaterhouseCoopers LLP |
Consent of Deloitte & Touche LLP |
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT THE COMPANY THAT IS NOT INCLUDED OR DELIVERED
WITH THIS PROSPECTUS. SUCH INFORMATION IS AVAILABLE WITHOUT
CHARGE TO SECURITY HOLDERS UPON WRITTEN OR ORAL REQUEST TO DONNA
MORE, TROPICANA ENTERTAINMENT, LLC AND TROPICANA FINANCE CORP.,
740 CENTRE VIEW BLVD., CRESTVIEW HILLS, KENTUCKY 41017,
(859) 669-1500.
TO OBTAIN TIMELY DELIVERY SECURITY HOLDERS MUST REQUEST THIS
INFORMATION AS SOON AS PRACTICABLE, BUT IN ANY EVENT NO LATER
THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION OF THE EXCHANGE
OFFER.
Each broker-dealer that receives exchange 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
exchange notes. The letter of transmittal delivered with this
prospectus states that by so acknowledging 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. 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 exchange notes received in
exchange for outstanding notes where such outstanding notes were
acquired by such broker-dealer as a result of market-making
activities or other trading activities. See Plan of
Distribution.
You should rely only on the information contained in this
prospectus or to which we have referred you. We have not
authorized anyone to provide you with information that is
different. This prospectus may only be used where it is legal to
sell the securities offered hereby. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy
any securities other than the registered securities to which it
relates, nor does this prospectus constitute an offer to sell or
a solicitation of an offer to buy securities in any jurisdiction
to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The information in this
prospectus may only be accurate as of the date on the front
cover of this prospectus.
Industry and market data used throughout this prospectus were
obtained through company research, surveys and studies conducted
by third parties and industry and other publications. While we
believe that such third-party industry and market data are
reasonable and reliable, we have not independently verified the
same. Similarly, our internal research is based upon our
understanding of industry conditions, and such information has
not been verified by any independent sources.
ii
FORWARD
LOOKING STATEMENTS
This prospectus includes forward looking statements within the
meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, including, without limitation, the
statements under Prospectus Summary, Risk
Factors, each Managements Discussion and
Analysis of Financial Condition and Results of Operations
section and Business. Management has based these
forward looking statements on its current expectations about
future events. The words believes,
anticipates, plans, expects,
intends, estimates and similar
expressions are intended to identify forward looking statements.
These forward looking statements involve known and unknown
risks, uncertainties and other factors which may cause our
actual results, performance and achievements, or industry
results, to be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements. In addition to the risk factors identified
elsewhere in this prospectus, important factors that could cause
actual results or events to differ materially from those
contemplated by such forward looking statements include, without
limitation:
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the financial performance of our business;
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legislative and regulatory matters, changes in government
regulation and regulatory action, including, without limitation,
potential (1) legalization of gaming in additional states
or (2) tax increases in our states of operation;
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increased competition in our markets;
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general business conditions, including competitive practices and
changes in customer demand, and general economic conditions that
impact the performance of our operations;
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the cyclical nature of the gaming and hospitality
businesses; and
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adverse outcomes of legal proceedings and the development of,
and changes in, claims or litigation reserves.
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All forward looking statements included in this prospectus are
based on information available to us on the date of this
prospectus. We undertake no obligation to publicly update or
revise any forward looking statement, whether as a result of new
information, future events or otherwise. All subsequent written
and oral forward looking statements attributable to us or
persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained throughout this
prospectus.
PRESENTATION
OF INFORMATION
In this prospectus, unless the context otherwise requires:
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Acquisition Financing Transactions refers to the
offering of the outstanding notes and the entering into of, and
initial borrowings under, the senior secured credit facility and
the Las Vegas secured loan.
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affiliate guarantors refers to Realty and CP
Vicksburg, affiliates of Tropicana Entertainment but not
subsidiaries of Tropicana Entertainment that guarantee the
outstanding notes and will guarantee the exchange notes, and
JMBS Casino, an affiliate of the Yung family but not a
subsidiary of Tropicana Entertainment that guarantees the
outstanding notes and will guarantee the exchange notes.
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Aztar refers to Aztar Corporation.
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Aztar Acquisition refers to the acquisition of Aztar.
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Aztar Missouri Riverboat Gaming Company refers to
Aztar Missouri Riverboat Gaming Company, L.L.C., which holds
Casino Aztar Caruthersville in Caruthersville, Missouri.
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iii
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Columbia Sussex refers to Columbia Sussex
Corporation, an affiliate of Tropicana Entertainment that is
controlled by Mr. William J. Yung, III, who indirectly
holds all of the equity interests in Tropicana Entertainment.
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CP Vicksburg refers to Columbia Properties
Vicksburg, LLC, an affiliate guarantor.
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JMBS Casino refers to JMBS Casino LLC, an affiliate
guarantor.
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JMBS Trust refers to JMBS Casino Trust, a trust
created for the benefit of the children of Mr. William J.
Yung, III that is subject to the control of his children.
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Realty refers to CP Laughlin Realty, LLC, an
affiliate guarantor.
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restricted group refers to those entities that are
subject to the restrictive covenants contained in the indenture.
The restricted group includes the affiliate guarantors and
Tropicana Entertainment and its consolidated subsidiaries other
than the subsidiaries that hold the assets and operations
relating to the Tropicana Resort and Casino Las
Vegas.
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Transactions refers to the Aztar Acquisition, the
Acquisition Financing Transactions (including the refinancing of
certain of Tropicana Casinos and Resorts, Aztars and
the affiliate guarantors indebtedness) and the corporate
reorganization described under Prospectus
Summary Corporate Reorganization and under
Business Corporate Reorganization.
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Tropicana Entertainment refers to Tropicana
Entertainment, LLC. Tropicana Entertainment, LLC was formerly
named Wimar OpCo, LLC. On February 12, 2007, its name was
changed to Tropicana Entertainment, LLC.
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Tropicana Finance refers to Tropicana Finance Corp.,
a direct wholly-owned subsidiary of Tropicana Entertainment and
a co-issuer of the notes. Tropicana Finance Corp. was formerly
named Wimar OpCo Finance Corp. On February 12, 2007, its
name was changed to Tropicana Finance Corp.
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we, us, our and the
company refer to Tropicana Entertainment together with,
unless the context otherwise requires, all of its consolidated
subsidiaries (and, unless the context otherwise requires, such
references give effect to the Aztar Acquisition and the
contribution of certain gaming operations by Tropicana Casinos
and Resorts to Tropicana Entertainment substantially
concurrently with the consummation of the Aztar Acquisition
pursuant to the corporate reorganization described under
Prospectus Summary Corporate
Reorganization and Business Corporate
Reorganization) and the affiliate guarantors.
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Tropicana Entertainment Holdings refers to Tropicana
Entertainment Holdings, LLC, a direct wholly-owned subsidiary of
Tropicana Casinos and Resorts, and the direct parent of
Tropicana Entertainment Intermediate Holdings. Tropicana
Entertainment Holdings, LLC was formerly named Wimar OpCo
Holdings, LLC. On February 12, 2007, its name was changed
to Tropicana Entertainment Holdings, LLC.
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Tropicana Entertainment Intermediate Holdings refers
to Tropicana Entertainment Intermediate Holdings, LLC, the
direct parent of Tropicana Entertainment. Tropicana
Entertainment Intermediate Holdings, LLC was formerly named
Wimar OpCo Intermediate Holdings, LLC. On February 12,
2007, its name was changed to Tropicana Entertainment
Intermediate Holdings, LLC.
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Tropicana Casinos and Resorts refers to Tropicana
Casinos and Resorts, Inc., Tropicana Entertainments
ultimate parent. Tropicana Casinos and Resorts was formerly
named Wimar Tahoe Corporation. On February 12, 2007, its
name was changed to Tropicana Casinos and Resorts, Inc.
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iv
FINANCIAL
STATEMENT PRESENTATION
This prospectus includes interim financial statements of
Tropicana Entertainment for the six months ended June 30,
2007. In addition, this prospectus includes historical financial
statements of Tropicana Casinos and Resorts, Tropicana
Entertainments ultimate parent company and predecessor. In
connection with the corporate reorganization conducted by
Tropicana Casinos and Resorts as described under the caption
Prospectus Summary Corporate
Reorganization and Business Corporate
Reorganization, Tropicana Casinos and Resorts contributed
to Tropicana Entertainment substantially all of its gaming
properties. In the corporate reorganization, Tropicana Casinos
and Resorts did not contribute to Tropicana Entertainment
(i) the assets relating to its subsidiary that owns its
riverboat casino formerly located in New Orleans, Louisiana and
then named the Belle of Orleans (which has since been re-branded
as the Amelia Belle Casino and which we refer to as the New
Orleans riverboat), which was temporarily decommissioned as a
result of damage it sustained during Hurricane Katrina in August
2005 and was subsequently redeployed in Amelia, Louisiana in May
2007, and (ii) the gaming assets and operations at the
Casuarina Las Vegas Casino, a casino located in leased space in
a hotel property that is managed by Columbia Sussex and owned by
an affiliate of Columbia Sussex. Accordingly, the historical
financial statements of Tropicana Casinos and Resorts reflect
the New Orleans riverboat and the gaming assets and operations
at the Casuarina Las Vegas Casino as discontinued operations.
See Note 1 to the audited consolidated financial statements
of Tropicana Casinos and Resorts included elsewhere in this
prospectus.
This prospectus also includes historical financial statements of
Aztar. Immediately following the Aztar Acquisition, Tropicana
Entertainment distributed the membership interests of Aztar
Missouri Riverboat Gaming Company, which holds the Casino Aztar
Caruthersville in Caruthersville, Missouri and was formerly a
wholly-owned subsidiary of Aztar, to Tropicana Casinos and
Resorts. On June 10, 2007, Tropicana Casinos and Resorts
sold Aztar Missouri Riverboat Gaming Company to Isle of Capri
Casinos, Inc., or Isle of Capri. As a result, Aztar Missouri
Riverboat Gaming Company is not a subsidiary of Tropicana
Entertainment and is no longer a subsidiary of Aztar or
Tropicana Casinos and Resorts. Accordingly, the historical
financial statements of Aztar reflect Aztar Missouri Riverboat
Gaming Company as a discontinued operation. See Note 17 to
the audited consolidated financial statements of Aztar included
elsewhere in this prospectus.
This prospectus also includes separate interim financial
statements for the six months ended June 30, 2007 and
historical financial statements of CP Vicksburg and JMBS Casino,
affiliate guarantors that guarantee the outstanding notes, and
will guarantee the exchange notes, but that are not subsidiaries
of Tropicana Entertainment.
This prospectus also includes separate interim financial
statements for the six months ended June 30, 2007 and
historical financial statements of Realty, an affiliate
guarantor that guarantees the outstanding notes, and will
guarantee the exchange notes, but that is not a subsidiary of
Tropicana Entertainment. However, as Realty is a variable
interest entity of which Tropicana Casinos and Resorts was the
primary beneficiary prior to the corporate reorganization and of
which Tropicana Entertainment became the primary beneficiary
thereafter, historical financial information with respect to
Realty is already reflected in the consolidated financial
statements of Tropicana Entertainment and Tropicana Casinos and
Resorts included elsewhere in this prospectus.
This prospectus also includes separate historical financial
statements of Argosy of Baton Rouge, which Tropicana Casinos and
Resorts acquired in October 2005 and thereafter renamed the
Belle of Baton Rouge, from January 1, 2004 to
October 24, 2005, the last date on which the property was
owned and operated by the seller. The results of operations of
the Belle of Baton Rouge for that portion of the year ended
December 31, 2005 following its acquisition, and for the
entire year ended December 31, 2006 are reflected in
Tropicana Casinos and Resorts audited consolidated
financial statements for the years ended December 31, 2005
and December 31, 2006 respectively. In connection with the
corporate reorganization conducted by Tropicana Casinos and
Resorts as described under the caption Prospectus
Summary Corporate Reorganization and
Business Corporate Reorganization,
Tropicana Casinos and Resorts contributed the Belle of Baton
Rouge to Tropicana Entertainment on January 3, 2007.
Accordingly, the
v
results of operations of the Belle of Baton Rouge are reflected
in Tropicana Entertainments consolidated financial
statements for the six months ended June 30, 2007.
This prospectus also includes a separate statement of direct
revenues and expenses of Desert Palace, Inc., the former owner
of Caesars Tahoe, for the period from January 1, 2005 to
June 10, 2005. Tropicana Casinos and Resorts acquired the
Caesars Tahoe property in June 2005 and thereafter renamed it
the MontBleu. The results of operations of the MontBleu for that
portion of the year ended December 31, 2005 following its
acquisition, and for the entire year ended December 31,
2006 are reflected in Tropicana Casinos and Resorts
audited consolidated financial statements for the years ended
December 31, 2005 and December 31, 2006 respectively.
In connection with the corporate reorganization conducted by
Tropicana Casinos and Resorts as described under the caption
Prospectus Summary Corporate
Reorganization and Business Corporate
Reorganization, Tropicana Casinos and Resorts contributed
the MontBleu to Tropicana Entertainment on January 3, 2007.
Accordingly, the results of operations of the MontBleu are
reflected in Tropicana Entertainments consolidated
financial statements for the six months ended June 30, 2007.
This prospectus does not include stand-alone historical
financial statements for the restricted group presented on a
consolidated basis as such a consolidated presentation would not
comply with generally accepted accounting principles in the
United States, or GAAP. In addition, this prospectus does not
present financial information for the restricted group on a
combined basis. Instead, as described above, this prospectus
presents financial information independently for each of the
affiliate guarantors and Tropicana Entertainment or, for certain
historical periods, Tropicana Casinos and Resorts. However,
financial information for Tropicana Entertainment and Tropicana
Casinos and Resorts presented in this prospectus does not
exclude data with respect to the subsidiaries of Tropicana
Entertainment that hold the assets and operations relating to
the Tropicana Resort and Casino Las Vegas, which are
not part of the restricted group. Accordingly, the financial
information for Tropicana Entertainment and Tropicana Casinos
and Resorts contained in this prospectus should not be
understood to represent the financial performance of the
restricted group.
Certain monetary amounts, percentages and other figures included
in this prospectus have been subject to rounding adjustments.
Accordingly, figures shown as totals in certain tables may not
be the arithmetic aggregation of the figures that precede them,
and figures expressed as percentages in the text may not total
100% or, as applicable, when aggregated may not be the
arithmetic aggregation of the percentages that precede them.
vi
The following summary highlights significant aspects of our
business and this offering, but you should read this entire
prospectus, including the information set forth under the
heading Risk Factors and the financial statements
and related notes, before electing to participate in the
exchange offer or making an investment decision with respect to
the exchange notes. Unless otherwise indicated, the figures
contained herein regarding the amenities and features of our
casino properties are approximations prepared as of
June 30, 2007.
Our
Company
Background
Information
As part of our campaign to expand our national footprint and
diversify our gaming operations, on January 3, 2007,
affiliates of Tropicana Entertainment acquired all of the
outstanding equity interests in Aztar for approximately
$2.1 billion in cash. In the corporate reorganization
completed substantially concurrently with the acquisition, Aztar
became a wholly-owned subsidiary of Tropicana Entertainment. For
more information concerning the Aztar Acquisition, see
The Aztar Acquisition and
Business The Aztar Acquisition. The
Aztar Acquisition added four casino properties located in
Nevada, New Jersey and Indiana to the holdings of Tropicana
Entertainment.
Overview
We are among the largest privately-held gaming entertainment
providers in the United States and a leading domestic casino
operator as determined by revenue. We own 11 casino properties
in eight distinct gaming markets, including Las Vegas, Laughlin
and South Lake Tahoe (Stateline), Nevada; Atlantic City, New
Jersey; Baton Rouge, Louisiana; Greenville and Vicksburg,
Mississippi; and Evansville, Indiana. Our casino properties have
an aggregate of 548,359 square feet of gaming space housing
12,244 gaming machines and 510 table games, as well as an
aggregate of 8,282 hotel rooms.
On a pro forma basis giving effect to the Transactions, the
aggregate net operating revenue of Tropicana Entertainment for
the year ended December 31, 2006 would have been
$1,183 million. The aggregate net operating revenue of
Tropicana Entertainment for the six months ended June 30,
2007 was $554.1 million.
At each of our gaming properties, we strive to provide our
customers with a high-quality casino entertainment and
hospitality experience at attractive prices. To develop and
maintain customer loyalty, we emphasize customer service and
seek to offer a comfortable gaming environment along with a
variety of amenities, including quality hotel rooms, varied
dining choices and appealing entertainment options. We plan to
continue to regularly invest in our facilities to maintain and
enhance their quality, appeal and competitiveness.
1
The following table sets forth certain information about our
properties as of June 30, 2007. Except as otherwise
indicated, we wholly own and operate the following casinos:
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Acquisition
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Approx. Casino
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Slot
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Table
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Hotel
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Parking
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Property Name
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Location
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Date
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Square Footage
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Machines
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Games
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Rooms
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Spaces
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Legacy Properties
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Belle of Baton Rouge
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Baton Rouge, LA
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Oct. 2005
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29,500
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1,019
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22
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300
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1,803
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River Palms Hotel and Casino
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Laughlin, NV
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Sept. 2003
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63,850
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1,061
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28
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1,001
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1,834
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Lake Tahoe Horizon Casino and Resort
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South Lake Tahoe, NV
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Jan. 1990
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43,000
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712
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32
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539
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1,396
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MontBleu Casino
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South Lake Tahoe, NV
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June 2005
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40,585
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638
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52
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440
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1,547
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Lighthouse Point Casino(1)(2)
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Greenville, MS
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Nov. 1996(3)
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22,000
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725
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9
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386
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Jubilee Casino(4)
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Greenville, MS
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March 2002
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28,500
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712
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13
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39
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512
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Vicksburg Horizon Casino(5)
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Vicksburg, MS
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Oct. 2003
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20,909
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696
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19
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117
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889
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Recently Acquired Properties
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Tropicana Atlantic City
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Atlantic City, NJ
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Jan. 2007
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147,248
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3,480
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209
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2,129
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5,477
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Tropicana Express Hotel and Casino
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Laughlin, NV
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Jan. 2007
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53,680
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1,075
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39
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1,495
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2,253
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Casino Aztar Evansville
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Evansville, IN
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Jan. 2007
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38,360
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1,132
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52
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346
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2,100
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Tropicana Las Vegas(2)
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Las Vegas, NV
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Jan. 2007
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60,727
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994
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35
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1,876
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2,388
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Total
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548,359
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12,244
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510
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8,282
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20,585
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(1)
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Tropicana Entertainment indirectly
holds a 79% voting interest and an 84% economic interest in
Greenville Riverboat, LLC, which manages the Lighthouse Point
Casino. A wholly-owned subsidiary of Tropicana Entertainment
owns the riverboat on which the Lighthouse Point Casino conducts
its operations.
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(2)
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Greenville Riverboat, LLC and the
subsidiaries of Tropicana Entertainment that hold the assets and
operations relating to the Tropicana Las Vegas are not
guarantors of the outstanding notes or of the senior secured
credit facility and will not be guarantors of the exchange
notes, although Greenville Riverboat, LLC is subject to the
restrictive covenants contained in the indenture and the credit
documentation governing the senior secured credit facility.
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(3)
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The Lighthouse Point Casino was
developed (as opposed to acquired) and commenced operations in
November 1996.
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(4)
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JMBS Casino, one of the affiliate
guarantors, owns and operates the Jubilee Casino.
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(5)
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CP Vicksburg, one of the affiliate
guarantors, owns and operates the Vicksburg Horizon Casino.
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Our
History
Columbia Sussex, which was founded in 1972 by William J.
Yung, III, has grown to become one of the largest
privately-held hospitality companies in the United States with
approximately $970.0 million in revenues in 2006. As of
June 30, 2007, Columbia Sussex and its affiliates owned and
operated 70 hotel properties across the United States, Canada
and the Caribbean, which are marketed under brands including
Marriott, Hilton, Westin, Sheraton, Renaissance, Wyndham and
Doubletree.
In 1990, Mr. William Yung made his initial investment in
the gaming industry when he formed Wimar Tahoe Corporation,
which has since been renamed Tropicana Casinos and Resorts, to
acquire the Lake Tahoe Horizon Casino and Resort, or the Tahoe
Horizon. Since obtaining a gaming license in 1990,
Mr. William Yung and the Yung family have built a record of
successful gaming acquisitions and development, while generating
growth and operational improvements.
Our
Competitive Strengths
Geographic Diversity. We believe we are one of
the largest and most diversified gaming operators in the United
States. We own and operate 11 casino facilities in eight
distinct gaming markets and six states, including five casinos
in Nevada, three casinos in Mississippi and one casino in each
of New Jersey, Louisiana and Indiana. We believe this geographic
diversity helps reduce our dependence on any one geographic
market.
2
Beneficial Relationship with Columbia
Sussex. Our relationship with Columbia Sussex
provides us with several advantages, including the following:
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Cost-Effective Administrative Services. We
share corporate offices with Columbia Sussex and many corporate
functions, such as human resources, accounting, administration,
purchasing, marketing, hotel management and supervision, risk
management, contracting, construction and development, treasury
and maintenance-related services, are performed for certain of
Tropicana Entertainments subsidiaries and the affiliate
guarantors by Columbia Sussex pursuant to the terms of service
agreements, which are subject to gaming regulatory approval.
Gaming regulatory approval of the terms of one service agreement
has not yet been obtained with respect to our Tropicana Atlantic
City property. The service agreements extend by their terms
until we elect to terminate them, which we are permitted to do
at any time with 60 days written notice. Under the terms of
these service agreements, subject to certain conditions,
Columbia Sussex provides corporate services on behalf of our
gaming properties that have received regulatory approval to date
for a total amount of approximately $1.9 million per year,
subject to modest price increases each year starting in 2008. We
believe the service agreements enable us to obtain corporate
services at costs that are more favorable than we would be able
to obtain on a stand-alone basis. We have also entered into
agreements with Tropicana Casinos and Resorts for the provision
to certain of Tropicana Entertainments subsidiaries and
the affiliate guarantors of casino services, such as the
supervision of casino operations, staffing, marketing and
advertising and accounting, which agreements are subject to
gaming regulatory approval. Gaming regulatory approval of the
terms of one of these agreements has not yet been obtained with
respect to our Tropicana Atlantic City property. Under these
agreements, we have agreed to pay Tropicana Casinos and Resorts
our allocated portion of the corporate overhead costs for these
services. For a more detailed description of the agreements
described in this paragraph, see Certain Relationships and
Related Party Transactions.
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Integrated Marketing Programs. The
compatibility of Columbia Sussexs extensive portfolio of
70 hotels and our network of casino properties has provided us
with a number of opportunities to develop integrated marketing
programs. We expect to develop joint programs whereby guests of
our casinos can receive discounts on stays at Columbia Sussex
hotel properties. In addition, we and Columbia Sussex are able
to pool our respective customer databases to develop direct
marketing campaigns targeting a broad group of prospective
customers, and to more effectively promote these programs by
sharing a centralized marketing platform. We believe that our
acquisition of Aztar has provided us with additional
opportunities for these types of joint marketing efforts.
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Extensive Construction and Development
Experience. Throughout our history, we have
engaged in a number of property renovation, refurbishment and
development projects, and we have a number of additional
projects underway or slated to commence in the near term. As a
developer of hotel properties, Columbia Sussex has over
30 years of experience in planning, financing and executing
hotel improvement and development programs. We have been able to
leverage this experience when undertaking our development
projects, which we believe has allowed us to develop and enhance
our gaming assets in a cost-effective manner, while meeting
target completion dates and development expectations.
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Experienced Management Team. Mr. William
Yung, who founded both Tropicana Entertainment and Columbia
Sussex, has over 30 years of gaming and hospitality
experience. The balance of our senior management team also has
significant experience operating, developing, acquiring and
integrating hotel and gaming properties and related amenities,
with an average tenure in the gaming or hospitality industries
among its members of more than 15 years. Mr. William
Yung and his management team have grown gaming operations
through strategic acquisitions and targeted development, with
Tropicana Casinos and Resorts net operating revenues
growing from $75.5 million to $288.9 million between
2001 and 2006 and operating income growing from
$14.0 million to $58.6 million during that same
period. In addition, Mr. William Yung and the management
team have made use of conservative financial management focused
on cost control and prudent capital deployment in order to
improve results.
3
Our
Business Strategy
We seek to continue growing in a profitable manner by pursuing
the following strategies:
Successfully Integrate Acquisitions. Tropicana
Casinos and Resorts acquired the MontBleu Casino, or the
MontBleu, in June 2005 and the Belle of Baton Rouge in October
2005, both of which properties it contributed to Tropicana
Entertainment in the corporate reorganization. The Aztar
Acquisition added four additional gaming properties to our
portfolio, resulting in six of our 11 casino properties having
been acquired within the past two years. As such, we believe
there is significant potential to realize efficiencies as we
integrate Aztar, and further integrate other recently acquired
casino properties, into our operations. Specifically, we expect
to eliminate redundant overhead costs at Aztar by leveraging
Tropicana Casinos and Resorts administrative
infrastructure. In addition, in markets such as Laughlin and
South Lake Tahoe, Nevada where we own more than one property, we
believe we will also be able to realize additional operational
synergies and cost savings by consolidating duplicative
back-office functions.
Enhance Marketing and Promotion
Activities. The Aztar Acquisition significantly
increased our geographic footprint and scale of operations. In
conjunction with Tropicana Casinos and Resorts and Columbia
Sussex, we will benefit from an integrated marketing platform
that will provide us with cross-selling opportunities among more
than 80 hotel and casino properties. Our expanded customer base
will enable us to develop cross-marketing initiatives across our
properties, which may include a player rewards program linking
selected gaming facilities. We believe a uniform player rewards
program will encourage customers traveling among different
markets to patronize our properties and will build increased
customer loyalty. In addition, in July 2007, we re-branded the
former Ramada Express in Laughlin, Nevada as the Tropicana
Express. We also plan to re-brand a number of our other
gaming properties under the Tropicana name. We believe this
re-branding will help to develop a strong, recognizable identity
for our properties.
Benefit from Recent Investments and Near-Term Growth
Opportunities. We believe we will benefit
significantly from recent capital investments made in our
properties. In addition, we have significant near-term growth
opportunities as a result of projects currently being developed,
as well as other development opportunities. These investments
and growth opportunities include the following:
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Tropicana Atlantic City: In November 2004,
Aztar completed a $285.0 million expansion to the Tropicana
Resort and Casino Atlantic City, or the Tropicana
Atlantic City, which included a 200,000-square-foot
entertainment, restaurant and retail complex known as The
Quarter at Tropicana, which we refer to as The Quarter. We
intend to proceed with a plan developed by Aztar, which we
expect will cost approximately $55.0 million, to enhance
the Tropicana Atlantic City by refurbishing its casino floors
and hotel towers so that they are similar in quality and
appearance to The Quarter. The three-phase refurbishment project
commenced in December 2005. During phase one of the project,
Aztar made enhancements to the north tower hotel rooms and
certain non-gaming amenities, which phase was completed during
the fourth quarter of 2006. During phase two of the project, we
refurbished half of the casino floor and the south tower hotel
rooms, which phase was completed during the second quarter of
2007. In phase three of the project, we will refurbish the other
half of the casino floor and two restaurants at the property. We
expect to complete the third phase in the first quarter of 2008.
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Casino Aztar Evansville: Construction was
completed in 2007 at the Casino Aztar Evansville on a
$32.6 million expansion that includes a 96-room boutique
hotel, multi-venue dining and entertainment complex and
associated infrastructure. We believe that the expansion has
increased the attractiveness of the property and expanded
customer reach through the availability of additional hotel
rooms. In addition, in August 2007, the City of
Evansvilles Redevelopment Commission approved our
preliminary plan to build a 1,046-seat theater at the Casino
Aztar Evansville. The venue, construction of which is currently
projected to be completed in the first quarter of 2008 at an
approximate cost of $4.0 million, is expected to offer live
entertainment for patrons of the property and residents of
Evansville.
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Belle of Baton Rouge: The Belle of Baton Rouge
benefited from the population increase in the Baton Rouge area
following the displacement of residents of New Orleans as a
result of Hurricane Katrina, although that benefit has since
somewhat subsided. To accommodate the increased demand for
gaming in this market and to build market share, we have
developed plans to build a 330-space parking structure adjacent
to the casino. We will endeavor to complete construction of the
parking structure, which is designed to increase casino traffic
and is estimated to cost approximately $12.5 million, by
the second quarter of 2008.
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MontBleu Casino: In the summer of 2006, we
completed a $21.0 million program to re-brand and
reposition the former Caesars Lake Tahoe as the MontBleu. We
introduced new
on-site
amenities and entertainment options at the MontBleu to appeal to
a younger clientele, while continuing to focus on the value
conscious customer in the South Lake Tahoe, Nevada market at our
sister property, the Tahoe Horizon. We intend to increase our
efforts to effectively market the MontBleu as we seek to
strengthen our customer base.
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Tropicana Express: We have completed the
$11.0 million program to renovate the hotel rooms at the
Tropicana Express Hotel and Casino, or the Tropicana Express,
which we believe will help solidify our position in the Laughlin
market. In addition, the Tropicana Express is situated less than
one mile from the River Palms, which we believe will allow us to
achieve operational synergies and cost savings by consolidating
duplicative back-office and other support functions, including
the sharing of laundry facilities and employees to reduce
overtime pay.
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Lighthouse Point Casino and Jubilee Casino: We
expect to invest between $7.0 million and $8.0 million
at the Lighthouse Point Casino and the Jubilee Casino, our two
casinos in Greenville, Mississippi, in order to renovate the
casino floors and public areas of the properties so as to better
position them to meet the competitive challenges posed by the
expected introduction of a new gaming property to the market in
late 2007. We will add up to 850 new and converted slot
machines, making all of the slot machines at the properties
ticket-in ticket-out and upgrade the slot tracking
systems. We will also make improvements to the restaurant at the
Lighthouse Point Casino.
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Redevelop the Tropicana Las Vegas Site. To
capitalize on its premium location on the Las Vegas
Strip, we expect to redevelop the Tropicana Resort
and Casino Las Vegas, or the Tropicana Las Vegas, by
refurbishing one of its two existing hotel towers and its
existing showroom (we expect to raze the other existing tower
and all of the other remaining structures on the site other than
the casino floor) and redeveloping the remainder of its
34-acre
site. Our preliminary plan for this redevelopment effort
envisions approximately 10,200 new and refurbished hotel rooms
of which approximately 500 will be refurbished hotel rooms in
the existing hotel tower to be retained, approximately
600,000 square feet of new meeting space, an increase in
the size of the casino floor to approximately
120,000 square feet, a more modern casino floor layout and
a new approximately 250,000-square-foot retail plaza. We plan to
complete this redevelopment in 2010. The redevelopment is
expected to be funded by a construction financing transaction
independent of the financing transactions that funded the Aztar
Acquisition and, if necessary, by additional capital
contributions from Tropicana Casinos and Resorts, Tropicana
Entertainments ultimate parent.
The outstanding notes are not, and the exchange notes will not
be, guaranteed by the subsidiaries of Tropicana Entertainment
that hold the assets and operations relating to the Tropicana
Las Vegas.
Our
Properties
Legacy
Properties
Belle of Baton Rouge. The Belle of Baton Rouge
is located on the Mississippi River in the downtown historic
district of Baton Rouge, Louisiana. The three-deck dockside
riverboat features 29,500 square feet of casino space
housing 1,019 slot machines and 22 table games. The Belle of
Baton Rouge is also located directly adjacent to the
300-room Sheraton Baton Rouge Convention Center Hotel,
which we own. The hotel offers three restaurants, a lounge and a
70-seat sports bar, approximately 150,000 square feet of
available retail space, approximately 40,000 square feet of
meeting space, a small entertainment venue, an
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approximately 50,000-square-foot glass-enclosed atrium and a
parking garage and surface parking lot, together offering
parking for 1,803 vehicles. The Baton Rouge market is located
approximately 75 miles to the northwest of New Orleans.
This market, which primarily caters to local patrons,
experienced a 37.2% increase in its gaming revenues for the
period between June 30, 2005 and June 30, 2006 as
compared to the period between June 30, 2004 and
June 30, 2005. This increase in revenue was primarily
attributable to the population shift from New Orleans to Baton
Rouge in the wake of Hurricane Katrina, although it appears that
some of the transient population caused by the hurricane has
begun to shift back to New Orleans and other Gulf Coast
communities, which has resulted in these increased revenues
subsiding somewhat while remaining above pre-Hurricane Katrina
levels.
River Palms Hotel and Casino. The River Palms
Hotel and Casino, or the River Palms, is located on
approximately 35 acres in Laughlin, Nevada. The property,
which underwent renovation in 2004, features 1,001 rooms and
suites and a 63,850-square-foot casino space boasting 1,061 slot
machines and 28 table games. In addition, the River Palms has
four dining facilities, two bars, two lounges, one nightclub, a
spa, a salon, approximately 10,500 square feet of meeting
and convention space and a 1,834-space parking facility.
Situated on the Colorado River at Nevadas southern tip,
Laughlin is approximately 225 miles from Phoenix and
285 miles from Los Angeles. The River Palms benefits from
approximately 1,300 feet of frontage on the Colorado River
and on Casino Drive, Laughlins principal thoroughfare.
Lake Tahoe Horizon Casino and Resort. The
Tahoe Horizon is located at the southeastern end of Lake Tahoe
in Stateline, Nevada, an area also known as South Lake Tahoe.
The property, which underwent an extensive remodeling in 1999,
features 539 hotel rooms and a 43,000-square-foot casino housing
712 slot machines and 32 table games. Other notable amenities
include South Lake Tahoes largest outdoor pool, an
eight-screen movie theater, four restaurants, a Starbucks
café, two entertainment venues, a game arcade,
11,000 square feet of meeting and convention space and a
1,396-space parking facility. The South Lake Tahoe market,
approximately 100 miles from Sacramento and 185 miles
from the San Francisco Bay area, is situated in a popular
domestic vacation destination and attracts visitors with a wide
range of year-round recreational activities.
MontBleu Resort Casino and Spa. The MontBleu
is situated on approximately 21 acres in South Lake Tahoe,
Nevada, immediately adjacent to the Tahoe Horizon. In May 2006,
we completed an extensive re-branding and refurbishment of the
propertys casino, lobby, retail facilities, restaurants
and nightclub. The property features 440 hotel rooms and a
40,585-square-foot casino that houses 638 slot machines, 52
table games and a new poker room. The property also offers
patrons a choice of four restaurants and various non-gaming
amenities, including a shopping galleria, a nightclub targeted
to younger visitors, a 1,500-seat auditorium, approximately
13,899 square feet of meeting and convention space and a
1,547-space parking facility.
Lighthouse Point Casino. The Lighthouse Point
Casino is a 210-foot riverboat operation located in Greenville,
Mississippi. The riverboat features an approximately
22,000-square-foot, three-floor casino housing 725 slot machines
and nine table games. The property also features a 386-space
parking facility. Lighthouse Point Casino, which draws the
majority of its customers from local markets, is located
approximately 90 miles from Vicksburg, Mississippi.
Greenville Riverboat, LLC, or Greenville Riverboat, which owns
and manages the Lighthouse Point Casino, is not a guarantor of
the outstanding notes and will not be a guarantor of the
exchange notes, however, it is subject to the restrictive
covenants contained in the indenture.
Bayou Caddys Jubilee Casino. Bayou
Caddys Jubilee Casino, or the Jubilee Casino, is a
240-foot riverboat located in Greenville, Mississippi. The
Jubilee Casino is owned and operated by JMBS Casino, one of the
affiliate guarantors. The riverboat features a
28,500-square-foot casino housing 712 slot machines and 13 table
games. The property has parking capacity to accommodate 512
vehicles. JMBS Casino also owns and operates the Greenville
Inn & Suites, a hotel located less than one mile from
the Jubilee Casino offering 39 suites and free shuttle service
to and from the Jubilee Casino.
Vicksburg Horizon Casino. The Vicksburg
Horizon Casino, or Vicksburg Horizon, is a 297-foot multi-level
antebellum style riverboat located in downtown Vicksburg,
Mississippi. The Vicksburg Horizon
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is owned and operated by CP Vicksburg, one of the affiliate
guarantors. The property features a three-floor,
20,909-square-foot casino housing 696 slot machines and 19 table
games and a hotel with 117 guest rooms. Additional amenities
include two restaurants, a sports bar, two covered parking
garages and an additional parking lot with free valet service,
which provide a total of 889 parking spaces. The Vicksburg
Horizon attracts patrons primarily from western and central
Mississippi and eastern Louisiana.
Recently
Acquired Properties
Tropicana Resort and Casino Atlantic
City. The Tropicana Atlantic City is situated on
a 14 acre site with approximately 660 feet of ocean
frontage along the Boardwalk in Atlantic City, New Jersey. The
Tropicana Atlantic City features 2,129 hotel rooms and suites,
the most rooms offered by any gaming property in the Atlantic
City market, and 147,248 square feet of casino space with
3,480 slot machines and 209 table games. The Quarter, a
200,000-square-foot Las Vegas-style indoor dining, entertainment
and retail center with a Havana-inspired theme, is the
centerpiece of a $285.0 million expansion, which was
completed in November 2004. The property is currently undergoing
a two-phase renovation of its casino floor and hotel towers,
which is scheduled to be completed in 2007. In addition to The
Quarter, the Tropicana Atlantic City also boasts a 2,000-seat
theatrical show room, a health club, swimming pools and tennis
courts, approximately 99,000 square feet of meeting,
convention and banquet space and parking facilities to
accommodate 5,477 vehicles. Atlantic City is the second largest
commercial gaming market in the United States. Although the
Atlantic City market has historically been patronized primarily
by day-trippers, we believe that the market is
continuing to evolve into a regional destination for overnight
visitors as a result of recent significant capital investment
and the introduction of improved amenities. The market attracts
patrons primarily from New Jersey, New York and Pennsylvania.
Tropicana Express Hotel and Casino. The
Tropicana Express is situated in close proximity to our River
Palms property on an approximately
31-acre site
in Laughlin, Nevada. The Tropicana Express features 1,495 guest
rooms and a 53,680-square-foot casino housing 1,075 slot
machines and 39 table games. The property also features a
novelty working train for use by its patrons. Other non-gaming
amenities include a train-shaped, heated outdoor swimming pool
and attached spa, five restaurants, an entertainment lounge, a
premium lounge for high-end players and parking accommodations
for 2,253 vehicles. We are nearing completion of an
approximately $11.0 million program to renovate the hotel
rooms at the Tropicana Express. We expect the renovation to be
completed in 2007.
Casino Aztar Evansville. The Casino Aztar
Evansville riverboat is located on the Ohio River adjacent to
approximately 15 acres of landside development in
metropolitan Evansville, Indiana. The Casino Aztar Evansville
features two hotels boasting an aggregate of 346 guest rooms and
approximately 38,360 square feet of casino space with 1,132
slot machines and 52 table games. In addition, the property has
a 44,000-square-foot passenger pavilion that has four
restaurants, an entertainment lounge, a gift shop, a
full-service Starbucks café, an executive conference center
and a 2,100-space parking structure. Construction has been
completed on a $32.6 million expansion that includes a
96-room boutique hotel, a multi-venue dining and entertainment
complex, improvements to an existing park and the infrastructure
required to support the expansion project. The new dining and
entertainment complex opened in November 2006 and the new
boutique hotel opened in December 2006. Casino Aztar Evansville
is the sole gaming facility in Evansville. It primarily attracts
patrons from the local tri-state area of southern Indiana,
northwestern Kentucky and southeastern Illinois.
Tropicana Resort and Casino Las
Vegas. The Tropicana Las Vegas is located on an
approximately
34-acre
parcel on the Strip in Las Vegas, Nevada. Together
with the MGM Grand, the Excalibur Hotel and Casino, the Luxor,
the Monte Carlo Resort and Casino and the New York-New York
Hotel and Casino, the Tropicana Las Vegas is located at the
intersection known as the Four Corners at Las Vegas
Boulevard and Tropicana Avenue. The properties situated at the
Four Corners collectively offer over 18,000 hotel rooms. The
Tropicana Las Vegas features 1,876 hotel rooms and suites and a
60,727-square-foot casino housing 994 slot machines and 35 table
games. Other amenities include seven restaurants, one of the
worlds largest indoor-outdoor swimming pools, a
five-acre
water oasis and tropical garden, approximately
106,358 square feet of convention and exhibit space and
parking to accommodate 2,388 vehicles. We believe
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the propertys central location enables it to benefit from
a cluster effect, which produces increased
pedestrian traffic, visitation and gaming play. The outstanding
notes are not, and the exchange notes will not be, guaranteed by
the subsidiaries of Tropicana Entertainment that hold the assets
and operations relating to the Tropicana Las Vegas.
The Aztar
Acquisition
On January 3, 2007, affiliates of Tropicana Entertainment
acquired Aztar for approximately $2.1 billion in cash. As
part of the corporate reorganization completed substantially
concurrently with the acquisition, Aztar became a wholly-owned
subsidiary of Tropicana Entertainment. The Aztar Acquisition was
consummated pursuant to an Agreement and Plan of Merger (which
we refer to as the Aztar Merger Agreement), dated as of
May 19, 2006, among Aztar and Tropicana
Entertainments affiliates Columbia Sussex, Tropicana
Casinos and Resorts and WT-Columbia Development, Inc.
Outstanding shares of Aztars common stock and
Series B preferred stock were acquired in exchange for
$54.3996 per share and $575.3546 per share in cash,
respectively. Following the Aztar Acquisition, Aztars
common stock was delisted from the New York Stock Exchange and
deregistered.
In accordance with the Aztar Merger Agreement, Aztar attempted
to divest the Casino Aztar Caruthersville prior to the
consummation of the Aztar Acquisition. Aztar located a
prospective buyer, however, the proposed sale was terminated
because the Missouri Gaming Commission, by resolution dated
October 25, 2006, determined that the licensure of the
proposed buyer would not occur on or before the proposed closing
date of the Aztar Acquisition. The Aztar Merger Agreement
contemplated that if the sale of the Casino Aztar Caruthersville
was not completed by the proposed closing date of the Aztar
Acquisition, the casino would be shut down because Tropicana
Casinos and Resorts would not have the necessary licenses to own
and operate a casino in Missouri. In order to avoid the
potential closure of the Casino Aztar Caruthersville, the
Missouri Gaming Commission entered into an agreement with Aztar
Missouri Riverboat Gaming Company and Aztar on November 3,
2006 permitting Tropicana Casinos and Resorts to own the Casino
Aztar Caruthersville on an interim basis during which time the
property was operated under the supervision of the Missouri
Gaming Commission. The agreement required Tropicana Casinos and
Resorts to either sell the Casino Aztar Caruthersville within
nine months of the date of its execution or discontinue the
casinos operations at that time. In accordance with the
agreement, Tropicana Casinos and Resorts divested the Casino
Aztar Caruthersville to Isle of Capri on June 10, 2007. All
proceeds from the disposition of the Casino Aztar Caruthersville
were retained by Tropicana Casinos and Resorts and we are not
entitled to any of these proceeds.
On December 12, 2006, Tropicana Casinos and Resorts
acquired all of the equity interests of Tropicana Pennsylvania,
LLC (which we refer to as Tropicana Pennsylvania), a subsidiary
of Aztar formed to file an application to develop a gaming
property in Pennsylvanias Lehigh Valley gaming market at a
site in Allentown, for a cash purchase price of
$6.9 million, which represented the estimated net total
assets of Tropicana Pennsylvania on the date the acquisition was
consummated. Following its acquisition by Tropicana Casinos and
Resorts, Tropicana Pennsylvania became a direct subsidiary of
Tropicana Casinos and Resorts. Tropicana Pennsylvania is not
subject to the restrictive covenants contained in the indenture.
In addition, LV Rec, Inc. and LV Red, LLC (which entities we
refer to collectively with Tropicana Pennsylvania as the
Tropicana Pennsylvania entities), subsidiaries of Aztar involved
in its erstwhile effort to develop a gaming property in
Allentown, Pennsylvania but that do not hold any material
assets, were distributed to Tropicana Casinos and Resorts
immediately following the Aztar Acquisition. Neither LV Rec,
Inc. nor LV Red, LLC is a subsidiary of Tropicana Entertainment
and neither of these entities is subject to the restrictive
covenants contained in the indenture. On December 21, 2006,
the Pennsylvania Gaming Control Board awarded the right to
develop a gaming property in Lehigh Valley to the Las Vegas
Sands Corp., or Sands, which had competed with Tropicana Casinos
and Resorts for the gaming license. Sands will develop a site in
Bethlehem, Pennsylvania. Tropicana Casinos and Resorts is
currently contemplating a sale of a portion of the real property
held by the Tropicana Pennsylvania entities in Allentown,
Pennsylvania to a third party which would make use of such real
property for non-gaming purposes.
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Substantially concurrently with the consummation of the Aztar
Acquisition, Tropicana Entertainment caused Aztar to call for
redemption its $300.0 million aggregate principal amount of
77/8% Senior
Subordinated Notes due 2014 and $175.0 million aggregate
principal amount of 9% senior subordinated notes due 2011
by irrevocably depositing with the trustees for such notes
amounts sufficient, without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness
outstanding under such series of notes, including principal,
premium and liquidated damages, if any, and accrued interest to
February 2, 2007, the date on which such series of notes
were redeemed. In addition, on January 3, 2007, Tropicana
Entertainment caused Aztar to repay in full all outstanding term
loans and revolving loans, together with interest and all other
amounts due in connection with such repayment, under
Aztars then outstanding credit agreement. The credit
agreement was comprised of a $675 million senior secured
credit facility consisting of a five-year revolving credit
facility of up to $550 million and a five-year term loan
facility of $125 million.
For more information concerning the Aztar Acquisition, see
Business The Aztar Acquisition.
The
Acquisition Financing Transactions
We financed the Aztar Acquisition and the refinancing of
Aztars outstanding indebtedness, along with the
refinancing of Tropicana Casino and Resorts then
outstanding credit facility and certain additional indebtedness
of the affiliate guarantors, with:
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the net proceeds of the offering of the outstanding notes;
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a senior secured credit facility (which we refer to as the
senior secured credit facility), which was made available to
Tropicana Entertainment and provided for $1,530.0 million
in aggregate principal amount of term loans, $229.8 million
in aggregate principal amount of which we have since repaid
resulting in $1,300.2 million in aggregate principal amount
of such term loans being outstanding as of September 30,
2007, and a $180.0 million revolving credit facility under
which we presently have approximately $170.3 million in
additional availability net of approximately $9.7 million
of outstanding letters of credit;
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a secured credit facility in an aggregate principal amount of
$440.0 million (which we refer to as the Las Vegas secured
loan), which was made available to Tropicana Las Vegas Resort
and Casino, LLC (which we refer to as the Las Vegas Borrower), a
newly formed indirect subsidiary of Tropicana Entertainment that
holds the assets and operations relating to the Tropicana Las
Vegas, including its
34-acre
property located on the Las Vegas Strip;
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the approximately $241.8 million remaining of a
$313.0 million deposit plus accrued interest made by
Columbia Sussex on behalf of Tropicana Casinos and Resorts into
a custodial account upon the execution of the Aztar Merger
Agreement;
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cash-on-hand
of ours and Aztar; and
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an additional equity contribution of approximately
$152.0 million from Tropicana Casinos and Resorts,
Tropicana Entertainments ultimate parent.
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For more information on the terms of the senior secured credit
facility and the Las Vegas secured loan, see Description
of Other Indebtedness.
Corporate
Reorganization
In order to facilitate the Transactions, we undertook an
internal corporate reorganization. As part of this
reorganization, Tropicana Entertainment, a co-issuer of the
notes and the borrower under the senior secured credit facility,
was formed on June 8, 2006. Tropicana Casinos and Resorts,
Tropicana Entertainments ultimate parent, contributed to
Tropicana Entertainment substantially all of its gaming
properties. Substantially concurrently with the consummation of
the Aztar Acquisition, Aztar became a direct wholly-owned
subsidiary of Tropicana Entertainment. Tropicana Casinos and
Resorts holds its equity interests in Tropicana Entertainment
through two holding companies, Tropicana Entertainment Holdings
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and its direct subsidiary Tropicana Entertainment Intermediate
Holdings, Tropicana Entertainments immediate parent. All
of the capital stock of Tropicana Casinos and Resorts is held by
Mr. William Yung.
In the corporate reorganization, Tropicana Casinos and Resorts
did not contribute to Tropicana Entertainment the assets
relating to two gaming properties: (1) its subsidiary that
owns the New Orleans riverboat, which was temporarily
decommissioned as a result of damage it sustained during
Hurricane Katrina in August 2005 and was subsequently redeployed
in Amelia, Louisiana in May 2007, and (2) the gaming assets
and operations at the Casuarina Las Vegas Casino, a casino
located in leased space in a hotel property that is managed by
Columbia Sussex and owned by a subsidiary of Columbia Sussex.
The assets relating to the New Orleans riverboat are held by
Belle of Orleans, LLC, a wholly-owned indirect subsidiary of
Tropicana Casinos and Resorts which is not a subsidiary of
Tropicana Entertainment, and the gaming assets and operations
relating to the Casuarina Las Vegas Casino are held by LV Casino
LLC, a wholly-owned direct subsidiary of Tropicana Casinos and
Resorts which is not a subsidiary of Tropicana Entertainment.
In addition, on December 12, 2006 and January 3, 2007,
Tropicana Casinos and Resorts acquired all of the equity
interests in the Tropicana Pennsylvania entities, which are not
subject to the restrictive covenants contained in the indenture.
Furthermore, Aztar Missouri Riverboat Gaming Company, which owns
the Casino Aztar Caruthersville, became a wholly-owned direct
subsidiary of Tropicana Casinos and Resorts, and not a
subsidiary of Aztar, as a result of the consummation of the
corporate reorganization. On June 10, 2007, Tropicana
Casinos and Resorts completed the sale of Aztar Missouri
Riverboat Gaming Company to Isle of Capri. See
Recent Developments Sale of Aztar Missouri Riverboat
Gaming Company.
Tropicana Entertainment and Tropicana Finance, a wholly-owned
subsidiary of Tropicana Entertainment with nominal assets and
which conducts no operations, are co-issuers of the outstanding
notes and will be co-issuers of the exchange notes. Tropicana
Entertainment is also the borrower under the senior secured
credit facility. The outstanding notes and the obligations under
the senior secured credit facility are, and the exchange notes
will be, guaranteed by certain of Tropicana Entertainments
existing and future domestic subsidiaries. In addition, the
outstanding notes and the obligations under the senior secured
credit facility are, and the exchange notes will be, guaranteed
by Realty and CP Vicksburg, each of which is an affiliate of
Tropicana Entertainment but not a subsidiary of Tropicana
Entertainment, and JMBS Casino, an affiliate of the Yung family
that is not a subsidiary of Tropicana Entertainment. Realty,
which is held indirectly by Columbia Sussex and a trust created
for the benefit of Mr. William Yungs children, owns
the real estate on which our River Palms in Laughlin, Nevada is
situated, as well as substantially all of the non-gaming assets
associated with the property. CP Vicksburg is owned by
Mr. William Yung and the JMBS Trust, and operates our
Vicksburg Horizon in Vicksburg, Mississippi. JMBS Casino is
owned by the JMBS Trust and is subject to the control of
Mr. William Yungs children. In addition, any amount
in excess of $100.0 million drawn under the senior secured
credit facilitys revolving loan facility will be
guaranteed on a senior unsecured basis by Columbia Sussex.
The outstanding notes and the obligations under the senior
secured credit facility are not, and the exchange notes will not
be, guaranteed by Greenville Riverboat, a direct subsidiary of
Tropicana Entertainment in which Tropicana Entertainment holds
an 84% economic interest and a 79% voting interest. However,
Greenville Riverboat is subject to the restrictive covenants
contained in the indenture. The remaining interests in
Greenville Riverboat are held by Rainbow Entertainment, Inc., or
Rainbow, an unrelated party, and Mr. William Yung.
Greenville Riverboat operates the Lighthouse Point Casino in
Greenville, Mississippi. However, Tropicana Entertainments
wholly-owned subsidiary St. Louis Riverboat Entertainment
Inc., or St. Louis Riverboat Entertainment, is the owner of
the vessel on which the Lighthouse Point Casino conducts its
operations, and is a guarantor of the outstanding notes and the
senior secured credit facility, and will be a guarantor of the
exchange notes. The outstanding notes and the senior secured
credit facility are not, and the exchange notes will not be,
guaranteed by Tropicana Casinos and Resorts, and, respectively,
are not and will not be guaranteed by Belle of Orleans, LLC, LV
Casino LLC or the Tropicana Pennsylvania entities, each of which
is outside of the group subject to the restrictive covenants
contained in the indenture.
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The outstanding notes and the obligations under the senior
secured credit facility are also not, and the exchange notes
will not be, guaranteed by any of Tropicana Entertainments
subsidiaries that hold the assets and operations relating to the
Tropicana Las Vegas, including the
34-acre
property located on the Las Vegas Strip. These
subsidiaries are the obligors in respect of the
$440.0 million aggregate principal amount Las Vegas secured
loan, and the assets and operations relating to the Tropicana
Las Vegas, including its site on the Strip, have
been pledged as collateral to secure the Las Vegas secured loan.
We expect that the Las Vegas secured loan will be refinanced
with a construction financing loan to fund our planned
redevelopment of the Tropicana Las Vegas and the real estate on
which it is situated.
The following chart summarizes our ownership, corporate
structure and indebtedness:
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(1)
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Provides a first-priority pledge of
all of the equity interests in Tropicana Entertainment
Intermediate Holdings to secure the Las Vegas secured loan.
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(2)
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Guarantees the obligations in
respect of the senior secured credit facility. Also provides a
first-priority pledge of all of the equity interests in
Tropicana Entertainment to secure the senior secured credit
facility.
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(3)
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Guarantee the outstanding notes and
the obligations in respect of the senior secured credit facility
and will guarantee the exchange notes. Also provide
first-priority pledges of substantially all of their tangible
and intangible assets to secure the senior secured credit
facility.
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(4)
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Tropicana Finance guarantees the
obligations in respect of the senior secured credit facility.
Tropicana Entertainment and Tropicana Finance provide a
first-priority pledge of substantially all of their tangible and
intangible assets to secure the senior secured credit facility.
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(5)
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Greenville Riverboat does not
guarantee the outstanding notes or secure the obligations in
respect of the senior secured credit facility and will not
guarantee the exchange notes, although it is subject to the
restrictive covenants of the indenture and the credit
documentation governing the senior secured credit facility.
Tropicana Entertainment holds an 84% economic interest and a 79%
voting interest in Greenville Riverboat and Tropicana
Entertainments wholly-owned subsidiary St. Louis
Riverboat Entertainment, which is a guarantor of the outstanding
notes and the senior secured credit facility and will be a
guarantor of the exchange notes, is the owner of the vessel on
which the Lighthouse Point Casino conducts its operations.
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(6)
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Guarantees the obligations in
respect of the Las Vegas secured loan. Also provides a perfected
first-priority pledge of all of the equity interests in the Las
Vegas Borrower to secure the Las Vegas secured loan. Does not
guarantee the outstanding notes or guarantee or secure the
obligations in respect of the senior secured credit facility and
will not guarantee the exchange notes.
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(7)
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The subsidiaries of the Las Vegas
Borrower guarantee the obligations in respect of the Las Vegas
secured loan. The Las Vegas Borrower and its subsidiary
guarantors provide first-priority pledges of substantially all
of their tangible and intangible assets to secure the Las Vegas
secured loan. The Las Vegas Borrower and its subsidiaries do not
guarantee the outstanding notes or guarantee or secure the
obligations in respect of the senior secured credit facility,
nor will they guarantee the exchange notes.
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Recent
Developments
Casino
Queen Developments
On April 20, 2006, CP St. Louis Casino, LLC and CP
St. Louis Acquisition, LLC (affiliates of Tropicana
Entertainment) entered into an agreement (which we refer to as
the Casino Queen Acquisition Agreement) to acquire Casino Queen,
Inc., or Casino Queen, for $200.0 million in cash, less the
aggregate amount of its outstanding indebtedness at the closing
of the acquisition and subject to certain purchase price
adjustments. Due to reasons beyond our control, the conditions
to the closing of the acquisition set forth in the Casino Queen
Acquisition Agreement were not satisfied by February 28,
2007, the outside date for the consummation of the transaction,
and accordingly the Casino Queen Acquisition Agreement was
terminated on March 9, 2007.
On March 14, 2007, $5.0 million (plus accrued interest
thereon) of a $10.0 million deposit that Tropicana Casinos
and Resorts previously made in connection with the contemplated
acquisition was returned to Tropicana Casinos and Resorts by
Casino Queen. Tropicana Casinos and Resorts, in turn, paid these
funds to us as an additional capital contribution. Casino Queen,
however, retained $5.0 million of the original deposit,
plus the accrued interest thereon, despite Tropicana Casinos and
Resorts demand that Casino Queen return the entire
original deposit, plus the accrued interest thereon. On
June 20, 2007, certain subsidiaries of Tropicana Casinos
and Resorts initiated an action against Casino Queen in the
United States District Court for the Southern District of
Illinois seeking compensatory and punitive damages in excess of
$5.0 million. In the complaint, these subsidiaries allege,
among other things, that Casino Queen is liable for breach of
contract, fraud, unjust enrichment, violations of the Illinois
Consumer Fraud and Deceptive Practices Act and violations of the
federal securities laws. The action is ongoing. No trial date
has been set. Any future proceeds derived from, or costs
required to pursue, this action will be retained or paid, as the
case may be, by Tropicana Casinos and Resorts and we are not
entitled to any such prospective proceeds, nor will we be
responsible for any such future costs.
In addition, as a result of the fact that the Casino Queen
Acquisition Agreement was terminated, on March 14, 2007 and
March 30, 2007, we repaid $167.9 million in aggregate
principal amount of the term loan under the senior secured
credit facility, which funds had been set aside to fund the
acquisition of Casino Queen.
Sale
of Aztar Missouri Riverboat Gaming Company
On June 10, 2007, Tropicana Casinos and Resorts completed
the sale of Aztar Missouri Riverboat Gaming Company, which holds
the Casino Aztar Caruthersville, to Isle of Capri for
$45.0 million in cash. The sale was consummated in
accordance with the terms of a purchase agreement entered into
on March 16, 2007 between Tropicana Casinos and Resorts and
Isle of Capri. All proceeds from the disposition of Aztar
Missouri Riverboat Gaming Company were retained by Tropicana
Casinos and Resorts and we are not entitled to any of these
proceeds.
12
Departure
of Chief Financial Officer and Appointment of
Successor
On July 13, 2007, Richard M. FitzPatrick resigned from his
positions as Senior Vice President, Chief Financial Officer and
Treasurer of Tropicana Entertainment and Tropicana Finance to
pursue other interests. On August 2, 2007, Tropicana
Entertainment and Tropicana Finance named John G. Jacob Senior
Vice President, Chief Financial Officer and Treasurer of
Tropicana Entertainment and Tropicana Finance, which appointment
became effective on August 23, 2007, following the
completion of interim gaming regulatory reviews. Certain
applicable gaming regulatory authorities have not yet granted
Mr. Jacob final approval or, as the case may be, made a
final determination with respect to his suitability.
Departure
of Senior Vice President, Casino Operations and Appointment of
Successor
On June 14, 2007, Howard Reinhardt resigned from his
position as Senior Vice President, Casino Operations of
Tropicana Entertainment and Tropicana Finance to pursue other
career opportunities. Shortly thereafter, Kevin E. Preston was
named Senior Vice President, Casino Operations of Tropicana
Entertainment and Tropicana Finance, succeeding
Mr. Reinhardt in such post. Certain applicable gaming
regulatory authorities have not yet granted Mr. Preston
final approval or, as the case may be, made a final
determination with respect to his suitability.
Departure
of President and Chief Operating Officer of the Tropicana
Atlantic City and Appointment of Successor
On August 9, 2007, in a move designed to unify and
streamline the management of its casino property in New Jersey,
Tropicana Entertainment named Mark Giannantonio President and
General Manager of the Tropicana Atlantic City. With the
appointment of Mr. Giannantonio, Tropicana Entertainment
also announced that Fred Buro, who had served as President and
Chief Operating Officer of the Tropicana Atlantic City, decided
to leave those positions effective August 8, 2007 to pursue
other business opportunities.
Settlement
of Tropicana Atlantic City Garage Collapse
Litigation
On April 4, 2007, Tropicana Entertainment settled with its
insurers with respect to out-of-pocket costs it and Aztar
incurred in connection with the collapse of a parking garage at
the Tropicana Atlantic City in 2003 and, as a result, Tropicana
Entertainment received approximately $18.3 million in
insurance proceeds net of a portion of the gross insurance
proceeds allocated to a contractor under an existing settlement
agreement. On April 11, 2007, Tropicana Entertainment
became a party to a settlement agreement that resolved all of
the construction accident related liability claims against Aztar
and Aztars claims against the contractors involved in the
Atlantic City garage collapse. The settlement amount was within
Tropicana Entertainments insurance policy limits. On
August 20, 2007, Tropicana Entertainment reached a partial
settlement with various insurers of business interruption claims
arising out of the Atlantic City garage collapse and received
$5.0 million as a result. For more information concerning
the settlements referred to above and the litigation underlying
them, see Business Legal
Proceedings Litigation matters relating to
Aztars October 30, 2003 garage collapse
accident.
13
Summary
Description of the Exchange Offer
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Outstanding Notes |
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95/8% Senior
Subordinated Notes due 2014, which we issued on
December 28, 2006. |
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Exchange Notes |
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95/8% Senior
Subordinated Notes due 2014, the issuance of which has been
registered under the Securities Act. The form and the terms of
the exchange notes will be identical in all material respects to
those of the outstanding notes, except that the transfer
restrictions and registration rights relating to the outstanding
notes will not apply to the exchange notes. |
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Exchange Offer |
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We are offering to issue up to $960.0 million aggregate
principal amount of the exchange notes in exchange for a like
principal amount of the outstanding notes to satisfy our
obligations under the registration rights agreement that we
entered into when the outstanding notes were issued in
transactions in reliance upon the exemptions from registration
provided by Rule 144A and Regulation S under the
Securities Act. |
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Expiration Date; Tenders |
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The exchange offer will expire at 5:00 p.m., New York City
time,
on ,
2007, the 30th day following the date of this prospectus, unless
extended in our sole and absolute discretion. By tendering your
outstanding notes, you represent to us that: |
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you are not our affiliate, as defined in
Rule 405 under the Securities Act or if you are our
affiliate as defined in Rule 405 under the
Securities Act and you are engaging in or intend to engage in or
have an arrangement or understanding with any person to
participate in a distribution of the exchange notes to be
acquired pursuant to the exchange offer, you will not rely on
the applicable interpretations of the SEC and will comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction;
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any exchange notes you receive in the exchange offer
are being acquired by you in the ordinary course of your
business;
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at the time of the commencement of the exchange
offer, neither you nor anyone receiving exchange notes from you,
has any arrangement or understanding with any person to
participate in the distribution, as defined in the Securities
Act, of the exchange notes in violation of the Securities Act;
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if you are a broker-dealer, you will receive the
exchange notes for your own account in exchange for outstanding
notes that were acquired by you as a result of your
market-making or other trading activities and that you will
deliver a prospectus in connection with any resale of the
exchange notes you receive. For further information regarding
resales of the exchange notes by participating broker-dealers,
see the discussion under the caption Plan of
Distribution; and
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if you are not a broker-dealer, you are not engaged
in, and do not intend to engage in, the distribution of the
exchange notes, as defined in the Securities Act.
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Withdrawal; Non-Acceptance |
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You may withdraw any outstanding notes tendered in the exchange
offer at any time prior to 5:00 p.m., New York City time,
on ,
2007. To be effective, a written notice of withdrawal must be
received by U.S. Bank National Association in its capacity as
exchange agent, or the exchange agent, at the address set forth
under the caption The Exchange Offer Exchange
Agent. The notice must specify: |
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the name of the person or entity having tendered the
outstanding notes to be withdrawn;
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the outstanding notes to be withdrawn, including the
principal amount of such outstanding notes; and
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where certificates for outstanding notes have been
transmitted, the name in which such outstanding notes are
registered, if different from that of the withdrawing holder.
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If we decide for any reason not to accept any outstanding notes
tendered for exchange, the outstanding notes will be returned to
the registered holder at our expense promptly after the
expiration or termination of the exchange offer. In the case of
the outstanding notes tendered by book-entry transfer into the
exchange agents account at The Depository
Trust Company, which we sometimes refer to in this
prospectus as DTC, any withdrawn or unaccepted outstanding notes
will be credited to the tendering holders account at DTC.
For further information regarding the withdrawal of any tendered
outstanding notes, see The Exchange Offer
Withdrawal Rights. |
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Conditions to the Exchange Offer |
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The exchange offer is subject to customary conditions, which we
may waive in our discretion. 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. |
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Procedures for Tendering Outstanding Notes |
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Unless you comply with the procedures described below under the
caption The Exchange Offer Guaranteed Delivery
Procedures, you must do one of the following on or prior
to the expiration or termination of the exchange offer to
participate in the exchange offer: |
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tender your outstanding notes by sending the
certificates for your outstanding notes, in proper form for
transfer, a properly completed and duly executed letter of
transmittal, with any required signature guarantees, and all
other documents required by the letter of transmittal, to the
exchange agent, at the address listed below under the caption
The Exchange Offer Exchange Agent; or
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tender your outstanding notes by using the
book-entry transfer procedures described below and transmitting
a properly
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completed and duly executed letter of transmittal, with any
required signature guarantees, or an agents message
instead of the letter of transmittal, to the exchange agent. In
order for a book-entry transfer to constitute a valid tender of
your outstanding notes in the exchange offer, the exchange agent
must receive a confirmation of book-entry transfer of your
outstanding notes into the exchange agents account at DTC
prior to the expiration or termination of the exchange offer.
For more information regarding the use of book-entry transfer
procedures, including a description of the required agents
message, see the discussion below under the caption The
Exchange Offer Book-Entry Transfers. |
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Guaranteed Delivery Procedures |
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If you are a registered holder of outstanding notes and wish to
tender your outstanding notes in the exchange offer, but |
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the outstanding notes are not immediately available;
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time will not permit your outstanding notes or other
required documents to reach the exchange agent before the
expiration or termination of the exchange offer; or
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the procedure for book-entry transfer cannot be
completed prior to the expiration or termination of the exchange
offer;
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then you may tender your outstanding notes by following the
procedures described below under the caption The Exchange
Offer Guaranteed Delivery Procedures. |
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Special Procedures for Beneficial Owners |
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If you are a beneficial owner whose outstanding notes are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to tender your
outstanding notes in the exchange offer, you should promptly
contact the person in whose name the outstanding notes are
registered and instruct that person to tender them on your
behalf. If you wish to tender in the exchange offer on your own
behalf, prior to completing and executing the letter of
transmittal and delivering your outstanding notes, you must
either make appropriate arrangements to register ownership of
the outstanding notes in your name, or obtain a properly
completed bond power from the person in whose name the
outstanding notes are registered. |
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Certain U.S. Federal Income Tax Considerations |
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The exchange of the outstanding notes for exchange notes in the
exchange offer should not be a taxable transaction for United
States federal income tax purposes. See the discussion below
under the caption Certain U.S. Federal Income Tax
Considerations for more information regarding the United
States federal income tax consequences to you of the exchange
offer. |
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Accounting Treatment |
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Tropicana Entertainment will record the exchange notes at the
same carrying value as the outstanding notes as reflected in its
accounting records on the date of the exchange. Accordingly,
Tropicana Entertainment will not recognize any gain or loss for
accounting purposes as a result of the exchange offer. The |
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expenses of the exchange offer will be amortized over the term
of the exchange notes. |
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Use of Proceeds |
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We will not receive any proceeds from the exchange offer. In
consideration for issuing the exchange notes in exchange for the
outstanding notes as described in this prospectus, we will
receive, retire and cancel the outstanding notes. See Use
of Proceeds. |
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Exchange Agent |
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U.S. Bank National Association 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. |
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Resales |
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Based on interpretations by the staff of the SEC, as set forth
in no-action letters issued to third parties, we believe that
the exchange notes you receive in the exchange offer may be
offered for resale, resold or otherwise transferred by you
without compliance with the registration and prospectus delivery
requirements of the Securities Act. However, you will not be
able to freely transfer the exchange notes if: |
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you are our affiliate, as defined in
Rule 405 of the Securities Act;
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you are not acquiring the exchange notes in the
exchange offer in the ordinary course of business;
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you have an arrangement or understanding with any
person to participate in the distribution, as defined in the
Securities Act, of the exchange notes you will receive in the
exchange offer;
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you are holding outstanding notes that have or are
reasonably likely to have the status of an unsold allotment in
the initial offering; or
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you are a broker-dealer that received exchange notes
for its own account in the exchange offer in exchange for
outstanding notes that were acquired as a result of
market-making or other trading activities.
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If you fall within one of the exceptions listed above, you must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction involving the exchange notes. See the discussion
below under the caption The Exchange Offer
Procedures for Tendering Outstanding Notes for more
information. |
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Broker-Dealers |
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Each broker-dealer that receives exchange 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
exchange notes. The letter of transmittal states that by so
acknowledging and delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an underwriter within the
meaning of the Securities Act. 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 exchange notes
received in exchange for outstanding notes which were received |
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by the broker-dealer as a result of market making or other
trading activities. See Plan of Distribution for
more information. |
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Registration Rights Agreement |
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When we issued the outstanding notes in December 2006, we
entered into a registration rights agreement with Credit Suisse
Securities (USA) LLC, as representative of the several initial
purchasers of the outstanding notes. See The Exchange
Offer Purpose of the Exchange Offer. Under the
terms of the registration rights agreement, we agreed to file a
registration statement with the SEC (which we refer to herein,
together with all amendments and exhibits thereto, as the
Registration Statement) with respect to a registered offer to
exchange the outstanding notes for the publicly registered
exchange notes. Under some circumstances set forth in the
registration rights agreement, holders of outstanding notes,
including holders who are not permitted to participate in the
exchange offer or who may not freely sell exchange notes
received in the exchange offer, may require us to file and cause
to become effective, a shelf registration statement covering
resales of the outstanding notes by these holders. |
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A copy of the registration rights agreement is attached as an
exhibit to the Registration Statement of which this prospectus
is a part. |
Consequences
of Not Exchanging Your Outstanding Notes
If you do not exchange your outstanding notes in the exchange
offer, you will continue to be subject to the restrictions on
transfer described in the legend on the certificate for your
outstanding notes. In general, you may offer or sell your
outstanding notes only:
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if they are registered under the Securities Act and applicable
state securities laws;
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if they are offered or sold under an exemption from registration
under the Securities Act and applicable state securities
laws; or
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if they are offered or sold in a transaction not subject to the
Securities Act and applicable state securities laws.
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We do not intend to register the outstanding notes under the
Securities Act. Under some circumstances set forth in the
registration rights agreement, however, holders of the
outstanding notes, including holders who are not permitted to
participate in the exchange offer or who may not freely sell
exchange notes received in the exchange offer, may require us to
file, and to cause to become effective, a shelf registration
statement covering resales of the outstanding notes by these
holders. For more information regarding the consequences of not
tendering your outstanding notes and our obligations to file a
shelf registration statement, see The Exchange
Offer Consequences of Exchanging or Failing to
Exchange Outstanding Notes.
18
Summary
Description of the Exchange Notes
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Issuers |
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Tropicana Entertainment, LLC, a Delaware limited liability
company, and Tropicana Finance Corp., a Delaware corporation. |
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Notes Offered |
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Up to $960,000,000 in aggregate principal amount of
95/8% Senior
Subordinated Notes due 2014. |
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Maturity Date |
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December 15, 2014. |
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Interest |
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95/8%
per annum, payable semi-annually in arrears on June 15 and
December 15, commencing on December 15, 2007. |
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Guarantees |
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The exchange notes will be guaranteed, jointly and severally, by
certain of Tropicana Entertainments existing and future
domestic subsidiaries, as well as by (i) Realty and CP
Vicksburg, each of which is an affiliate of Tropicana
Entertainment but not a subsidiary of Tropicana Entertainment,
and (ii) JMBS Casino, an affiliate of the Yung family that
is not a subsidiary of Tropicana Entertainment. The exchange
notes will not be guaranteed by Greenville Riverboat, a direct
subsidiary of Tropicana Entertainment that it does not wholly
own, although Greenville Riverboat is subject to the restrictive
covenants contained in the indenture. The exchange notes will
not be guaranteed by any of Tropicana Entertainments
subsidiaries that hold the assets and operations relating to the
Tropicana Las Vegas, including its
34-acre
property located on the Las Vegas Strip. |
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Ranking |
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The exchange notes and the guarantees will be the
co-issuers and the guarantors senior subordinated
obligations and will rank: |
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junior to all of the co-issuers and the
guarantors existing and future senior indebtedness,
including all indebtedness under the senior secured credit
facility;
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equally with any of the co-issuers and the
guarantors existing and future unsecured senior
subordinated indebtedness, including indebtedness in respect of
the outstanding notes; and
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senior to all of the co-issuers and the
guarantors existing and future unsecured subordinated
indebtedness.
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As of September 30, 2007: |
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Tropicana Entertainment and its consolidated
subsidiaries had approximately $1,740.2 million of senior
indebtedness outstanding, $1,300.2 million of which
consisted of secured indebtedness under the senior secured
credit facility and $440.0 million of which consisted of
secured indebtedness under the Las Vegas secured loan;
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the guarantors had approximately
$1,300.2 million of senior indebtedness outstanding, all of
which consisted of their respective guarantees of senior
indebtedness of Tropicana Entertainment under the senior secured
credit facility;
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Tropicana Entertainments subsidiaries that are
not guarantors had $440.0 million of indebtedness
outstanding, all of which
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consisted of indebtedness under the Las Vegas secured loan; and |
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Tropicana Finance had no senior indebtedness
outstanding other than in respect of its guarantee of senior
indebtedness of Tropicana Entertainment under the senior secured
credit facility.
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Optional Redemption |
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On or after December 15, 2010, we may redeem some or all of
the exchange notes at the redemption prices set forth in this
prospectus. In addition, prior to December 15, 2010, we may
redeem some or all of the exchange notes at a price equal to
100% of the principal amount thereof, plus accrued and unpaid
interest, if any, and the make-whole premium set
forth in this prospectus. We may also redeem up to 35% of the
aggregate principal amount of the exchange notes using the net
proceeds from certain equity offerings completed on or prior to
December 15, 2009 at the redemption price set forth in this
prospectus. |
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The exchange notes will be subject to mandatory disposition and
redemption requirements following certain determinations by
gaming authorities. See Description of the Exchange
Notes Gaming Redemption. |
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Change of Control |
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Upon a change of control, we will be required to make an offer
to purchase each holders exchange notes at a price of 101%
of the then outstanding principal amount thereof, plus accrued
and unpaid interest to the date of purchase. See
Description of the Exchange Notes Change of
Control. |
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Certain Covenants |
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The indenture governing the exchange notes contains covenants
that will, among other things, limit the co-issuers
ability and the ability of the guarantors, and certain of the
co-issuers and the guarantors subsidiaries, to: |
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incur or guarantee additional indebtedness;
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pay dividends and make other restricted payments;
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transfer or sell assets;
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make certain investments;
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create or incur certain liens;
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transfer all or substantially all of their assets or
enter into merger or consolidation transactions; and
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enter into transactions with affiliates.
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If we do not comply with the covenants described above, a
default or an event of default could result under the indenture.
The covenants described above are subject to a number of
important limitations and exceptions as discussed under
Description of the Exchange Notes Certain
Covenants. |
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Amendment |
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The indenture may be amended in the manner described under the
caption Description of the Exchange Notes
Amendments and Waivers. |
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Trustee |
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U.S. Bank National Association is the trustee for the notes. See
Description of the Exchange Notes Concerning
the Trustee. |
Risk
Factors
Participation in the exchange offer involves substantial risks.
You should carefully consider the information under the caption
Risk Factors and all other information included in
this prospectus before participating in the exchange offer or
investing in the exchange notes.
Additional
Information
Our principal executive offices are located at 740 Centre View
Blvd., Crestview Hills, Kentucky 41017. Our telephone number is
(859) 669-1500.
21
Summary
Unaudited Pro Forma Financial Data
The following summary unaudited pro forma financial data have
been prepared by (i) making pro forma adjustments to
Tropicana Casinos and Resorts historical consolidated
financial statements to give effect to the corporate
reorganization that occurred immediately prior to the
consummation of the Aztar Acquisition in which Tropicana Casinos
and Resorts contributed to Tropicana Entertainment substantially
all of its gaming properties, other than its New Orleans
riverboat and the gaming assets and operations of the Casuarina
Las Vegas Casino and (ii) further adjusting these amounts
to give effect to the Aztar Acquisition and the related
Acquisition Financing Transactions. The summary unaudited pro
forma income statement data give effect to the foregoing
transactions as if they had occurred on January 1, 2006.
The summary unaudited pro forma financial data have been derived
from the unaudited pro forma consolidated financial data
included elsewhere in this prospectus.
The pro forma adjustments are based upon available information
and assumptions that we consider reasonable. The summary
unaudited pro forma financial data have been presented for
informational purposes only, and do not purport to represent
what results of operations actually would have been had the
transactions reflected been consummated on the dates indicated
or to project results of operations for any future period.
The information in the table below does not represent data for
the restricted group under the indenture as it does not include
data with respect to the affiliate guarantors, nor does it
exclude data with respect to the subsidiaries of Tropicana
Entertainment that hold the assets and operations relating to
the Tropicana Las Vegas.
The information presented below should be read in conjunction
with Use of Proceeds, Capitalization,
Unaudited Pro Forma Consolidated Financial
Statements, Selected Historical Consolidated
Financial Data Tropicana Entertainment and Tropicana
Casinos and Resorts, Managements Discussion
and Analysis of Financial Condition and Results of
Operations Tropicana Entertainment and Tropicana
Casinos and Resorts, Managements Discussion
and Analysis of Financial Condition and Results of
Operations Aztar and the financial statements
included elsewhere in this prospectus.
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Pro Forma for
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Aztar Acquisition
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Pro Forma for
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and
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Corporate
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Financing
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Reorganization
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Transactions
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Year
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|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
288,863
|
|
|
$
|
1,183,199
|
|
Operating expenses
|
|
|
230,285
|
|
|
|
968,545
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
58,578
|
|
|
|
214,654
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
2,640
|
|
Interest income
|
|
|
8,918
|
|
|
|
10,767
|
|
Interest expense
|
|
|
(16,641
|
)
|
|
|
(248,195
|
)
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(7,723
|
)
|
|
|
(234,788
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interest
|
|
|
50,855
|
|
|
|
(20,134
|
)
|
Minority interest in net income in consolidated subsidiary
|
|
|
(3,224
|
)
|
|
|
(3,224
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
47,631
|
|
|
$
|
(23,358
|
)
|
|
|
|
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
18,033
|
|
|
$
|
81,030
|
|
Capital expenditures excluding acquisitions
|
|
$
|
40,924
|
|
|
$
|
117,038
|
|
22
Summary
Financial Information of Tropicana Entertainment and Tropicana
Casinos and Resorts
The following financial data for the years ended
December 31, 2006 and 2005 are derived from the audited
consolidated financial statements of Tropicana Casinos and
Resorts, Tropicana Entertainments ultimate parent company
and predecessor. The selected historical income statement data
for the six month period ended June 30, 2006 have been
derived from the consolidated financial statements of Tropicana
Casinos and Resorts which, in the opinion of management, include
all adjustments necessary for a fair presentation of the
information for those periods. In connection with the corporate
reorganization conducted by Tropicana Casinos and Resorts
described under Corporate
Reorganization, Tropicana Casinos and Resorts contributed
to Tropicana Entertainment substantially all of its gaming
properties. In the corporate reorganization, Tropicana Casinos
and Resorts did not contribute to Tropicana Entertainment the
assets relating to its New Orleans riverboat or the gaming
assets and operations at the Casuarina Las Vegas Casino in Las
Vegas, Nevada, a casino located in leased space in a hotel
property that is managed by Columbia Sussex and owned by an
affiliate of Columbia Sussex. Accordingly, the historical
consolidated financial data of Tropicana Casinos and Resorts set
forth in the table below reflect the New Orleans riverboat and
the gaming assets and operations at the Casuarina Las Vegas
Casino as discontinued operations. In addition, in accordance
with FASB Interpretation No. 46R, Consolidation of
Variable Interest Entities, the selected historical
consolidated financial data of Tropicana Entertainment and
Tropicana Casinos and Resorts include the results of Realty, one
of the affiliate guarantors, a variable interest entity of which
Tropicana Casinos and Resorts was the primary beneficiary prior
to the corporate reorganization and of which Tropicana
Entertainment became the primary beneficiary thereafter. For a
more detailed presentation of Realtys results, see the
financial statements of Realty included elsewhere in this
prospectus.
The selected historical income statement for the six month
period ended June 30, 2007 and the selected historical
balance sheet data as of June 30, 2007 have been derived
from the unaudited consolidated financial statements of
Tropicana Entertainment included elsewhere in this prospectus
which, in the opinion of management, include all adjustments
necessary for a fair presentation of the information for those
periods.
The information in the table below does not represent data for
the restricted group under the indenture as it does not include
data with respect to the affiliate guarantors, nor does it
exclude data with respect to the subsidiaries of Tropicana
Entertainment that hold the assets and operations relating to
the Tropicana Las Vegas.
The historical results set forth below do not necessarily
indicate results expected for any future period, and the results
of any future period do not necessarily indicate results that
may be expected for any other period or the full fiscal year.
The following historical consolidated financial information
should be read in conjunction with Use of Proceeds,
Capitalization, Unaudited Pro Forma
Consolidated Financial Statements, Selected
Historical Consolidated Financial Data Tropicana
Entertainment and Tropicana Casinos and Resorts,
Managements Discussion and Analysis of Financial
Condition and Results of Operations Tropicana
Entertainment and Tropicana Casinos and Resorts,
Selected Historical Consolidated Financial
Data Aztar, Managements Discussion
and Analysis of Financial Condition and Results of
Operations Aztar and the financial statements
included elsewhere in this prospectus.
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007(1)
|
|
|
|
Tropicana
|
|
|
Tropicana
|
|
|
Tropicana
|
|
|
|
|
|
|
Casinos
|
|
|
Casinos
|
|
|
Casinos
|
|
|
Tropicana
|
|
|
|
and Resorts
|
|
|
and Resorts
|
|
|
and Resorts
|
|
|
Entertainment
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
186.6
|
|
|
$
|
288.9
|
|
|
$
|
147.8
|
|
|
$
|
554.1
|
|
Operating expenses
|
|
|
146.9
|
|
|
|
230.3
|
|
|
|
112.6
|
|
|
|
433.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
39.7
|
|
|
|
58.6
|
|
|
|
35.2
|
|
|
|
120.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
0.5
|
|
|
|
8.9
|
|
|
|
0.9
|
|
|
|
6.5
|
|
Interest expense
|
|
|
(6.0
|
)
|
|
|
(35.6
|
)
|
|
|
(8.0
|
)
|
|
|
(114.1
|
)
|
Loss from early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(5.5
|
)
|
|
|
(26.7
|
)
|
|
|
(7.1
|
)
|
|
|
(110.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest
|
|
|
34.2
|
|
|
|
31.9
|
|
|
|
28.1
|
|
|
|
10.2
|
|
Minority interest in net income of consolidated subsidiaries
|
|
|
(3.4
|
)
|
|
|
(3.2
|
)
|
|
|
(1.8
|
)
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, before income tax
benefit
|
|
|
30.8
|
|
|
|
28.7
|
|
|
|
26.3
|
|
|
|
7.9
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
384.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
30.8
|
|
|
|
28.7
|
|
|
|
26.3
|
|
|
|
392.6
|
|
Discontinued operations, casinos to be transferred
|
|
|
(9.0
|
)
|
|
|
4.7
|
|
|
|
(2.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
21.8
|
|
|
$
|
33.4
|
|
|
$
|
24.2
|
|
|
$
|
392.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
9.6
|
|
|
$
|
18.0
|
|
|
$
|
6.4
|
|
|
$
|
43.4
|
|
Capital expenditures excluding acquisitions
|
|
$
|
24.2
|
|
|
$
|
63.8
|
|
|
$
|
21.1
|
|
|
$
|
41.5
|
|
|
|
|
(1)
|
|
Includes Aztars results of
operations from January 3, 2007, the date of its
acquisition.
|
24
You should carefully consider the risks described below as
well as the other information contained in this prospectus
before participating in the exchange offer or making an
investment decision with respect to the exchange notes. The
risks described below are not the only risks we face. Additional
risks and uncertainties not currently known to us or that we
currently deem to be immaterial may also materially adversely
affect our business, financial condition or results of
operations. Any of the following risks could materially
adversely affect our business, financial condition or
results of operations. In such case, you may lose all or
part of your original investment.
Risks
Related to Our Business, the Aztar Acquisition and the Gaming
Industry
Intense
competition could result in our loss of market share or
profitability.
We face intense competition in each of the markets in which our
gaming facilities are located. All of our casinos primarily
compete with other casinos in their respective geographic
markets and, to a lesser degree, with casinos in other
locations, including on Native American lands and on cruise
ships, and with other forms of legalized gaming in the United
States, including state sponsored lotteries, racetracks, jai
alai, off-track wagering, video lottery and video poker
terminals and card parlors. We expect this competition to
intensify as new gaming operators enter some of the markets in
which we operate and existing competitors expand their
operations. For example, Revel Entertainment Group has announced
a two-phase plan to develop a $2.0 billion casino hotel
project in Atlantic City. The property, which is tentatively
scheduled to open in 2011, is expected to feature nearly 4,000
guestrooms and various retail and entertainment attractions. In
addition, Pinnacle Entertainment, Inc., or Pinnacle, and MGM
Mirage have recently unveiled plans to build new upscale casino
resorts in the Atlantic City market. We expect that these new
projects, when completed, will exert acute competitive pressure
on our Tropicana Atlantic City property. See
Business Competition and Information About
Gaming Markets Atlantic City, New Jersey.
Moreover, we expect that our Lighthouse Point Casino and Jubilee
Casino, both of which are located in Greenville, Mississippi,
will face significant competitive pressure in that market once
Southwest Gaming LLC completes construction of its planned
single-level dockside casino facility in Greenville. See
Business Competition and Information About
Gaming Markets Greenville, Mississippi. In
addition, some of our competitors have significantly greater
financial resources than we do and as a result we may not be
able to successfully compete with them in the future.
Several states have considered legalizing casino gaming and
others may in the future. Legalization of large-scale, unlimited
casino gaming in or near any major metropolitan area or
increased gaming in other areas could have an adverse economic
impact on the business of any or all of our gaming facilities by
diverting our customers to competitors in those areas. In
particular, the expansion of casino gaming in or near any
geographic area from which we attract or expect to attract a
significant number of customers could have a material adverse
effect on us.
In addition, online gaming, despite its illegality in the United
States, is a growing sector in the gaming industry. Online
casinos offer a variety of games, including slot machines,
roulette, poker and blackjack. Web-enabled technologies allow
individuals to game using credit or debit cards. We are unable
to assess the impact that online gaming will have on our
operations in the future and there is no assurance that the
impact will not be material.
Competition from other casino and hotel operators involves not
only the quality of casino, hotel room, restaurant,
entertainment and convention facilities, but also hotel room,
food and beverage prices. Our operating results can be adversely
affected by significant cash outlays for advertising and
promotions and complimentary services to patrons, the amount and
timing of which are partially dictated by the policies of our
competitors and our efforts to keep pace with them. If our
operating revenues are insufficient to allow management the
flexibility to match the promotions of competitors, the number
of our casino patrons may decline, which may have an adverse
effect on our financial performance.
25
Our ability to successfully compete will also be dependent upon
our ability to develop and implement strong and effective
marketing campaigns both at our individual properties and across
our business. To the extent we are unable to successfully
develop and implement these types of marketing initiatives, we
may not be successful in competing in our markets and our
financial position could be adversely affected. See
Business Competition and Information About
Gaming Markets.
The
recent acquisition of Aztar presents many risks and we may not
realize the financial and strategic goals that we contemplated
at the time affiliates of Tropicana Entertainment agreed to
acquire Aztar.
On January 3, 2007, the Aztar Acquisition was completed.
The risks we may face in connection with the Aztar Acquisition
include:
|
|
|
|
|
we have limited experience operating a full-scale casino resort
in the Atlantic City or Las Vegas markets;
|
|
|
|
|
|
we have limited experience operating the gaming properties
acquired from Aztar;
|
|
|
|
|
|
upon the consummation of the Aztar Acquisition, the amount of
our indebtedness increased substantially, which may constrain
our future operations and strategic development;
|
|
|
|
our results of operations may not meet our expectations, which
would then make it difficult to service the debt we incurred to
consummate the transaction;
|
|
|
|
given its size, operating Aztar may strain our management
resources and the integration of Aztar may divert the attention
of our management team from our other important business
concerns;
|
|
|
|
we may be unable to achieve the contemplated operational
synergies or other cost savings and benefits that we had
anticipated in connection with the Aztar Acquisition in the
expected timeframe or at all;
|
|
|
|
we may experience adverse accounting consequences as a result of
efforts to conform Aztars accounting policies to those of
Tropicana Entertainment;
|
|
|
|
we may experience difficulties and incur expenses in connection
with applying our internal control procedures to Aztars
operations; and
|
|
|
|
we may experience some or all of the risks described under
We may not be able to successfully complete
strategic transactions or integrate new businesses into our
business, which may prevent us from implementing strategies to
grow our business.
|
We
have incurred, and will continue to incur, substantial costs to
integrate Aztar into our operations.
The acquisition of Aztar involves a complex integration process
necessitating significant administrative resources. We have
incurred, and will continue to incur, substantial costs and
committed significant management resources in order to
integrate, among other things, Aztars operations,
information technology, communications and other systems and
personnel into our Company. The integration of Aztar into our
business will cause us to incur cash outflows, including with
respect to:
|
|
|
|
|
fees and expenses of professionals and consultants involved in
completing the integration process;
|
|
|
|
settling existing liabilities of the acquired business;
|
|
|
|
integrating information technology systems and
personnel; and
|
|
|
|
other transaction costs associated with the Aztar Acquisition.
|
We may
not be able to successfully complete other strategic
transactions or integrate new businesses into our operations,
which may prevent us from implementing strategies to grow our
business.
We have grown our business through a number of strategic
acquisitions and intend to continue to evaluate and pursue other
strategic transactions that we believe can broaden our customer
base, provide
26
enhanced geographic presence and provide complementary technical
and commercial capabilities. Successful completion of any
strategic transaction we identify depends on a number of factors
that are not entirely within our control, including our ability
to negotiate acceptable terms and satisfactory agreements and
obtain all necessary regulatory approvals. In addition, we may
need to finance any strategic transaction that we identify, and
may not be able to obtain the necessary financing on
satisfactory terms and within the timeframe that would permit a
transaction to proceed. We may also fail to discover liabilities
of a business or operating or other problems prior to completing
a transaction. We could experience adverse accounting and
financial consequences, such as the need to make large
provisions against the acquired assets or to write down acquired
assets. We might also experience a dilutive effect on our
earnings. In addition, we may be unable to successfully
integrate the operations of newly acquired companies or assets
into our business. Moreover, depending on how any such
transaction is structured, there may be an adverse impact on our
capital structure, including through the incurrence of
significant additional indebtedness. We may incur significant
costs arising from our efforts to engage in strategic
transactions, and such costs may exceed the returns that we
realize from a given transaction. Furthermore, these
expenditures may not result in the successful completion of a
transaction.
Our
expansion, development and renovation projects face significant
risks inherent in such projects, including the possibility of
incurring cost overruns and potential difficulties in obtaining
necessary governmental approvals.
We regularly evaluate expansion, development and renovation
opportunities, and develop plans to pursue such opportunities.
For example, we have planned construction and redevelopment
projects for the Tropicana Atlantic City, Casino Aztar
Evansville, Belle of Baton Rouge, Tropicana Las Vegas, Tropicana
Express and Lighthouse Point Casino, the expected costs and
development timetables associated with which are described in
greater detail in Prospectus Summary Our
Business Strategy Benefit from Recent Investments
and Near-Term Growth Opportunities and Prospectus
Summary Our Business Strategy Redevelop
the Tropicana Las Vegas Site. These projects, in addition
to similar projects we may execute in the future, are subject to
significant development and construction risks, any one of which
could cause unanticipated schedule delays and significant cost
overruns. In particular, we may experience:
|
|
|
|
|
shortages of energy, material and skilled labor;
|
|
|
|
labor disputes and work stoppages;
|
|
|
|
disputes with contractors or subcontractors;
|
|
|
|
delays in obtaining or inability to obtain necessary permits,
licenses and approvals;
|
|
|
|
changes to plans or specifications;
|
|
|
|
engineering, geological, excavation, regulatory and equipment
problems;
|
|
|
|
changes in statutes, regulations, policies and agency
interpretations of laws applicable to gaming projects;
|
|
|
|
environmental and real property issues;
|
|
|
|
weather interference or delays;
|
|
|
|
unanticipated delays and cost increases; and
|
|
|
|
fires, earthquakes, floods and other natural disasters that
disrupt development.
|
Our anticipated costs and construction timetables for projects
are based upon budgets, conceptual design documents and
construction schedule estimates prepared by us in consultation
with our architects and contractors. The cost of any project may
vary significantly from initial expectations, and we may have a
limited amount of capital resources to fund cost overruns on any
project. If we cannot finance cost overruns on a timely basis,
the completion of one or more projects may be delayed until
adequate funding is available. The completion dates of any of
our projects could also differ significantly from expectations
for
27
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 in
connection with our projects could have a material adverse
effect on our results of operations, financial condition and
ability to satisfy our obligations under the notes.
We may commence construction before all design documents are
finalized, which could result in inefficiencies or subsequent
modifications to the plans and may cause actual construction
costs to exceed budgeted amounts. For example, certain items may
need to be modified or replaced after they have been purchased,
constructed or installed in order to conform with the final
design documents or building code requirements. There can be no
assurance that changes in the scope of any project will not be
required, and if such changes are required, they may result in
additional costs.
The scope of the approvals required for our contemplated
development projects could be extensive, and may include the
need to obtain gaming approvals, state and local land-use
permits, building and zoning permits. Unexpected changes or
conditions imposed by local, state or federal regulatory
authorities could involve significant additional costs and delay
the scheduled openings of the facilities. We may not receive the
necessary permits, licenses and approvals or obtain the
necessary permits, licenses and approvals within the anticipated
time frame.
In addition, although we seek to design our redevelopment
projects so as to permit operations at our properties to
continue during construction and renovation, we cannot assure
that we will always be able to achieve this objective. Moreover,
even if operations at our properties continue during the course
of our redevelopment projects, various areas of such properties
may not be fully operational or accessible during periods of the
construction and renovation process, or the construction and
development process may disrupt the ongoing activities in the
functioning areas not under construction or renovation.
Accordingly, our redevelopment projects may result in decreased
hotel occupancy and use of our casino facilities at certain
sites, and we cannot ensure that this will not have a material
adverse effect on our business, financial condition and results
of operations.
When
we redevelop Tropicana Las Vegas, we could encounter problems
during the development and construction process that may
substantially increase costs or delay completion of the
redevelopment project.
We have begun undertaking a major redevelopment project at
Tropicana Las Vegas. Construction projects of this magnitude are
typically subject to significant development and construction
risks, any of which could cause unanticipated cost increases and
delays that could have a material adverse effect on our
financial condition, results of operations and prospects.
Specifically, we may experience some or all of the risks
described under Our expansion, development and
renovation projects face significant risks inherent in such
projects, including the possibility of incurring cost overruns
and potential difficulties in obtaining necessary government
approvals.
In addition, our Tropicana Las Vegas redevelopment project
presents a number of special risks, including:
|
|
|
|
|
by the time we complete our planned Tropicana Las Vegas
redevelopment effort, the Las Vegas market may be saturated with
newly constructed casino resorts of the type we intend to offer.
Among others, Sands expansion project, the
Palazzo, Wynn Resorts latest full-scale resort
project, the Encore, and Boyd Gamings new
hotel-casino-shopping complex, Echelon Place, are
scheduled to open in the coming years, any of which may
adversely affect customer demand for the Tropicana Las Vegas
once we have completed redeveloping the property;
|
|
|
|
|
|
there can be no assurance that we will be able to obtain
sufficient financing to execute the redevelopment project as
presently envisaged, particularly in light of the recent
weakening in the credit markets. If we are unable to obtain
sufficient financing to fund the redevelopment project or obtain
such funding on terms or at prices acceptable to us, we may have
to adopt one or more
|
28
|
|
|
|
|
alternatives, such as reducing the scope or delaying the
construction of the planned redevelopment project or certain
capital expenditures associated with it;
|
|
|
|
|
|
the indebtedness we expect to incur to fund the redevelopment
project is anticipated to be significant, and will exceed the
$440.0 million of indebtedness under the Las Vegas secured
loan incurred by the Las Vegas Borrower in connection with the
Aztar Acquisition (which indebtedness would be refinanced with
the construction financing that we expect to obtain to fund the
redevelopment);
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although we intend to design the project to minimize disruption
to our existing business operations, we expect portions of the
existing operations at the Tropicana Las Vegas to be closed or
disrupted during the redevelopment project, which may have a
significant adverse effect on our results of operations;
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we may incur additional design and construction costs associated
with redeveloping the Tropicana Las Vegas by building around
selected existing structures instead of razing all of the
existing structures on the property;
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recent increases in the cost of raw materials for construction,
driven in part by demand in Las Vegas, may also cause the cost
of the project to exceed our budgeted amount; and
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as a result of the many other development and expansion projects
currently being carried out and planned for the near term in the
Las Vegas market, we may experience shortages of qualified
contractors or the skilled labor required to complete the
redevelopment project or retaining the services of such
contractors or labor may cost significantly more than we
presently anticipate that it will.
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As a result of these and other factors, our redevelopment of the
Tropicana Las Vegas may not be completed on time or within
budget, which could have a material adverse effect on our
results of operations, financial condition and prospects.
The
State of New Jersey provided us with only interim casino
authorization to operate the Tropicana Atlantic City. If we do
not subsequently obtain approval and plenary qualification to
operate the Tropicana Atlantic City, we will be required to
dispose of our interests in the Tropicana Atlantic
City.
The State of New Jersey subjects casino operators to rigorous
regulatory scrutiny, and the acquisition of Aztar and our
consequent operation of the Tropicana Atlantic City required us
to obtain a license from the New Jersey Casino Control
Commission. We have obtained an Interim Casino Authorization
(which we refer to as an ICA), which permitted us to consummate
the Aztar Acquisition and enables us to operate the Tropicana
Atlantic City on an interim basis.
Since we have obtained an ICA, we are now required to qualify as
holding
and/or
intermediary companies of a casino licensee under the New Jersey
Casino Control Act. Findings of qualification are made within
the discretion of the New Jersey Casino Control Commission, and
the grant of an ICA does not mean that we will ultimately be
found qualified. Pending receipt of plenary qualification, we
were required to place Tropicana Entertainments interests
in the Tropicana Atlantic City in an ICA Trust approved by the
New Jersey Casino Control Commission.
The qualification criteria for New Jersey casino licensees, as
well as for officers, directors and shareholders of New Jersey
casino licensees, include good character, honesty, integrity,
financial stability, responsibility and sufficient business
ability and experience to operate a casino. Financial stability
is one of the primary criteria considered by the New Jersey
Casino Control Commission in its qualification evaluation, and
to be considered financially stable, a licensee must establish
the ability to pay winning wagers, achieve annual gross
operating profits, pay all taxes when due, make necessary
capital and maintenance expenditures and pay, exchange,
refinance or extend debts which will mature or become due and
payable during the license term. Additionally, New Jersey casino
licensees must establish the integrity and adequacy of any of
their financial resources that bear a relation to the casino
facility. Financial sponsors
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of a casino licensee must be found qualified or have such
qualification requirement waived. Banks and other licensed
lending institutions may be exempt from the qualification
requirement or have the qualification requirement with respect
to them waived. Also, certain types of institutional investors
may have the qualification requirement with respect to them
waived. However, the identity of institutional investors holding
debt and equity securities may be subject to disclosure to the
regulatory authorities.
The ICA was set to expire in November 2007, but, on
September 5, 2007, our petition to extend the expiration
date to January 2008 was approved. The filing of a petition to
extend the expiration date of the ICA is in keeping with
customary practice under New Jersey gaming regulations. We
anticipate that a hearing with respect to plenary qualification
for the Tropicana Atlantic City will be held in November 2007.
There can be no assurance that we will be able to satisfy the
New Jersey Casino Control Commissions evaluation criteria
and be granted a casino license to operate the Tropicana
Atlantic City. If we fail to obtain a license, the trustee for
the ICA Trust will be required to dispose of Tropicana
Entertainments interests in the Tropicana Atlantic City.
In the event of any such sale, we cannot predict the existence
or interest of potential buyers or the purchase price that could
be obtained. Further, the gaming laws of the State of New Jersey
would limit the amount of proceeds that we may recognize from
any such sale, and there can be no assurance that, if any such
sale is required, we would receive proceeds in an amount that
reflects the value of the Tropicana Atlantic City at the time of
such sale. Finally, in such event, we would not be entitled to
exercise any rights of ownership or receive any income from the
operation of Tropicana Atlantic City during the period between
our denial of plenary licensure and sale by the ICA Trustee.
Our
operations depend significantly on the results of Tropicana
Atlantic City. Accordingly, any material adverse effect on the
operations of Tropicana Atlantic City could have a material
adverse effect on us.
On a pro forma basis after giving effect to the Transactions,
approximately 35.9% of Tropicana Entertainments
consolidated net operating revenues for the twelve months ended
December 31, 2006 would have been derived from the
operations of Tropicana Atlantic City. Because of the importance
of Tropicana Atlantic City to our results, poor performance at
Tropicana Atlantic City could have a material adverse effect on
us. Tropicana Atlantic City experiences seasonal fluctuations in
casino play that we believe are typical of casino hotel
operations in Atlantic City. Operating results indicate that
casino play is higher from May through October. Consequently,
Tropicana Atlantic Citys revenues during the first and
fourth quarters have generally been lower than for the second
and third quarters, and from time to time it has experienced
losses in the first and fourth quarters. Any event that
adversely affects the operating results of Tropicana Atlantic
City could have a material adverse effect on our results of
operations and financial condition. Given Atlantic Citys
location, it is also subject to occasional adverse weather
conditions, including storms and hurricanes that could impede
access to that market and adversely affect our results of
operations. In addition, competition has intensified in the
Atlantic City market in light of recent and proposed expansion
and new development activities. Specifically, the Atlantic City
market faces increased internal competition from new development
projects within the market and increased external competition
from competitors in Pennsylvania and New York State, especially
in light of the emergence of new entrants in the Pennsylvania
gaming market following the first gaming facility commencing
operations in Pennsylvania in late 2006 as well as the continued
expansion of existing, and the development of new, gaming
facilities in New York. Moreover, the imposition in April 2007
of a partial ban on smoking at gaming facilities in New Jersey
has adversely affected the results of operations of the
Tropicana Atlantic City.
Alleged
defaults under our leases with Park Cattle could have a material
adverse effect on us.
In October 2005, Tropicana Casinos and Resorts, Tropicana
Entertainments ultimate parent, received a default notice
from Park Cattle Co. (which we refer to as Park Cattle), the
landlord for the two ground leases for our Tahoe Horizon
property, arising from Tropicana Casinos and Resorts
alleged failure to maintain the Tahoe Horizon hotel and casino
facilities as required by the leases. Tropicana Casinos and
Resorts has operated the Tahoe Horizon on the leased premises
since 1990. In response to this default notice, Tropicana
Casinos and Resorts filed a Complaint for Declaratory Relief,
Injunctive Relief and Damages in the Ninth Judicial District
Court in Douglas County, Nevada seeking relief from the court in
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the form of an order declaring that Tropicana Casinos and
Resorts is not in default under the leases and enjoining Park
Cattle from terminating the leases or attempting to retake the
leased premises. Park Cattle filed a counterclaim seeking a
declaration from the court that Tropicana Casinos and Resorts
breached the leases by failing to maintain the Tahoe Horizon in
a first class condition competitive with other
casino hotels in South Lake Tahoe, and that the leases should
therefore be considered terminated due to Tropicana Casinos and
Resorts alleged failure to cure the alleged defaults. The
parties attempted to settle the dispute through mediation but
were not successful in their efforts to do so. Written and
deposition discovery is ongoing. Numerous discovery disputes are
in the process of being resolved and trial preparation has
begun. Trial is set to begin in January 2008.
Although Tropicana Casinos and Resorts rejects Park
Cattles allegations that the Tahoe Horizon is not being
maintained in accordance with the terms of the leases, it made
and will continue to make various repairs to the property,
including repairs to the parking garage during 2005, ongoing
work to replace several sections of the roof, the outer surface
of the casino and the windows and outer surface of the main
hotel tower. Further, since July 2005, Tropicana Casinos and
Resorts has been engaged in an ongoing effort to update the
propertys electrical infrastructure.
As part of the internal corporate reorganization that was
executed in order to facilitate the Transactions (see
Prospectus Summary Corporate
Reorganization and Business Corporate
Reorganization), on September 18, 2006, Tropicana
Casinos and Resorts informed Park Cattle that it intended to
assign the two ground leases for the Tahoe Horizon property to
Tahoe Horizon, LLC, which is a subsidiary of Tropicana
Entertainment and owns and operates the Tahoe Horizon. On
November 17, 2006, as part of the existing litigation
dispute regarding the Tahoe Horizon leases, Park Cattle filed a
motion with the court seeking a temporary restraining order and
a preliminary injunction prohibiting Tropicana Casinos and
Resorts from assigning the ground leases to Tahoe Horizon, LLC.
While the terms of the ground leases provide that assignments to
entities controlled by Mr. William Yung, such as Tahoe
Horizon, LLC, may be made without obtaining the consent of Park
Cattle, Park Cattle nevertheless contended that its rights and
remedies under the leases would be impaired by the assignment
and that the assignment would therefore contravene the terms of
the leases. On November 22, 2006, the court denied Park
Cattles motion for a temporary restraining order and
preliminary injunction, refusing to set a hearing or briefing
schedule with respect to the preliminary injunction Park Cattle
sought. The court ordered Tropicana Casinos and Resorts to
provide it with certain financial information regarding
Tropicana Casinos and Resorts and Tahoe Horizon, LLC, and to
provide a schedule by which financial experts of each party
could review this information. The schedule outlined by the
court with respect to these matters was such that it did not
impede or prevent the lease assignments or the closing of the
corporate reorganization and the Aztar Acquisition, which was
completed in January 2007. However, Park Cattle was allowed to
amend its counterclaim to include various allegations that the
corporate reorganization and the Aztar Acquisition were
completed in an effort to defraud Park Cattle.
Although we believe that Park Cattles allegations
regarding the maintenance of the Tahoe Horizon and the Aztar
Acquisition are without merit, we cannot predict the outcome of
the ongoing litigation. If we and Tropicana Casinos and Resorts
cannot successfully defend against the default notices or reach
a reasonable settlement with Park Cattle, our leases governing
the Tahoe Horizon property may be adversely affected or we may
incur significant additional costs in order to address Park
Cattles allegations. Potential adverse outcomes relating
to this matter could include the unwinding of part of the
internal reorganization to facilitate the transactions, payment
of significant damages sought by Park Cattle in the litigation,
including attorneys fees and costs should Park Cattle
prevail, the termination of the ground leases and the forfeiture
of our casino property located on the leased premises, or the
incurrence by us of additional expenses to cure the alleged
lease defaults. We are also expending significant resources in
the form of legal fees to contest the allegations made by Park
Cattle.
Our MontBleu property is also subject to a lease with Park
Cattle. Tropicana Casinos and Resorts has not received a default
notice from Park Cattle with respect to the MontBleu lease and
is not currently party to any litigation with Park Cattle with
respect to this lease. However, in early 2005, Tropicana Casinos
and Resorts began receiving notices from Park Cattle requesting
that specific repairs be made at the MontBleu
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property. Although we have not received any new notices relating
to the MontBleu since mid-2006, we cannot assure you that Park
Cattle will not allege defaults under the MontBleu lease.
Tropicana Casinos and Resorts acquired MontBleu (which was
formerly named Caesars Tahoe) from Harrahs
Entertainment, Inc., or Harrahs, in June 2005. Under the
terms of the acquisition agreement with Harrahs,
Harrahs agreed to indemnify us in an amount not to exceed
$10.0 million for capital expenditures we are required to
make at the MontBleu property and has paid for certain repairs
to the parking garage and roof of the property pursuant to this
indemnity arrangement in an aggregate amount of
$4.7 million. However, we cannot assure you that
Harrahs will indemnify us up to the remaining amount or
that the remaining amount of the Harrahs indemnity will be
sufficient to cover any further expenditures that we may be
required to make to the MontBleu property in response to
requests from Park Cattle.
We are
subject to litigation which, if adversely determined, could
cause us to incur substantial losses.
We are, from time to time, during the normal course of operating
our businesses, subject to various litigation claims and legal
disputes, including contract and employment claims and claims
made by visitors to our properties. In addition, there are
litigation risks inherent in the construction and development of
our casino properties.
Certain litigation claims may not be covered entirely by our
insurance policies, or at all, or our insurance carriers may
seek to deny coverage. In addition, litigation claims can be
expensive to defend and may divert the attention of our
management from the operations of our business. Further,
litigation involving visitors to our properties, even if
meritless, can attract adverse media attention. As a result,
litigation can have a material adverse effect on our business
and, because we cannot predict the outcome of any action, it is
possible that adverse judgments or settlements could
significantly reduce our earnings or result in losses.
For more information, see Business Legal
Proceedings.
Union
organization activity could significantly increase our labor
costs.
Tropicana Entertainments subsidiaries that operate the
Tropicana Atlantic City, Tropicana Las Vegas, MontBleu and Belle
of Baton Rouge are parties to various collective bargaining
agreements with certain unions. The unions with which Tropicana
Entertainments subsidiaries have collective bargaining
agreements or other unions could seek to organize employees at
our non-union properties or groups of employees at our union
properties that are not currently represented by unions. In this
connection, we note that the approximately 950 full-time
and part-time table games dealers and race book writers employed
by the Tropicana Atlantic City voted on August 25, 2007 to
be represented by the United Auto Workers union, which we refer
to as the UAW, in a National Labor Relations Board election. As
a consequence, we are required to recognize the UAW as the
representative of the table games dealers and race book writers
employed by the Tropicana Atlantic City and negotiate in good
faith to reach a collective bargaining agreement with it. We
will soon enter into collective bargaining negotiations with the
UAW and expect that the table games dealers and race book
writers at the Tropicana Atlantic City will ultimately be
covered by a contract with the union. The Atlantic City UAW
organizing effort appears to be part of a broader UAW campaign
to organize table games dealers throughout Atlantic City. So
far, the UAW has won National Labor Relations Board elections at
three Atlantic City casinos, and lost at two. At the three where
the UAW won, there has been little progress to date toward
settlement of a union contract. In addition, the table games
dealers employed by Casino Aztar Evansville have notified us of
their intent to unionize. The table games dealers at Casino
Aztar Evansville have also filed a petition with the National
Labor Relations Board requesting a union election at which they
are expected to determine whether to be to be represented by the
UAW.
On October 10, 2007, approximately 140 security officers
employed by the Tropicana Atlantic City voted against union
representation by the Security Police and Fire Professionals
Association. However, the vote has not yet been certified and
the Security Police and Fire Professionals Association may
pursue legal challenges to the validity of the vote. Also,
approximately 53 slot technicians employed by the Tropicana
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Atlantic City are scheduled to vote in a National Labor
Relations Board election on October 22, 2007 to determine
whether to be represented by the UAW. Accordingly, it is
possible that either or both of these groups will ultimately be
represented by unions.
Union organization efforts such as those described above, or
other similar union organization efforts that may occur in the
future, could cause disruptions in our business and result in
our incurrence of significant costs, both of which could have a
material adverse effect on our results of operations and
financial condition. In addition, union activities may result in
labor disputes, including work stoppages, which could have a
material adverse effect on our business and financial condition.
In addition, unfavorable union contract settlements could cause
significant increases in our labor costs, which could have a
material adverse effect on our business and financial condition.
We may also face an increased risk of union activity as a result
of the Aztar Acquisition due to the comparatively high profile
of the Tropicana brand.
Work
stoppages, labor problems and unexpected shutdowns may limit our
operational flexibility and negatively impact our future
profits.
Any work stoppage at one or more of our casino properties,
including our construction projects, could require us to spend
significant amounts to hire replacement workers, and qualified
replacement labor may not be available. Strikes and work
stoppages could also result in adverse media attention or
otherwise discourage customers from visiting our casinos.
Strikes and work stoppages involving laborers at our
construction projects could result in construction delays and
increases in construction costs. As a result, a strike or other
work stoppage at one of our casino properties or construction
projects could have an adverse effect on our business and
results of operations. There can be no assurance that we will
not experience a strike or work stoppage at one or more of our
casino properties or construction projects in the future. In
this connection, we note that the approximately
950 full-time and part-time table games dealers and race
book writers employed by the Tropicana Atlantic City voted on
August 25, 2007 to be represented by the UAW in a National
Labor Relations Board election. As a consequence, we are
required to recognize the UAW as the representative of the table
games dealers and race book writers employed by the Tropicana
Atlantic City and negotiate in good faith to reach a collective
bargaining agreement with it. We will soon enter into collective
bargaining negotiations with the UAW and expect that the table
games dealers and race book writers at the Tropicana Atlantic
City will ultimately be covered by a contract with the union.
The Atlantic City UAW organizing effort appears to be part of a
broader UAW campaign to organize table games dealers throughout
Atlantic City. So far, the UAW has won National Labor Relations
Board elections at three Atlantic City casinos, and lost at two.
At the three where the UAW won, there has been little progress
to date toward settlement of a union contract. In addition, the
table games dealers employed by Casino Aztar Evansville have
notified us of their intent to unionize. The table games dealers
at Casino Aztar Evansville have also filed a petition with the
National Labor Relations Board requesting a union election at
which they are expected to determine whether to be to be
represented by the UAW. On October 10, 2007, approximately
140 security officers employed by the Tropicana Atlantic City
voted against union representation by the Security Police and
Fire Professionals Association. However, the vote has not yet
been certified and the Security Police and Fire Professionals
Association may pursue legal challenges to the validity of the
vote. Also, approximately 53 slot technicians employed by the
Tropicana Atlantic City are scheduled to vote in a National
Labor Relations Board election on October 22, 2007 to
determine whether to be represented by the UAW. Accordingly, it
is possible that either or both of these groups will ultimately
be represented by unions. There can be no assurance that any
negotiations we conduct with the table games dealers at the
Tropicana Atlantic City or Casino Aztar Evansville will result
in an agreement, or that any agreement reached will not cause us
to incur significant increases in our labor costs. In addition,
if we are unable to reach an agreement on mutually acceptable
terms with the table games dealers at the Tropicana Atlantic
City or Casino Aztar Evansville, the affected employees could
engage in a work stoppage, which could have a material adverse
effect on our results of operations and financial condition.
Further, certain of our collective bargaining agreements have
expired, as a result of which we are seeking to renegotiate
those agreements. The collective bargaining agreements between
Tropicana Las
33
Vegas and each of the Culinary Local 226 union and the
International Alliance of Theatrical Stage Employees, Moving
Picture Technicians, Artists and Allied Crafts of the United
States, its Territories and Canada Local No. 720 (which we
refer to as IATSE Local No. 720) both expired on
May 31, 2007. While we have begun negotiations with the
Culinary Local 226 union and the IATSE Local No. 720 union
aimed at entering into new collective bargaining agreements with
each of them to replace the agreements that expired on
May 31, 2007 and we and these unions have agreed to
continue to perform under the terms of the expired contracts
while negotiations continue among the parties, there can be no
assurance that we will be able to successfully renegotiate such
agreements without incurring significant increases in our labor
costs. In addition, if we are unable to renegotiate these
agreements on mutually acceptable terms, the affected employees
may engage in a strike instead of continuing to operate under
the expired contracts, which could have a material adverse
effect on our results of operations and financial condition.
In addition, any unexpected shutdown of one of our casino
properties or construction projects could have an adverse effect
on our business and results of operations. There can be no
assurance that we will be adequately prepared for unexpected
events, including political or regulatory actions, that may lead
to a temporary or permanent shutdown of any of our casino
properties. For example, due to the New Jersey state
legislatures failure to pass a budget on time in 2006, the
state government shut down all non-essential government
functions in July 2006, such as the services of gambling
inspectors at Atlantic Citys casinos, including the
Tropicana Atlantic City. This forced casinos in Atlantic City to
suspend their operations for several days in July 2006.
We are
subject to extensive governmental regulation and taxation
policies, the enforcement of which could adversely affect our
business, financial condition and results of
operations.
Regulation by Gaming Authorities. We are
subject to extensive regulation with respect to our ownership
and operation of gaming facilities. State and local gaming
authorities require us to hold various licenses, qualifications,
findings of suitability, registrations, permits and approvals.
The various gaming regulatory authorities, including the Nevada
Gaming Commission, the Nevada State Gaming Control Board, the
New Jersey Casino Control Commission, the Indiana Gaming
Commission, the Louisiana Gaming Control Board and the
Mississippi Gaming Commission have broad powers with respect to
the licensing of casino operations and may deny, revoke,
suspend, condition or limit our gaming or other licenses, impose
substantial fines, temporarily suspend casino operations and
take other actions, any one of which could adversely affect our
business, financial condition and results of operations.
To date, we have applied for or obtained all material
governmental licenses, qualifications, registrations, permits
and approvals that we believe to be materially necessary for the
operation of our gaming facilities as operations at such
facilities are presently conducted (other than certain findings
of suitability with respect to recently appointed officers and
managers). There can be no assurance that we can obtain any new,
or renew any existing, licenses, qualifications, findings of
suitability, registrations, permits or approvals that may be
required in the future or that existing ones will not be
suspended or revoked. If we expand any of our current gaming
facilities or enter new jurisdictions, we must obtain all
additional licenses, qualifications, findings of suitability,
registrations, permits and approvals of the applicable gaming
authorities in such jurisdictions. Indiana and New Jersey
regulators have initiated staffing reviews in response to
staffing reductions we implemented at our properties in those
jurisdictions. We can neither predict the outcome of these
staffing reviews nor what, if any, formal action may be taken by
these regulatory agencies.
Potential Changes in Legislation and
Regulation. From time to time, legislators and
special interest groups propose legislation that would expand,
restrict or prevent gaming operations in the jurisdictions in
which we operate. Further, from time to time individual
jurisdictions have considered or enacted legislation and
referendums, such as bans on smoking in casinos and other
entertainment and dining facilities, that could adversely affect
our operations.
Any restriction on or prohibition relating to our gaming
operations or enactment of other adverse legislation or
regulatory changes could have a material adverse effect on our
operating results. Legislative proposals have been offered in
New Jersey to authorize video lottery terminals at certain race
tracks, which
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proposals are currently being considered and evaluated by the
New Jersey legislature. If such proposals are enacted into law,
we may experience decreased visitation levels at the Tropicana
Atlantic City and our business, financial condition and results
of operations could be adversely affected. In addition, in April
2007, the Indiana General Assembly enacted legislation that
allows 2,000 slot machines at each of the states two horse
tracks, which are located in Shelbyville and Anderson. Although
the closest of these horse tracks is located over 200 miles
from Casino Aztar Evansville, this new legislation could
adversely affect our financial condition and results of
operations by introducing additional competition in one of our
market regions. It is anticipated that the horse tracks will
commence slot operations in the first quarter of 2008.
Taxation and Fees. The casino entertainment
industry represents a significant source of tax revenues to the
various jurisdictions in which casinos operate. Gaming companies
are currently subject to significant state and local taxes and
fees in addition to the federal and state income taxes that
typically apply to corporations, and such taxes and fees could
increase at any time. From time to time, various state and
federal legislators and officials have proposed changes in tax
laws, or in the administration of such laws, including increases
in tax rates, which would affect the industry. For example, the
federal government has considered a federal tax on casino
revenues and may consider adopting such a tax in the future. In
addition, in June 2002, the legislature in Indiana changed the
gaming and admission tax rates for casino operators. Then, in
its 2003 legislative session, the Indiana General Assembly
imposed a retroactive wagering tax on all riverboat casinos,
moving the effective date of the 2002 graduated wagering tax
from August 1, 2002 to July 1, 2002. The Indiana
Department of Revenue has assessed this retroactive tax on
riverboat casinos without providing an offset for taxes paid at
a higher tax rate during that one-month period. In addition, in
April 2007, the Indiana General Assembly increased the maximum
wagering tax rate to 40% on adjusted gross receipts, which we
refer to as AGR, in excess of $600 million, but left other
tax rates on gaming proceeds unchanged. This increased maximum
wagering tax rate went into effect July 1, 2007. The other
tax rates on gaming proceeds in Indiana remained as follows:
(i) 15% on AGR on the first $25 million; (ii) 20%
on AGR in excess of $25 million but less than
$50 million; (iii) 25% on AGR in excess of
$50 million but not exceeding $75 million;
(iv) 30% on AGR in excess of $75 million but not
exceeding $150 million; and (v) 35% on AGR in excess
of $150 million but not exceeding $600 million.
Worsening economic conditions could intensify the efforts of
state and local governments to raise revenues through increases
in gaming taxes and fees. In addition, state or local budget
shortfalls could prompt tax or fee increases. Any material
increase in assessed taxes, or the adoption of additional taxes
or fees in any of our markets, could have a material adverse
effect on our financial results.
Compliance With Other Laws. We are also
subject to a variety of other rules and regulations, including
zoning, environmental, construction and land-use laws and
regulations governing the sale of alcoholic beverages. Failure
to comply with these laws could have a material adverse effect
on our business, financial condition or results of operations.
Our
riverboats are subject to extensive regulations.
The riverboat gaming and support facilities that we operate
must, in certain jurisdictions, including Louisiana and Indiana,
comply with U.S. Coast Guard requirements as to boat
design, on-board facilities, equipment, personnel and safety or
requirements of state and local law, including the requirements
of state gaming authorities, or both. If any of our riverboat
gaming and support facilities fail to meet these requirements,
we might be forced to stop operating the casino on it or
connected with it. Each of our floating riverboat facilities
must hold a Certificate of Inspection or must be approved by the
American Bureau of Shipping for stabilization and flotation, and
may also be subject to local zoning and building codes, as well
as additional requirements mandated by state law or the relevant
gaming regulatory authority. The U.S. Coast Guard
requirements establish design standards, set limits on the
operation of the vessels and require individual licensing of all
personnel involved with the operation of the vessels. Loss of a
Certificate of Inspection or American Bureau of Shipping
approval or other approval mandated by state law or by the
gaming regulatory authority with respect to our riverboat
facilities would preclude its use as a casino. In addition,
U.S. Coast Guard regulations require a hull inspection at a
U.S. Coast Guard-approved dry docking facility or an
underwater hull survey for all riverboats at five-year intervals
and state and local
35
authorities may have additional inspection requirements. The
costs of travel to and from such docking facility, as well as
the time required for inspections, could be significant. The
loss of a dockside casino or riverboat casino from service for
any period of time could adversely affect our business,
financial condition and results of operations.
We are
subject to environmental, health and safety regulations, and any
liabilities arising out of noncompliance with applicable laws,
or the implementation of significant regulatory change, could
adversely affect our results of operations.
As the owner, operator and developer of real property we have to
address, and may be liable for, hazardous materials or
contamination of these sites. Some of our properties currently
have or had in the past underground fuel storage tanks and
construction materials containing asbestos. We have in the past,
and may in the future, become liable for contamination of our
properties that was caused by former owners or operators. For
sites that we acquire for development, we typically conduct
environmental assessments to identify potential adverse impacts
of former activities, including the improper storage or disposal
of hazardous substances, and the existence of
asbestos-containing materials. We may not always identify
environmental problems through this process and may become
liable for historical contamination not previously discovered.
For sites that we have sold, we may retain all or a portion of
any residual environmental liability. In order to receive
governmental approvals prior to engaging in site development, we
must conduct assessments of the environmental impact of our
proposed operations. Our ongoing operations are subject to
stringent regulations relating to protection of the environment
and handling of waste, particularly with respect to the
management of wastewater from our facilities. Any 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.
Our
operations could be adversely affected due to the adoption of
certain anti-smoking regulations.
In November 2006, voters in the State of Nevada adopted a
referendum prohibiting smoking in indoor places of employment
including, but not limited to, bars, taverns, grocery stores,
drug stores and convenience stores, and giving future control
over smoking regulation to individual counties and
municipalities. While Nevada casino floors are exempt from the
new law, the restaurants, lounges and bars adjacent, or
connected, to our casinos are not exempt. Accordingly, this
smoking restriction could result in decreased customer traffic
at our casinos and have an adverse effect on our operating
results.
New Jersey recently adopted the Smoke Free Air Act, which
prohibits smoking in indoor public places and indoor places of
work. New Jersey casinos were previously exempt from the smoking
ban. However, effective April 15, 2007, an ordinance passed
by the City Council of Atlantic City eliminated the exemption
provided to casinos and currently limits smoking at gaming
establishments to no more than 25% of the casino floor. The city
ordinance will eventually require casinos in New Jersey to build
enclosures with ventilation systems to remove smoke from the
air. Casinos were required to submit their plans for such
enclosures to the state Department of Community Affairs by
September 15, 2007 and will have 90 days after state
approval of such plans to begin constructing the enclosures. In
part as a result of the city ordinance eliminating the smoking
exemption formerly provided to casinos, we believe we have
experienced decreased visitation levels at the Tropicana
Atlantic City and consequently our business, financial condition
and results of operations have been adversely affected.
Compliance
with the Sarbanes-Oxley Act and the disclosure requirements
under the indenture will likely increase our operating
expenses.
Concurrently with the filing of the Registration Statement
containing this prospectus, many provisions of the
Sarbanes-Oxley Act of 2002 (as well as rules subsequently
promulgated by the SEC to implement the Sarbanes-Oxley Act of
2002, which we refer to collectively as the Sarbanes-Oxley Act),
became applicable to us. In addition, the indenture requires us
to file periodic reports, such as annual reports on
Form 10-K
and quarterly reports on
Form 10-Q,
with the SEC. These requirements require us to carry out
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activities that we have not done previously, and will result in
the incurrence by us of additional administrative, legal and
accounting costs.
The Sarbanes-Oxley Act will require changes to some of our
corporate governance practices. For example, under
Section 404 of the Sarbanes-Oxley Act, which under current
regulations we do not expect to be applicable to us until our
first fiscal year ending on or after December 31, 2008, we
will be required to document and test our internal control
procedures, our management will need to assess and report on our
internal control over financial reporting and our registered
public accounting firm will need to issue an opinion on that
assessment and the effectiveness of those internal controls.
Further, if we identify any issues in complying with those
requirements (for example, if we or our registered public
accounting firm identify a material weakness in our internal
controls over financial reporting), we could incur additional
costs in rectifying those issues, and the existence of those
issues could adversely affect us, including our ability to
execute additional financing transactions or acquisitions, our
reputation or the trading price or rating of the notes. We also
expect that the applicability of these rules and regulations to
our company could make it more difficult for us to attract and
retain qualified executive officers.
The
owner of Tropicana Entertainments equity interests may
take actions that conflict with your interests.
Mr. William Yung indirectly owns all of the outstanding
equity securities of Tropicana Entertainment, including 100% of
its outstanding voting equity securities. See Security
Ownership of Certain Beneficial Owners and Management.
Thus, Mr. William Yung controls the election of Tropicana
Entertainments Board of Managers (of which he is presently
the sole member), the election of Tropicana Finances Board
of Directors (of which he is presently the sole director) and
the appointment of members of Tropicana Entertainments
management team, and can approve or disapprove any other matters
requiring the approval of Tropicana Entertainments Board
of Managers or Tropicana Finances Board of Directors, such
as mergers, acquisitions, sales of all or substantially all of
the assets of Tropicana Entertainment and change of control
transactions. Further, Tropicana Entertainments Board of
Managers and Tropicana Finances Board of Directors are
empowered to make decisions affecting Tropicana
Entertainments capital structure, including decisions to
issue additional capital stock, repurchase capital stock and
declare dividends.
The interests of Mr. William Yung as Tropicana
Entertainments indirect controlling equity holder, the
sole member of Tropicana Entertainments Board of Managers
and the sole director of Tropicana Finances Board of
Directors could conflict with your interests. For example, if
Tropicana Entertainment encounters financial difficulties or is
unable to pay its debts as they mature, the interests of
Mr. William Yung as a holder of its equity might conflict
with your interests as a holder of the notes. Mr. William
Yung may also have an interest in pursuing acquisitions,
divestitures, financings or other transactions that, in his
judgment, would enhance the value of his equity position in
Tropicana Entertainment, even though such transactions might
involve risks to you as a holder of the notes. Further,
Mr. William Yung has no obligation to provide Tropicana
Entertainment with any additional equity or debt financing.
In addition to being Tropicana Entertainments indirect
controlling equity holder and the sole member of its Board of
Managers and Tropicana Finances Board of Directors,
Mr. William Yung is also the controlling shareholder of
Columbia Sussex and his interests with respect to our company
and Columbia Sussex may conflict. Your interests as a holder of
our notes may be harmed as a result of these conflicts. For
example, Columbia Sussex is an operator of hotel properties and
future business opportunities may arise that would be
advantageous for either us or Columbia Sussex to pursue. Under
such circumstances, Mr. William Yung may take actions which
are more favorable to Columbia Sussex than to us and, under most
circumstances, would not owe you, in your capacity as a holder
of the notes, any fiduciary duties with respect to such actions.
Mr. William Yung also controls gaming assets that are not
subsidiaries of Tropicana Entertainment or any of the affiliate
guarantors. Specifically, Tropicana Casinos and Resorts directly
holds the operations of its New Orleans riverboat and the gaming
assets and operations at the Casuarina Las Vegas Casino. In
addition, Columbia Sussex owns a resort in St. Maarten that
contains a casino. There can be no assurance
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that Mr. William Yung will pursue future business
opportunities in the gaming industry through us rather than one
of his other gaming development platforms.
In addition, Mr. William Yung holds a 1% ownership interest
and a 100% voting interest in CP Vicksburg, an affiliate
guarantor, and is its sole manager. See Security Ownership
of Certain Beneficial Owners and Management. Accordingly,
Mr. William Yung exercises control over CP Vicksburg and
his interests could conflict with your interests in the ways
described above with respect to Tropicana Entertainment.
Mr. William
Yung does not control JMBS Casino, one of the guarantors of the
notes that is not a subsidiary of Tropicana Entertainment, and
the managers of, or holders of membership interests in, JMBS
Casino could take actions that conflict with your interests or
conflict with the interests of Tropicana
Entertainment.
JMBS Casino, one of the affiliate guarantors, is wholly-owned by
the JMBS Trust. Unlike CP Vicksburg and Realty, the other
affiliate guarantors, Mr. William Yung does not control the
business or operations of JMBS Casino. Each of Mr. William
Yungs children serves as a manager of JMBS Casino and, in
such capacities, they collectively have full and exclusive power
to manage and control the business and affairs of JMBS Casino.
JMBS Casino has agreed to guarantee the notes and has agreed to
be subject to the restrictive covenants contained in the
indenture. However, JMBS Casino and its managers are not
obligated to otherwise operate the business of JMBS Casino in a
way that benefits Tropicana Entertainment or the holders of its
debt obligations. Further, JMBS Casino is controlled by
Mr. William Yungs children, and their interests could
conflict with your interests in a manner similar to the
potential conflicts of interest described under
The owner of Tropicana Entertainments
equity interests may take actions that conflict with your
interests.
We
depend upon our key employees and certain members of our
management.
Our success is substantially dependent upon the efforts and
skills of Mr. William Yung, our Chief Executive Officer and
President, and members of our senior management team. We will
rely on senior managements experience in opening and
operating casinos in the markets in which we presently operate
and intend to operate in the future. If we were to lose the
services rendered by Mr. William Yung or other members of
our senior management team, our operations could be adversely
affected. In addition, we compete with other potential employers
for employees, and we may not succeed in hiring and retaining
the executives and other employees that we need. In New Jersey
and Nevada, for example, there is intense competition to hire
and retain high-level gaming executives and managerial
personnel. An inability to hire and retain qualified employees
could have a material adverse effect on our business, financial
condition and results of operations. See Management.
Our
dockside and riverboat facilities are subject to additional
risks.
Dockside and riverboat facilities are subject to risks in
addition to those associated with land-based casinos, including
loss of service due to casualty, mechanical failure, extended or
extraordinary maintenance, flood, hurricane or other severe
weather. Our riverboats face additional risks from the movement
of vessels on waterways, such as collisions with other vessels
or damage from debris in the water. Reduced patronage and the
loss of a dockside or riverboat casino from service for any
period of time could adversely affect our results of operations.
The
concentration and evolution of the slot machine manufacturing
industry could impose additional costs on us.
A majority of our gaming revenue is attributable to slot
machines operated by us at our gaming facilities. It is
important, for competitive reasons, that we offer the most
popular and technologically advanced slot machine games to our
customers. We believe that a substantial majority of the slot
machines
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sold in the United States in recent years were manufactured by a
limited number of companies. A deterioration in our commercial
arrangements with any of these slot machine manufacturers could
result in our being unable to acquire the slot machines desired
by our customers, or could result in manufacturers significantly
increasing the cost of these machines. Alternatively,
significant industry demand for new slot machines may result in
our being unable to acquire the desired number of new slot
machines or result in manufacturers increasing the cost of these
machines. The inability to obtain new and up-to-date slot
machine games could impair our competitive position and result
in decreased gaming revenues at our casinos. In addition,
increases in the costs associated with acquiring slot machine
games could adversely affect our profitability.
In recent years, the prices of new slot machines have risen more
rapidly than the domestic rate of inflation. Furthermore, in
recent years, slot machine manufacturers have frequently refused
to sell slot machines featuring the most popular games, instead
requiring gaming operators to execute participation lease
arrangements in order for them to be able to offer such machines
to patrons. Participation slot machine leasing arrangements
typically require the payment of a fixed daily rental fee. Such
agreements may also include a percentage payment to the
manufacturer of coin-in or net win.
Generally, a slot machine participation lease is more expensive
over the long term than the cost of purchasing a new slot
machine. We have slot machine participation leases at each of
our properties.
For competitive reasons, we may be forced to purchase new slot
machines, replace our older slot machines with more costly
ticket-in ticket-out machines, or enter into
participation lease arrangements that are more expensive than
the costs currently associated with the continued operation of
our existing slot machines. If the newer slot machines do not
result in sufficient incremental revenues to offset the
increased investment and participation lease costs, our
profitability could be adversely affected.
We
extend credit to our customers and our inability to collect
gaming debts may have an adverse effect on our results of
operations.
At certain of our casino properties, we conduct our gaming
activities on a credit as well as a cash basis. Table games
players are typically extended more credit than slot players,
and high-stakes players are typically extended more credit than
patrons who wager lower amounts. Our credit policy varies from
facility to facility based upon the types of customers at each
facility and regulatory requirements in each jurisdiction. In
general, credit is extended to new credit customers after
verification of certain banking information and evaluation of
the customers credit history from other casinos, the
customers income and net worth, and traditional consumer
credit reports. Additional credit may be extended to existing
credit customers after evaluating the above factors plus the
players gaming and credit history with our casinos. Gaming
debts are legally enforceable under the current laws of Nevada,
Mississippi, New Jersey and Indiana provided that the gaming
licensee conforms to regulatory guidelines governing the
extension of credit and collection activities. However, it is
not clear that all other states or foreign countries will honor
these policies. We have made provisions for estimated
uncollectible gaming receivables in order to reduce gaming
receivables to amounts deemed to be collectible. However, our
inability to collect gaming receivables could have an adverse
effect on our results of operations.
Our
business is capital intensive, and we may not be able to raise
adequate capital to finance our business strategy, or we may be
able to do so only on terms that significantly restrict our
ability to operate our business.
Implementation of our business strategy, specifically the
development of our properties, requires a substantial outlay of
capital. As we pursue our business strategy and seek to respond
to opportunities and trends in our industry, our actual capital
expenditures may differ from our expected capital expenditures
and there can be no assurance that we will be able to satisfy
our capital requirements in the future. Furthermore, if we
determine that we need to obtain additional funds through
external financing and are unable to do so, particularly in
light or the recent weakening of the credit markets, we may be
prevented from fully implementing our business strategy and, as
a consequence, our results of operations could be adversely
affected.
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The indenture and the credit documentation governing the senior
secured credit facility impose restrictions on us that may limit
our flexibility in conducting our business and implementing our
strategy. For example, the credit documentation governing the
senior secured credit facility contains financial and operating
covenants that, among other things, limit our ability and the
ability of the guarantors under the senior secured credit
facility to incur additional indebtedness or to pledge their
assets as security for additional borrowings. These restrictions
will likely make it more difficult for us to obtain further
external financing if we require it and could significantly
restrict our ability to operate our business.
We may
not have or be able to obtain sufficient insurance coverage to
replace or cover the full value of losses we may
suffer.
The terrorist attacks of September 11, 2001, Hurricanes
Katrina and Rita in 2005 and other factors have substantially
affected the cost and availability of insurance coverage for
certain types of damages or occurrences. We evaluate our risks
and insurance coverage annually. While we believe we have
obtained sufficient insurance coverage with respect to the
occurrences of casualty damage to cover losses that could result
from the acts or events described above for the next year, we
may not be able to obtain sufficient or similar insurance for
later periods and we cannot predict whether we will encounter
difficulty in collecting on any insurance claims we may submit,
including claims for business interruption.
In addition, while we maintain insurance against many risks to
the extent and in amounts that we believe are reasonable, these
policies do not cover all risks. Furthermore, portions of our
business are difficult or impracticable to insure. Therefore,
after carefully weighing the costs, risks and benefits of
retaining versus insuring various risks, as well as the
availability of certain types of insurance coverage, we
occasionally opt to retain certain risks not covered by our
insurance policies. Retained risks are associated with
deductible limits, partial self-insurance programs and insurance
policy coverage ceilings.
As an example, we carry certain insurance policies that, in the
event of certain substantial losses, may not be sufficient to
pay the full current market value or current replacement cost of
damaged property. As a result, if a significant event were to
occur that is not fully covered by our insurance policies, we
may lose all, or a portion of, the capital we have invested in a
property, as well as the anticipated future revenue from such
property, and our financial condition and results of operations
could be adversely affected. Consequently, uninsured losses may
negatively affect our financial condition, liquidity and results
of operations. There can be no assurance that we will not face
uninsured losses pertaining to the risks we have retained.
Our
results of operations and financial condition could be
materially adversely affected by the occurrence of natural
disasters, such as hurricanes, or other catastrophic events,
including war and terrorism.
Natural disasters such as major hurricanes, floods, fires and
earthquakes could adversely affect our business and operating
results. Hurricanes are common to the areas in which our
Louisiana property is located and the severity of such natural
disasters is unpredictable. In 2005, Hurricanes Katrina and Rita
caused significant damage in the Gulf Coast region. We cannot
predict the impact that any future natural disasters will have
on our ability to maintain our customer base or to sustain our
business activities.
Catastrophic events such as terrorist and war activities in the
United States and elsewhere have had a negative effect on travel
and leisure expenditures, including lodging, gaming (in some
jurisdictions) and tourism. We cannot predict the extent to
which such events may affect us, directly or indirectly, in the
future. We also cannot assure you that we will be able to obtain
any insurance coverage with respect to occurrences of terrorist
acts and any losses that could result from these acts. If there
is a prolonged disruption at any of our properties due to
natural disasters, terrorist attacks or other catastrophic
events, or if several of our properties simultaneously
experience such events, our results of operations and financial
condition could be materially adversely affected.
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Economic
and political conditions, including slowdowns in the economy,
and other factors affecting discretionary consumer spending may
harm our operating results.
The strength and profitability of our business depends on
consumer demand for hotel and casino resorts and gaming in
general and for the types of amenities we offer. A general
downturn in economic conditions, changes in consumer preferences
or other factors affecting discretionary consumer spending,
could harm our business. The terrorist attacks of
September 11, 2001, ongoing terrorist and war activities
involving the United States generally have had a negative impact
on leisure expenditures, including lodging, gaming and tourism,
and may continue to affect the overall economy and consumer
confidence. An extended period of reduced discretionary spending
or disruptions or declines in travel could significantly harm
our operations.
Sudden changes in economic conditions can also result in changes
to our operating results that are not sustainable. For instance,
as a result of Hurricanes Katrina and Rita in 2005, the
population in and around Baton Rouge, Louisiana and Vicksburg,
Mississippi experienced increases that contributed to
significant improvements in the operating results of the Belle
of Baton Rouge and the Vicksburg Horizon in 2005 and the first
eight months of 2006. In addition, the hurricanes resulted in
the closure of many other casinos in the Gulf Coast region,
which eliminated some of our competition and contributed
positively to our operating results. However, by September 2006,
the revenue increases we experienced at the Belle of Baton Rouge
and the Vicksburg Horizon began to decline as more casinos
re-opened in the Gulf Coast region and the transient population
created by the hurricanes began to shift back, in part, to New
Orleans and other Gulf Coast areas.
Energy
price increases may adversely affect our cost of operations and
our revenues.
Our casino properties use significant amounts of electricity,
natural gas and other forms of energy. While we have not
experienced shortages of energy or fuel to date, substantial
increases in energy and fuel prices in the United States may
negatively affect our operating results in the future. The
extent of the impact is subject to the magnitude and duration of
the energy and fuel price increases, but this impact could be
material. In addition, energy and gasoline price increases in
cities that constitute a significant source of customers for our
properties could result in a decline in disposable income of
potential customers and a corresponding decrease in visitation
and spending at our properties, which would negatively impact
our revenues.
Risks
Related to the Exchange Offer and Our Indebtedness
Holders
who fail to exchange their outstanding notes will continue to be
subject to restrictions on transfer.
If you do not exchange your outstanding notes in the exchange
offer, your outstanding notes will continue to be subject to the
restrictions on transfer described in the legend on the
certificates for such notes. The restrictions on transfer of
your outstanding notes arise because we issued the outstanding
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 outstanding notes if they are registered under the
Securities Act and applicable state securities laws, or are
offered and sold under an exemption from these requirements. We
do not plan to register the outstanding notes under the
Securities Act. Furthermore, we have not conditioned the
exchange offer on receipt of any minimum or maximum principal
amount of outstanding notes. As outstanding notes are tendered
and accepted in the exchange offer, the principal amount of
remaining outstanding notes will decrease. This decrease will
reduce the liquidity of the trading market for the outstanding
notes. We cannot assure you of the liquidity, or even the
continuation, of the trading market for the outstanding notes
following the completion of the exchange offer. For further
information regarding the consequences of tendering your
outstanding notes in the exchange offer, see the discussions
below under the captions The Exchange Offer
Consequences of Exchanging or Failing to Exchange Outstanding
Notes and Certain U.S. Federal Income Tax
Considerations.
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You
must comply with the exchange offer procedures in order to
receive new, freely tradeable notes.
Delivery of exchange notes in exchange for outstanding 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:
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certificates for outstanding notes or a book-entry confirmation
of a book-entry transfer of outstanding notes into the exchange
agents account at DTC, New York, New York as a depository,
including an agents message, as defined in this
prospectus, if the tendering holder does not deliver a letter of
transmittal;
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a complete and signed letter of transmittal, or facsimile copy,
with any required signature guarantees, or, in the case of a
book-entry transfer, an agents message in place of the
letter of transmittal; and
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any other documents required by the letter of transmittal.
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Therefore, holders of outstanding notes who would like to tender
outstanding notes in exchange for exchange notes should be sure
to allow enough time for the outstanding notes to be delivered
in a timely fashion. We are not required to notify you of
defects or irregularities in tenders of outstanding notes for
exchange. Outstanding notes that are not tendered or that are
tendered but not accepted by us 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 Outstanding Notes and The Exchange
Offer Consequences of Exchanging or Failing to
Exchange Outstanding Notes.
Some
holders who exchange their outstanding notes may be deemed to be
underwriters and these holders will be required to comply with
the registration and prospectus delivery requirements in
connection with any resale transaction.
If you exchange your outstanding notes in the exchange offer for
the purpose of participating in a distribution of the exchange
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.
Our
substantial indebtedness could adversely affect our financial
condition and prevent us from fulfilling our obligations under
the notes.
We have a significant amount of indebtedness. As of
September 30, 2007, our total indebtedness was
approximately $2.70 billion (which includes
$440.0 million of indebtedness of the Las Vegas borrower
under the Las Vegas secured loan). In addition, we had
approximately $9.7 million of letters of credit issued for
our account and approximately $170.3 million in additional
availability under the revolving credit facility under the
senior secured credit facility.
Our substantial indebtedness could have important consequences
for you. For example, it could:
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make it more difficult for us to satisfy our obligations with
respect to the notes;
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increase our vulnerability to general adverse economic and
industry conditions, and limit our ability to withstand
competitive pressures;
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require us to dedicate a substantial portion of our cash flow
from operations to payments in respect of our indebtedness,
thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, development projects and
other general operating requirements;
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limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
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restrict us from making strategic acquisitions or exploiting
business opportunities;
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place us at a competitive disadvantage compared to our
competitors that have less debt; and
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limit our ability to borrow additional funds.
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Any of the above factors could materially adversely affect our
business, financial condition and results of operations.
Despite
our level of indebtedness, we may be able to incur substantially
more debt. This could exacerbate the risks described
above.
We may be able to incur significant additional indebtedness in
the future. Although the indenture and the credit agreement
governing the senior secured credit facility contain
restrictions on the incurrence of additional indebtedness, these
restrictions are subject to a number of qualifications and
exceptions, and the indebtedness incurred in compliance with
these restrictions could be substantial. Furthermore, these
restrictions do not prevent us from incurring obligations that
do not constitute indebtedness, as defined in the applicable
agreement. To the extent new debt is added to our current debt
levels, the substantial leverage risks described above would
increase. See Description of Other Indebtedness and
Description of the Exchange Notes.
To
service our indebtedness, including the notes, we will require a
significant amount of cash, but our ability to generate cash
depends on many factors beyond our control.
Our ability to make payments on and to refinance our
indebtedness, including the notes, and to fund planned capital
expenditures will depend on our ability to generate cash in the
future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and
other factors beyond our control.
We cannot assure you that our business will generate sufficient
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, or to fund our other
liquidity needs. If we do not generate sufficient cash flows
from operations to satisfy our debt obligations, including
payments on the notes, we may have to undertake alternative
financing plans, such as refinancing or restructuring our debt,
selling assets, reducing or delaying capital investments or
seeking to raise additional capital. We cannot assure you that
any refinancing would be possible, that any assets could be
sold, or, if sold, of the timing of the sales and the amount of
proceeds to be realized from those sales, or that additional
financing could be obtained on acceptable terms, if at all. Our
ability to restructure or refinance our debt will depend on the
condition of the capital markets and our financial condition at
that time. Any refinancing of our debt could be at higher
interest rates and may require us to comply with more onerous
covenants, which could further restrict our business operations.
The
terms of the indenture, the credit documentation governing the
senior secured credit facility and the documentation governing
our other indebtedness may restrict our current and future
operations, particularly our ability to respond to changes in
our business or to take certain actions.
The indenture, the credit documentation governing the senior
secured credit facility and the documentation governing our
other indebtedness, as well as documentation governing any
future indebtedness of ours, contain or may contain, as the case
may be, a number of restrictive covenants imposing significant
operating and financial restrictions on Tropicana Entertainment
and its subsidiaries, as well as the affiliate guarantors,
including covenants restricting or otherwise limiting, among
other things, Tropicana Entertainments ability, or the
ability of its subsidiaries or the affiliate guarantors, to:
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incur or guarantee additional debt or issue certain preferred
stock;
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pay certain dividends, or make certain redemptions, repurchases
or distributions, with respect to equity interests or
subordinated indebtedness;
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create or incur certain liens;
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make certain loans or investments;
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engage in mergers, acquisitions, amalgamations, asset sales and
sale and leaseback transactions;
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engage in transactions with affiliates; and
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create restrictions on the ability of Tropicana
Entertainments subsidiaries or the affiliate guarantors to
pay dividends or make other payments to Tropicana Entertainment.
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The senior secured credit facility also requires us to maintain
certain financial ratios, which will become increasingly
restrictive over time.
The restrictions and covenants in the indenture, the credit
documentation governing the senior secured credit facility and
the documentation governing our other indebtedness may adversely
affect our ability to finance future operations or capital needs
or to engage in other business activities that we believe would
be in the best interests of our business, and may make it more
difficult for us to successfully execute our business strategy
or effectively compete with companies that are not similarly
restricted. We cannot assure you that we will be granted waivers
or amendments to these agreements if for any reason we are
unable to comply with such agreements. The breach of any of
these restrictions or covenants could result in a default under
the applicable agreement, which could result in the acceleration
of the indebtedness governed by such agreements as well as much
of our other indebtedness.
If we
default on our obligations to pay our other indebtedness, we may
not be able to make payments on the notes.
Any default under the agreements governing our indebtedness,
including a default under the senior secured credit facility,
and the remedies sought by the holders of such indebtedness,
could adversely affect our ability to pay the principal,
premium, if any, and interest on the notes and substantially
decrease the market value of the notes. If we are unable to
generate sufficient cash flow and are otherwise unable to obtain
funds necessary to meet required payments of principal, premium,
if any, and interest on our indebtedness, or if we otherwise
fail to comply with the various covenants, including financial
and operating covenants, in the instruments governing our
indebtedness (including the senior secured credit facility), we
would be in default under the terms of the agreements governing
such indebtedness. In the event of such a default, the holders
of such indebtedness could elect to declare all outstanding
borrowings, together with accrued interest and other fees, to be
immediately due and payable, the lenders under the senior
secured credit facility could elect to terminate their
commitments or cease making further loans and institute
foreclosure proceedings against our assets, or we could be
forced to apply all available cash to repay such indebtedness
and, in any such case, we could ultimately be forced into
bankruptcy or liquidation. Because the indenture and the credit
documentation governing the senior secured credit facility
contain customary cross-default provisions, if the indebtedness
under the notes or under the senior secured credit facility is
accelerated, we may be unable to repay or refinance the amounts
due. See Description of Other Indebtedness and
Description of the Exchange Notes.
Because
of Tropicana Entertainments holding company structure, it
depends on the guarantors to satisfy its obligations under the
notes.
Tropicana Entertainment is a holding company with no business
operations of its own. Consequently, its cash flow and its
ability to repay its indebtedness, including the notes, depends
on the cash flow of the guarantors and the payments they make to
Tropicana Entertainment. In addition, the guarantors
ability to make any payments to Tropicana Entertainment depends
on their earnings, the terms of their indebtedness, legal and
regulatory restrictions and other conditions. Each of the
guarantors, including those that are subsidiaries of Tropicana
Entertainment, is a distinct legal entity and, under certain
circumstances, legal and contractual restrictions may limit
Tropicana Entertainments ability to obtain cash from it.
While the indenture limits the ability of the guarantors to
incur restrictions on their ability to pay dividends or make
other intercompany payments to Tropicana Entertainment, these
limitations are subject to certain qualifications and
exceptions. Further, the ability of the guarantors to make
payments to Tropicana Entertainment is also governed by the
gaming laws of certain jurisdictions, which place limits on the
amount of funds which may be transferred to Tropicana
Entertainment and may require prior or subsequent approval for
any
44
payments to Tropicana Entertainment. We cannot assure you that
the guarantors will be able to provide Tropicana Entertainment
with sufficient dividends, distributions or loans to fund
payments on the notes when due.
Your
right to receive payments on the notes is junior to all of the
co-issuers and the guarantors existing and future
senior indebtedness.
The outstanding notes and guarantees are, and the exchange notes
and guarantees will be, subordinated to the prior payment in
full of the co-issuers and the guarantors current
and future senior debt. As of September 30, 2007, the
co-issuers and the guarantors had approximately
$1,740.2 million of senior indebtedness outstanding (which
included the $440.0 million of senior indebtedness of the
Las Vegas borrower under the Las Vegas secured loan) and
approximately $170.3 million in additional revolving loan
availability under the senior secured credit facility (which was
net of approximately $9.7 million of outstanding letters of
credit). All of these borrowings are senior to the outstanding
notes and will be senior to the exchange notes. The indenture
permits us and the guarantors to incur additional debt under
specified circumstances, all of which may be senior to the notes
and the guarantees of the notes. Because of the subordination
provision of the indenture, in the event of the bankruptcy,
liquidation or dissolution of the co-issuers or any guarantor,
the co-issuers assets and the assets of the guarantors
would be available to pay obligations under the notes only after
all payments had been made on the co-issuers and the
guarantors senior debt, including under the senior secured
credit facility. We cannot assure you that sufficient assets
will remain after all these payments have been made to make any
payments on the notes, including payments of interest when due.
Also, because of these subordination provisions, you may recover
less ratably than our other creditors in a bankruptcy,
liquidation or dissolution. In addition, all payments on the
notes and the guarantees will be prohibited in the event of a
payment default on senior debt, including borrowings under the
senior secured credit facility, and may be prohibited for up to
179 consecutive days in the event of non-payment defaults on
certain of our senior debt, including the senior secured credit
facility. See Description of the Exchange
Notes Ranking.
The
outstanding notes and guarantees are not, and the exchange notes
and guarantees will not be, secured by the co-issuers
assets, or the assets of the guarantors, and the lenders under
the senior secured credit facility are entitled to remedies
available to a secured lender, which give them priority over you
to collect amounts due to them.
In addition to being contractually subordinated to all existing
and future senior indebtedness, the outstanding notes and
guarantees are not, and the exchange notes and guarantees will
not be, secured by any of the co-issuers assets or any of
the assets of the guarantors. In contrast, the co-issuers
obligations under the senior secured credit facility are
expected to be secured by substantially all of their assets and
substantially all of the assets of the guarantors. In addition,
we may incur other senior indebtedness, which may be substantial
in amount, and which may be secured. As of September 30,
2007, we and the guarantors had approximately
$1,740.2 million of secured indebtedness outstanding and
approximately $170.3 million in additional revolving loan
availability under the senior secured credit facility (which is
net of approximately $9.7 million of outstanding letters of
credit), with any additional revolving borrowings under the
facility also being secured.
Because the outstanding notes and guarantees are, and the
exchange notes and guarantees will be, unsecured obligations,
your right of repayment may be compromised if any of the
following situations occur:
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we enter into a bankruptcy, liquidation, reorganization or any
other
winding-up
proceeding;
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there is a default in payment under the senior secured credit
facility or other secured indebtedness; or
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there is an acceleration of any indebtedness under the senior
secured credit facility or other secured indebtedness.
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If any of these events occurs, the secured lenders could sell
those of our assets in which they have been granted a security
interest, to your exclusion, even if an event of default exists
under the indenture at such
45
time. As a result, upon the occurrence of any of these events,
there may not be sufficient funds to pay amounts due on the
notes and the guarantees.
Only
certain of Tropicana Entertainments subsidiaries guarantee
the outstanding notes and will guarantee the exchange notes, and
the assets of non-guarantor subsidiaries may not be available to
make payments on the notes.
Certain of Tropicana Entertainments subsidiaries,
including Greenville Riverboat, a direct subsidiary of Tropicana
Entertainment that it does not wholly-own, and its subsidiaries
that hold the assets and operations relating to the Tropicana
Las Vegas, including the
34-acre
property located on the Las Vegas Strip, do not
provide guarantees in respect of the outstanding notes and will
not provide guarantees in respect of the exchange notes.
Greenville Riverboat is, however, subject to the restrictive
covenants contained in the indenture. On a pro forma basis
giving effect to the Transactions, the non-guarantor
subsidiaries would have generated approximately 16.1% of
Tropicana Entertainments net operating revenues for the
year ended December 31, 2006. For the six months ended
June 30, 2007, the non-guarantor subsidiaries generated
approximately 17.7% of Tropicana Entertainments net
operating revenues. As part of the Transactions, Tropicana
Entertainments subsidiaries that operate the Tropicana Las
Vegas incurred $440.0 million of indebtedness in respect of
the Las Vegas secured loan. It is expected that this loan will
be replaced with a construction financing loan with a longer
term in order to finance the redevelopment of the Tropicana Las
Vegas property, which financing is expected to be significantly
larger than the Las Vegas secured loan. Further, Tropicana
Entertainments subsidiaries that operate the Tropicana Las
Vegas are designated as unrestricted parties under
the indenture and, as a result, are not subject to its
restrictive covenants or event of default provisions. As a
result, the indenture does not restrict the amount of additional
indebtedness that may be incurred by these non-guarantor
subsidiaries, and defaults by these non-guarantor subsidiaries
in respect of their indebtedness or even bankruptcy or
liquidation events with respect to these subsidiaries would not
constitute events of default under the indenture.
In the event that a non-guarantor subsidiary becomes insolvent,
liquidates, reorganizes, dissolves or otherwise winds up,
holders of its indebtedness and its trade creditors generally
will be entitled to payment on their claims from the assets of
that subsidiary before any of those assets are made available to
us. Consequently, your claims in respect of the notes will be
effectively subordinated to all of the liabilities of the
non-guarantor subsidiaries, including trade payables, and the
claims (if any) of third party holders of preferred equity
interests in the non-guarantor subsidiaries.
The credit documentation with respect to the Las Vegas secured
loan contains, and the terms of any construction financing that
replaces the Las Vegas secured loan are expected to contain,
restrictions on the ability of the parties to those financing
arrangements to distribute any cash or assets relating to the
Tropicana Las Vegas to Tropicana Entertainment. Further, since
the subsidiaries of Tropicana Entertainment that operate the
Tropicana Las Vegas casino are designated as unrestricted
parties under the indenture and are not subject to its
restrictive covenants or event of default provisions, those
subsidiaries will be able to declare and pay dividends in
respect of their equity interests, repurchase equity interests,
sell assets, make investments and otherwise transfer cash and
assets without regard to the restrictive covenants in the
indenture. As a result, you should not rely on any of the assets
or cash flow relating to the Tropicana Las Vegas, or any other
non-guarantor subsidiary, for purposes of making an investment
decision with respect to the exchange notes.
U.S.
federal and state statutes allow courts, under specific
circumstances, to void the notes and the guarantees, subordinate
claims in respect of the notes and the guarantees and require
noteholders to return payments received from Tropicana
Entertainment or the guarantors.
Certain of Tropicana Entertainments subsidiaries and the
affiliate guarantors guarantee the obligations under the
outstanding notes and will guarantee the obligations under the
exchange notes. The co-issuers issuance of the notes and
the issuance of guarantees of the notes by the guarantors may be
subject to review under state and federal laws if a bankruptcy,
liquidation or reorganization case or a lawsuit, including in
circumstances in which bankruptcy is not involved, were
commenced at some future date by, or on behalf
46
of, the co-issuers unpaid creditors or the unpaid
creditors of any guarantor. Under the federal bankruptcy laws
and comparable provisions of state fraudulent transfer laws, a
court may void or otherwise decline to enforce the notes or a
guarantee, or may subordinate the notes or such guarantee, to
the co-issuers or the applicable guarantors existing
and future indebtedness. While the relevant laws may vary from
state to state, a court might do so if it found that when the
notes were issued or when the applicable guarantor entered into
its guarantee, or, in some states, when payments became due
under the notes or a guarantee:
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the notes were issued or the guarantee was entered into with the
actual intent to hinder, delay or defraud creditors; or
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the co-issuers or the applicable guarantor received less than
reasonably equivalent value or fair consideration and either:
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was insolvent or rendered insolvent by reason of such incurrence;
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was engaged in a business or transaction for which their or its
remaining assets constituted unreasonably small capital; or
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intended to incur, or believed that they or it would incur,
debts beyond their or its ability to pay such debts as they
mature.
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Alternatively, payments by the co-issuers or a guarantor
pursuant to the notes or its guarantee could be voided and
required to be returned to the co-issuers or such guarantor or
to a fund for the benefit of the
co-issuers
or such guarantors creditors, and accordingly a court
might direct you to repay any amounts that you had already
received from the co-issuers or such guarantor.
A court would likely find that the co-issuers or a guarantor did
not receive reasonably equivalent value or fair consideration
for the notes or such guarantee if the co-issuers or the
guarantor did not substantially benefit directly or indirectly
from the issuance of the notes. The measures of insolvency for
purposes of these fraudulent transfer laws vary depending upon
the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a
co-issuer or a guarantor, as applicable, would be considered
insolvent if:
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the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of its respective
assets; or
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the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its respective debts as they become due.
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Each guarantee will contain a provision intended to limit the
guarantors liability to the maximum amount that it could
incur without causing the incurrence of obligations under its
guarantee to be a fraudulent transfer. This provision may not be
effective to protect the guarantees from being voided under
fraudulent transfer law, or may reduce that guarantors
obligation to an amount that effectively makes its guarantee
worthless.
Because
the notes and each guarantors liability under its
guarantee may be reduced to zero, avoided or released under
certain circumstances, you may not receive any payments from the
co-issuers or from some or all of the guarantors.
To the extent a court voids the notes or any of the guarantees
as fraudulent transfers or holds the notes or any of the
guarantees to be unenforceable for any other reason, holders of
notes would cease to have any direct claim against the
applicable co-issuer or guarantor. If a court were to take this
action, the applicable co-issuers or guarantors
assets would be applied first to satisfy its liabilities, if
any, before any portion of its respective assets could be
applied to the payment of the notes. Sufficient funds to repay
the notes may not be available from other sources, including the
remaining guarantors, if any.
47
We may
not be able to repurchase the notes upon a change of
control.
The indenture requires us to offer to repurchase some or all of
the outstanding notes, and will require us to offer to
repurchase some or all of the exchange notes, when certain
change of control events occur. If we experience a change of
control, you will have the right to require us to repurchase
your notes at a purchase price in cash equal to 101% of the
principal amount of your notes plus accrued and unpaid interest,
if any. It is possible that we will not have sufficient funds at
the time of a change of control to make the required repurchase
of the notes. Moreover, the senior secured credit facility
restricts, and any future indebtedness we incur may restrict,
our ability to repurchase the notes, including following a
change of control event. Our failure to purchase tendered notes
would constitute an event of default under the indenture which,
in turn, would constitute a default under the senior secured
credit facility.
In addition, the senior secured credit facility provides that a
change of control, as defined in the credit documentation
governing it, constitutes a default. Any future credit agreement
or other agreements relating to senior indebtedness to which we
become a party may contain similar provisions. If we experience
a change of control that triggers a default under the senior
secured credit facility, we could seek a waiver of such default
or seek to refinance the senior secured credit facility. In the
event that we do not obtain such a waiver or refinance the
senior secured credit facility, such default could result in
amounts outstanding under the senior secured credit facility
being declared due and payable. In the event that we experience
such a change of control that also results in us having to
repurchase the notes, we may not have sufficient financial
resources at the time to satisfy all of our obligations under
the senior secured credit facility, the notes and our other
indebtedness.
The change of control covenant in the indenture does not cover
all corporate reorganizations, mergers or similar transactions
and may not provide you with protection in a highly leveraged
transaction. See Description of the Exchange
Notes Change of Control.
If
interest rates rise, the amount of interest paid by us under the
senior secured credit facility will increase.
Revolving borrowings and the term loan under the senior secured
credit facility bear interest at variable rates based on
adjusted LIBOR or an alternate base rate (as such concepts are
defined in the senior secured credit facility). We cannot
predict the interest rate environment or guarantee that interest
rates will not rise in the near future. An increase in LIBOR or
the alternate base rate could result in a significant increase
in our annual interest expense under the senior secured credit
facility. See the notes to the unaudited consolidated pro forma
financial presentation included elsewhere in this prospectus.
Should interest rates rise significantly, our cash flows and
ability to satisfy our obligations under the notes and our other
indebtedness will be adversely affected. While we have entered
into agreements limiting our exposure to such variations (See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Tropicana
Entertainment and Tropicana Casinos and Resorts
Quantitative and Qualitative Disclosures About Market
Risk), such agreements do not offer complete protection
from this risk.
There
has not been, and may not be, an active trading market for the
exchange notes.
The exchange notes will be new issues of securities for which
there is currently no market. We cannot guarantee the future
development of a market for the exchange notes or the ability of
holders to sell, or the price at which holders may be able to
sell, their exchange notes. If the exchange notes are traded
after their initial issuance, they may trade at a discount from
their initial offering price, depending upon prevailing interest
rates, the market for similar securities and other factors. We
do not intend to apply for the exchange notes to be listed on
any securities exchange or to arrange for quotation with respect
to the exchange notes on any automated dealer quotation system.
Therefore, no assurance can be given as to whether an active
trading market will develop for the exchange notes or, if a
market develops, whether it will continue.
48
You
may be required to dispose of, or we may be permitted to redeem,
the notes pursuant to gaming laws.
Gaming authorities can generally require that any holder or
beneficial owner of our securities be licensed (or, in the case
of New Jersey, obtain ICA) or be found qualified or suitable
under applicable gaming laws. If, at any time, any gaming
authority requires that a holder or beneficial owner of notes be
licensed, authorized or found qualified or suitable under any
applicable gaming laws or regulations and that holder or
beneficial owner:
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fails to apply for a license, authorization, qualification or
finding of suitability within 30 days (or such shorter
period as may be required by the applicable gaming
authority); or
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is denied such license, authorization, qualification or finding
of suitability,
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subject to applicable gaming laws, we will have the right, at
our option,
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to require such holder or beneficial owner to dispose of its
notes within 30 days (or such earlier date as may be
required by the applicable gaming authority) of receipt of such
notice or finding by such gaming authority; or
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to call for redemption the notes held by such holder or
beneficial owner. The redemption price will be equal to the
lesser of:
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the principal amount of the notes, together with accrued
interest thereon,
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the price that the holder or the beneficial owner paid for the
notes, together with accrued interest thereon, or
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such other lesser amount as may be required by the applicable
gaming authority.
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Finally, under such circumstances, you would not be entitled to
exercise any rights of ownership or receive any income from the
notes if you fail to obtain the required license, authorization,
qualification or finding of suitability.
For more information, see Regulation and Licensing
and Description of the Exchange Notes Gaming
Redemption.
49
Purpose
of the Exchange Offer
We sold the outstanding notes to certain initial purchasers on
December 28, 2006. The initial purchasers subsequently
resold the outstanding notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act and to
non-U.S. persons
outside the United States in reliance on Regulation S under
the Securities Act. In connection with the issuance of the
outstanding notes, we entered into a registration rights
agreement with Credit Suisse Securities (USA) LLC, as
representative of the several initial purchasers of the
outstanding notes.
Among other things, the registration rights agreement requires
us to register the exchange notes under the federal securities
laws and offer to exchange the exchange notes for the
outstanding notes. The exchange notes will be issued without a
restrictive legend and generally may be resold without
registration under the federal securities laws. We are effecting
the exchange offer in order to comply with the registration
rights agreement. Under some circumstances set forth in the
registration rights agreement, holders of outstanding notes,
including holders who are not permitted to participate in the
exchange offer or who may not freely sell exchange notes
received in the exchange offer, may require us to file and cause
to become effective, a shelf registration statement covering
resales of the outstanding notes by these holders. For more
information concerning the registration rights agreement, you
should refer to the complete copy of the registration rights
agreement, which has been filed as an exhibit to the
Registration Statement of which this prospectus is a part. See
Where You Can Find More Information.
Each broker-dealer that receives exchange notes for its own
account in exchange for outstanding notes, where such
outstanding notes were acquired by such broker-dealer 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 exchange notes. See Plan of
Distribution.
Terms of
the Exchange Offer; Period for Tendering Outstanding
Notes
Subject to terms and conditions detailed in this prospectus, we
will accept for exchange outstanding notes that are properly
tendered on or prior to the expiration date and not withdrawn as
permitted below. The term expiration date means
5:00 p.m., New York City
time, ,
2007, the 30th day following the date of this prospectus.
We may, however, in our sole discretion, extend the period of
time that the exchange offer is open, in which case the term
expiration date will mean the latest time and date
to which the exchange offer is extended.
As of the date of this prospectus, $960.0 million aggregate
principal amount of outstanding notes are outstanding. We are
sending this prospectus, together with the letter of
transmittal, to all holders of outstanding notes that we are
aware of on the date hereof.
We expressly reserve the right, at any time, to extend the
period of time that the exchange offer is open, and delay
acceptance for exchange of any outstanding notes, by giving oral
or written notice of an extension to the holders of the
outstanding notes as described below. During any extension, all
outstanding notes previously tendered will remain subject to the
exchange offer and may be accepted for exchange by us. Any
outstanding notes not accepted for exchange for any reason will
be returned without expense to the tendering holder as promptly
as practicable after the expiration or termination of the
exchange offer.
Outstanding Notes tendered in the exchange offer must be in
denominations of principal amount of $1,000 and any greater
integral multiple thereof.
We expressly reserve the right to amend or terminate the
exchange offer, and not to exchange any outstanding notes, upon
the occurrence of any of the conditions to the exchange offer
specified under Conditions to the Exchange
Offer. We will give oral or written notice of any
extension, amendment, non-acceptance or termination to the
holders of the outstanding notes as promptly as practicable. In
the case of any extension, we will issue a notice by means of a
press release or other public announcement no later than
9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
50
Procedures
for Tendering Outstanding Notes
Your tender to us of outstanding notes as set forth below and
our acceptance of the outstanding notes will constitute a
binding agreement between us and you upon the terms and subject
to the conditions detailed in this prospectus and in the
accompanying letter of transmittal. Except as set forth below,
to tender outstanding notes for exchange in the exchange offer,
you must transmit a properly completed and duly executed letter
of transmittal, including all other documents required by the
letter of transmittal or, in the case of a book-entry transfer,
an agents message in place of the letter of transmittal,
to U.S. Bank National Association, as exchange agent, at
the address set forth below under Exchange
Agent on or prior to the expiration date. In addition,
either:
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certificates for outstanding notes must be received by the
exchange agent along with the letter of transmittal,
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a timely confirmation of a book-entry transfer, which we refer
to in this prospectus as a book-entry confirmation, of
outstanding notes, if this procedure is available, into the
exchange agents account at DTC pursuant to the procedure
for book-entry transfer set forth below under
Book-Entry Transfers must be received by the exchange
agent prior to the expiration date, with the letter of
transmittal or an agents message in place of the letter of
transmittal, or
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the holder must comply with the guaranteed delivery procedures
described below.
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The term agents message means a message,
transmitted by DTC to and received by the exchange agent and
forming a part of a book-entry confirmation, which states that
DTC has received an express acknowledgment from the tendering
participant stating that such participant has received and
agrees to be bound by the letter of transmittal and that we may
enforce such letter of transmittal against such participant.
The method of delivery of outstanding notes, letters of
transmittal and all other required documents is at your election
and risk. If such delivery is by mail, it is recommended that
you use registered mail, properly insured, with return receipt
requested. In all cases, you should allow sufficient time to
assure timely delivery. No letter of transmittal or outstanding
notes should be sent to us.
Signatures on a letter of transmittal or a notice of withdrawal,
as the case may be, must be guaranteed unless the outstanding
notes surrendered for exchange are tendered:
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by a holder of the outstanding notes who has not completed the
box entitled Special Issuance Instructions or
Special Delivery Instructions on the letter of
transmittal, or
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for the account of an eligible institution (as defined below).
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In the event that signatures on a letter of transmittal or a
notice of withdrawal are required to be guaranteed, such
guarantees must be by a firm which is a member of the Securities
Transfer Agent Medallion Program, the Stock Exchanges Medallion
Program or the New York Stock Exchange Medallion Program (we
refer to each such entity as an eligible institution
in this prospectus). If outstanding notes are registered in the
name of a person other than the signatory of the letter of
transmittal, the outstanding notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as we
or the exchange agent determine in our sole discretion, duly
executed by the registered holder with the signature thereon
guaranteed by an eligible institution.
We or the exchange agent in our sole discretion will make a
final and binding determination on all questions as to the
validity, form, eligibility, including time of receipt, and
acceptance of outstanding notes tendered for exchange. We
reserve the absolute right to reject any and all tenders of any
particular old note not properly tendered or to not accept any
particular old note which acceptance might, in our judgment or
our counsels, be unlawful. We also reserve the absolute
right to waive any defects or irregularities or conditions of
the exchange offer as to any particular old note either before
or after the expiration date, including the right to waive the
ineligibility of any holder who seeks to tender outstanding
notes in the exchange offer. Our or the exchange agents
interpretation of the terms and conditions of the exchange offer
as to any particular old note either before or after the
expiration date, including the letter of transmittal and
51
the instructions thereto, will be final and binding on all
parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding notes for exchange must
be cured within a reasonable period of time, as we determine. We
are not, nor is the exchange agent or any other person, under
any duty to notify you of any defect or irregularity with
respect to your tender of outstanding notes for exchange, and no
one will be liable for failing to provide such notification.
If the letter of transmittal is signed by a person or persons
other than the registered holder or holders of outstanding
notes, such outstanding notes must be endorsed or accompanied by
powers of attorney signed exactly as the name(s) of the
registered holder(s) that appear on the outstanding notes.
If the letter of transmittal or any outstanding notes or powers
of attorneys are signed 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. Unless waived by us or the
exchange agent, proper evidence satisfactory to us of their
authority to so act must be submitted with the letter of
transmittal.
By tendering outstanding notes, you represent to us that, among
other things:
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the exchange notes acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of the person
receiving such exchange notes, whether or not such person is the
holder; and
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neither the holder nor such other person has any arrangement or
understanding with any person, to participate in the
distribution of the exchange notes.
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In the case of a holder that is not a broker-dealer, that
holder, by tendering, will also represent to us that the holder
is not engaged in or does not intend to engage in a distribution
of the exchange notes.
If you are our affiliate, as defined under
Rule 405 under the Securities Act, and engage in or intend
to engage in or have an arrangement or understanding with any
person to participate in a distribution of such exchange notes
to be acquired pursuant to the exchange offer, you or any such
other person:
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could not rely on the applicable interpretations of the staff of
the SEC, and
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must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction.
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Each broker-dealer that receives exchange notes for its own
account in exchange for outstanding notes, where the outstanding
notes were acquired by the broker-dealer 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 exchange notes. See Plan of
Distribution. The letter of transmittal states that by so
acknowledging 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.
Acceptance
of Outstanding Notes for Exchange; Delivery of Exchange
Notes
Upon satisfaction or waiver of all of the conditions to the
exchange offer, we will accept, promptly after the expiration
date, all outstanding notes properly tendered and will issue the
exchange notes promptly after acceptance of the outstanding
notes. See Conditions to the Exchange
Offer. For purposes of the exchange offer, we will be
deemed to have accepted properly tendered outstanding notes for
exchange if and when we give oral notice, confirmed in writing,
or written notice to the exchange agent.
The holder of each old note accepted for exchange will receive a
new note in the amount equal to the surrendered old note.
Accordingly, registered holders of exchange notes on the record
date for the first interest payment date following the
consummation of the exchange offer will receive interest
accruing from the most recent date that interest has been paid
on the outstanding notes. Holders of exchange notes will not
receive any payment in respect of accrued interest on
outstanding notes otherwise payable on any interest payment
date, the record date for which occurs on or after the
consummation of the exchange offer.
52
In all cases, issuance of exchange notes for outstanding notes
that are accepted for exchange will only be made after timely
receipt by the exchange agent of:
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certificates for such outstanding notes or a timely book-entry
confirmation of such outstanding notes into the exchange
agents account at DTC,
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a properly completed and duly executed letter of transmittal or
an agents message in lieu thereof, and
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all other required documents.
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If any tendered outstanding notes are not accepted for any
reason set forth in the terms and conditions of the exchange
offer or if outstanding notes are submitted for a greater
principal amount than the holder desires to exchange, the
unaccepted or non-exchanged outstanding notes will be returned
without expense to the tendering holder or, in the case of
outstanding notes tendered by book-entry transfer into the
exchange agents account at DTC pursuant to the book-entry
procedures described below, the non-exchanged outstanding notes
will be credited to an account maintained with DTC, as promptly
as practicable after the expiration or termination of the
exchange offer.
Book-Entry
Transfers
For purposes of the exchange offer, the exchange agent will
request that an account be established with respect to the
outstanding notes at DTC within two business days after the date
of this prospectus, unless the exchange agent already has
established an account with DTC suitable for the exchange offer.
Any financial institution that is a participant in DTC may make
book-entry delivery of outstanding notes by causing DTC to
transfer such outstanding notes into the exchange agents
account at DTC in accordance with DTCs procedures for
transfer. Although delivery of outstanding notes may be effected
through book-entry transfer at DTC, the letter of transmittal or
facsimile thereof or an agents message in lieu thereof,
with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by
the exchange agent at the address set forth under
Exchange Agent on or prior to the
expiration date, or the guaranteed delivery procedures described
below must be complied with.
Guaranteed
Delivery Procedures
If you desire to tender your outstanding notes and your
outstanding notes are not immediately available, or time will
not permit your outstanding notes or other required documents to
reach the exchange agent before the expiration date, a tender
may be effected if:
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the tender is made through an eligible institution,
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prior to the expiration date, the exchange agent received from
such eligible institution a notice of guaranteed delivery,
substantially in the form we provided, by telegram, telex,
facsimile transmission, mail or hand delivery, setting forth
your name and address, the amount of outstanding notes tendered,
stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed
delivery, the certificates for all physically tendered
outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly
completed and duly executed appropriate letter of transmittal or
facsimile thereof or agents message in lieu thereof, with
any required signature guarantees and any other documents
required by the letter of transmittal will be deposited by such
eligible institution with the exchange agent, and
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the certificates for all physically tendered outstanding notes,
in proper form for transfer, or a book-entry confirmation, as
the case may be, together with a properly completed and duly
executed appropriate letter of transmittal or facsimile thereof
or agents message in lieu thereof, with any required
signature guarantees and all other documents required by the
letter of transmittal, are received by the exchange agent within
three New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery.
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53
Withdrawal
Rights
You may withdraw your tender of outstanding notes at any time
prior to the expiration date. To be effective, a written notice
of withdrawal must be received by the exchange agent at one of
the addresses set forth under Exchange Agent.
This notice must specify:
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the name of the person having tendered the outstanding notes to
be withdrawn,
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the outstanding notes to be withdrawn, including the principal
amount of such outstanding notes, and
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where certificates for outstanding notes have been transmitted,
the name in which such outstanding notes are registered, if
different from that of the withdrawing holder.
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If certificates for outstanding notes have been delivered or
otherwise identified to the exchange agent, then, prior to the
release of the certificates, the withdrawing holder must also
submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible institution, unless such holder is an
eligible institution. If outstanding notes have been tendered
pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn
outstanding notes and otherwise comply with the procedures of
DTC.
We or the exchange agent will make a final and binding
determination on all questions as to the validity, form and
eligibility, including time of receipt, of such notices. Any
outstanding notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange
offer. Any outstanding notes tendered for exchange but not
exchanged for any reason will be returned to the holder without
cost to the holder, or, in the case of outstanding notes
tendered by book-entry transfer into the exchange agents
account at DTC pursuant to the book-entry transfer procedures
described above, the outstanding notes will be credited to an
account maintained with DTC for the outstanding notes as soon as
practicable after withdrawal, rejection of tender or termination
of the exchange offer. Properly withdrawn outstanding notes may
be re-tendered by following one of the procedures described
under Procedures for Tendering Outstanding
Notes above at any time on or prior to the expiration date.
Conditions
to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we
are not required to accept for exchange, or to issue exchange
notes in exchange for, any outstanding notes and may terminate
or amend the exchange offer, if any of the following events
occur prior to acceptance of such outstanding notes:
(a) the exchange offer violates any applicable law or
applicable interpretation of the staff of the SEC; or
(b) there is threatened, instituted or pending any action
or proceeding before, or any injunction, order or decree has
been issued by, any court or governmental agency or other
governmental regulatory or administrative agency or commission,
(1) seeking to restrain or prohibit the making or
consummation of the exchange offer or any other transaction
contemplated by the exchange offer, or assessing or seeking any
damages as a result thereof, or
(2) resulting in a material delay in our ability to accept
for exchange or exchange some or all of the outstanding notes
pursuant to the exchange offer;
or any statute, rule, regulation, order or injunction has been
sought, proposed, introduced, enacted, promulgated or deemed
applicable to the exchange offer or any of the transactions
contemplated by the exchange offer by any government or
governmental authority, domestic or foreign, or any action has
been taken, proposed or threatened, by any government,
governmental authority, agency or court, domestic or foreign,
that in our sole judgment might, directly or indirectly, result
in any of the consequences referred to in clauses (1) or
(2) above or, in our reasonable judgment, might result in
the holders of exchange notes having obligations with respect to
resales and transfers of exchange notes
54
which are greater than those described in the interpretation of
the SEC referred to on the cover page of this prospectus, or
would otherwise make it inadvisable to proceed with the exchange
offer; or
(c) there has occurred:
(1) any general suspension of or general limitation on
prices for, or trading in, securities on any national securities
exchange or in the over-the-counter market,
(2) any limitation by a governmental agency or authority
which may adversely affect our ability to complete the
transactions contemplated by the exchange offer,
(3) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which
adversely affects the extension of credit, or
(4) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing
existing at the time of the commencement of the exchange offer,
a material acceleration or worsening thereof; or
(d) any change (or any development involving a prospective
change) has occurred or is threatened in our business,
properties, assets, liabilities, financial condition,
operations, results of operations or prospects taken as a whole
that, in our reasonable judgment, is or may be adverse to us, or
we have become aware of facts that, in our reasonable judgment,
have or may have adverse significance with respect to the value
of the outstanding notes or the exchange notes;
which in our reasonable judgment in any case, and regardless of
the circumstances (including any action by us) giving rise to
any such condition, makes it inadvisable to proceed with the
exchange offer
and/or with
such acceptance for exchange or with such exchange.
The foregoing conditions are for our sole benefit and may be
asserted by us regardless of the circumstances giving rise to
any condition or may be waived by us in whole or in part at any
time in our reasonable discretion. Our failure at any time to
exercise any of the foregoing rights will not be deemed a waiver
of any such right and each such right will be deemed an ongoing
right which may be asserted at any time.
In addition, we will not accept for exchange any outstanding
notes tendered, and we will not issue exchange notes in exchange
for any such outstanding notes, if at such time any stop order
by the SEC is threatened or in effect with respect to the
Registration Statement, of which this prospectus constitutes a
part, or the qualification of the indenture under the
Trust Indenture Act.
Exchange
Agent
U.S. Bank National Association has been appointed as the
exchange agent for the exchange offer. All executed letters of
transmittal should be directed to the exchange agent at the
address set forth below. Questions and requests for assistance,
requests for additional copies of this prospectus or of the
letter of transmittal and requests for notices of guaranteed
delivery should be directed to the exchange agent addressed as
follows:
U.S. Bank
National Association,
Exchange Agent
By Regular Mail, Overnight Courier or in Person (By Hand
Only):
West Side Flats
60 Livingston Avenue
St. Paul, MN 55107
Attention: Specialized Finance
By Facsimile Transmission
(for Eligible Institutions only):
(651) 495-8158
Confirm Facsimile Transmission by Telephone:
(800) 934-6802
55
Delivery of the letter of transmittal to an address other
than as set forth above or transmission of such letter of
transmittal via facsimile other than as set forth above does not
constitute a valid delivery of the letter of transmittal.
Fees and
Expenses
The principal solicitation is being made by mail by
U.S. Bank National Association, as exchange agent. We will
pay the exchange agent customary fees for its services,
reimburse the exchange agent for its reasonable out-of-pocket
expenses incurred in connection with the provision of these
services and pay other registration expenses, including fees and
expenses of the trustee under the indenture relating to the
exchange notes, filing fees, blue sky fees and printing and
distribution expenses. We will not make any payment to brokers,
dealers or others soliciting acceptances of the exchange offer.
Additional solicitation may be made by telephone, facsimile or
in person by our and our affiliates officers and regular
employees and by persons so engaged by the exchange agent.
Accounting
Treatment
Tropicana Entertainment will record the exchange notes at the
same carrying value as the outstanding notes as reflected in its
accounting records on the date of the exchange. Accordingly,
Tropicana Entertainment will not recognize any gain or loss for
accounting purposes as a result of the exchange offer. The
expenses of the exchange offer will be amortized over the term
of the exchange notes.
Transfer
Taxes
You will not be obligated to pay any transfer taxes in
connection with the tender of outstanding notes in the exchange
offer unless you instruct us to register exchange notes in the
name of, or request that outstanding notes not tendered or not
accepted in the exchange offer be returned to, a person other
than the registered holder. In those cases, you will be
responsible for the payment of any potentially applicable
transfer tax.
Consequences
of Exchanging or Failing to Exchange Outstanding Notes
If you do not exchange your outstanding notes for exchange notes
in the exchange offer, your outstanding notes will continue to
be subject to the provisions of the indenture regarding transfer
and exchange of the outstanding notes and the restrictions on
transfer of the outstanding notes described in the legend on
your certificates. These transfer restrictions are required
because the outstanding notes were issued under an exemption
from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state
securities laws. In general, the outstanding notes may not be
offered or sold unless registered under the Securities Act,
except under an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities laws. We
do not plan to register the outstanding notes under the
Securities Act.
Based on interpretations by the staff of the SEC, as set forth
in no-action letters issued to third parties, we believe that
the exchange notes you receive in the exchange offer may be
offered for resale, resold or otherwise transferred without
compliance with the registration and prospectus delivery
provisions of the Securities Act. However, you will not be able
to freely transfer the exchange notes if:
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you are our affiliate, as defined in Rule 405
under the Securities Act,
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you are not acquiring the exchange notes in the exchange offer
in the ordinary course of your business,
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you have an arrangement or understanding with any person to
participate in the distribution, as defined in the Securities
Act, of the exchange notes you will receive in the exchange
offer,
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you are holding outstanding notes that have, or are reasonably
likely to have, the status of an unsold allotment in the initial
offering, or
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56
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you are a broker-dealer that received exchange notes for its own
account in the exchange offer in exchange for outstanding notes
that were acquired as a result of market-making or other trading
activities.
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We do not intend to request the SEC to consider, and the SEC has
not considered, the exchange offer in the context of a similar
no-action letter. As a result, we cannot guarantee that the
staff of the SEC would make a similar determination with respect
to the exchange offer as in the circumstances described in the
no-action letters discussed above. Each holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and
does not intend to engage in, a distribution of the exchange
notes and has no arrangement or understanding to participate in
a distribution of the exchange notes. If you are our affiliate,
are engaged in or intend to engage in a distribution of the
exchange notes or have any arrangement or understanding with
respect to the distribution of the exchange notes you will
receive in the exchange offer, you may not rely on the
applicable interpretations of the staff of the SEC and you must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction involving the exchange notes. If you are a
participating broker-dealer, you must acknowledge that you will
deliver a prospectus in connection with any resale of the
exchange notes. In addition, to comply with state securities
laws, you may not offer or sell the exchange notes in any state
unless they have been registered or qualified for sale in that
state or an exemption from registration or qualification is
available and is complied with. The offer and sale of the
exchange notes to qualified institutional buyers (as
defined in Rule 144A of the Securities Act) is generally
exempt from registration or qualification under state securities
laws. We do not plan to register or qualify the sale of the
exchange notes in any state where an exemption from registration
or qualification is required and not available.
57
We will not receive any proceeds from this exchange offer. Any
outstanding notes that are properly tendered and exchanged
pursuant to the exchange offer will be retired and cancelled.
58
RATIO
OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed
charges of (i) Tropicana Casinos and Resorts as of
December 31, 2002, 2003, 2004, 2005 and 2006,
(ii) Tropicana Entertainment as of December 31, 2006
on a pro forma basis to give effect to the Aztar Acquisition and
the corporate reorganization that occurred immediately prior to
the consummation of the Aztar Acquisition and
(iii) Tropicana Entertainment as of the six months ended
June 30, 2007. We have calculated the ratio of earnings to
fixed charges by dividing earnings by fixed charges. For the
purpose of computing the ratio of earnings to fixed charges,
earnings is defined as income from continuing
operations before provision for income taxes and fixed charges,
adjusted to exclude capitalized interest. Fixed
charges consist of interest expense, amortization of
capitalized debt costs and premium on debt, capitalized interest
and the estimated interest included in rental expense.
The information in the table below does not represent data for
the restricted group under the indenture as it does not include
data with respect to the affiliate guarantors, nor does it
exclude data with respect to the subsidiaries of Tropicana
Entertainment that hold the assets and operations relating to
the Tropicana Las Vegas.
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Tropicana
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Tropicana
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Entertainment
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Entertainment
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Six Months Ended
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Tropicana Casinos and Resorts
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Pro Forma
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June 30,
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2002
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2003
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2004
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2005
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2006
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2006(1)
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2007
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Ratio of Earnings to Fixed Charges
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5.63
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5.29
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6.85
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3.92
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1.69
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1.06
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(1)
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Reflects ratio of earnings to fixed
charges of Tropicana Entertainment on a pro forma basis to give
effect to the Transactions. For this period, earnings were
inadequate to cover fixed charges by $23.0 million.
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59
The following table sets forth Tropicana Entertainments
cash and cash equivalents, restricted cash and capitalization as
of June 30, 2007.
The information in the table below does not represent data for
the restricted group under the indenture as it does not include
data with respect to the affiliate guarantors, nor does it
exclude data with respect to the subsidiaries of Tropicana
Entertainment that hold the assets and operations relating to
the Tropicana Las Vegas.
The following table should be read in conjunction with
Prospectus Summary Summary Unaudited Pro Forma
Financial Data, Prospectus Summary
Summary Financial Information of Tropicana Entertainment and
Tropicana Casinos and Resorts, Selected Historical
Consolidated Financial Data Tropicana Entertainment
and Tropicana Casinos and Resorts, Managements
Discussion and Analysis of Financial Condition and Results of
Operations Tropicana Entertainment and Tropicana
Casinos and Resorts and the financial statements included
elsewhere in this prospectus.
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Tropicana
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Entertainment
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as of
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June 30, 2007
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(In thousands,
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Unaudited)
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Cash and cash equivalents
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$
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86,648
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Restricted cash(1)
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$
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33,698
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Debt (includes current maturities):
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New senior secured credit facility
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$
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1,340,239
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Las Vegas secured loan
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440,000
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Notes
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960,000
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Capital Leases
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1,550
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Total debt
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2,741,789
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Total members equity
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960,377
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Total capitalization
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$
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3,702,166
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(1)
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Represents funds deposited in
escrow in respect of interest payable under the Las Vegas
secured loan for a period of 12 months.
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60
UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL PRESENTATION
We have derived the following unaudited pro forma consolidated
financial presentation by applying pro forma adjustments to the
historical consolidated financial statements of Tropicana
Casinos and Resorts and Aztar included elsewhere in this
prospectus.
The unaudited pro forma consolidated financial presentation
gives effect to:
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adjustments related to the corporate reorganization that
occurred immediately prior to the consummation of the Aztar
Acquisition in which Tropicana Casinos and Resorts contributed
to Tropicana Entertainment substantially all of its gaming
properties other than its New Orleans riverboat, the gaming
assets and operations at the Casuarina Las Vegas Casino and the
assets and operations of Tropicana Pennsylvania; and
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further adjustments related to the Aztar Acquisition and the
Acquisition Financing Transactions.
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The following unaudited pro forma consolidated financial
presentation gives effect to the foregoing transactions as if
they had occurred on January 1, 2006.
The following unaudited pro forma consolidated financial
presentation is based on managements current estimates of,
and good faith assumptions regarding, the adjustments reflected
in the unaudited pro forma consolidated financial presentation.
The unaudited pro forma consolidated financial presentation is
based on currently available information and actual adjustments
could differ materially from current estimates. The unaudited
pro forma consolidated financial presentation is presented for
informational purposes only, and does not purport to represent
what results of operations actually would have been had the
foregoing transactions been consummated on the dates indicated
or to project our results of operations for any future period.
The Aztar Acquisition was accounted for as a purchase in
accordance with Statement of Financial Accounting Standard
No. 141, Business Combinations
(SFAS No. 141), with intangible assets recorded in
accordance with Statement of Financial Accounting Standard
No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142). The total consideration paid,
including transaction-related fees, for the Aztar Acquisition
was allocated to the acquired tangible and intangible assets and
liabilities based on their estimated fair values as of the date
on which the Aztar Acquisition was consummated. In presenting
the following pro forma financial information, we have allocated
the total estimated purchase price for the Aztar Acquisition to
the relevant assets acquired and liabilities assumed based on
preliminary estimates of fair values. A final determination of
these fair values will reflect our consideration of valuations
prepared by third-party appraisers, and may result in
adjustments to the amounts recorded in the following
presentation.
The unaudited pro forma consolidated financial presentation
contained herein consists of a pro forma consolidated income
statement for the year ended December 31, 2006. The Aztar
Acquisition was consummated on January 3, 2007. We have not
included herein an additional pro forma consolidated income
statement as of the six months ended June 30, 2007 because
the pro forma results for such period would not be significantly
different than Tropicana Entertainments actual results for
such period in light of the fact that the pro forma adjustments
for such period would only reflect three days of Aztar
operations. The actual unaudited consolidated financial
statements of Tropicana Entertainment for the six months ended
June 30, 2007 are contained elsewhere in this prospectus.
The information in the table below does not represent data for
the restricted group under the indenture as it does not include
data with respect to the affiliate guarantors, nor does it
exclude data with respect to the subsidiaries of Tropicana
Entertainment that hold the assets and operations relating to
the Tropicana Las Vegas.
The following table should be read in conjunction with
Prospectus Summary Summary Unaudited Pro Forma
Financial Data, Prospectus Summary
Summary Financial Information of Tropicana Entertainment and
Tropicana Casinos and Resorts, Selected Historical
Consolidated Financial Data Tropicana Entertainment
and Tropicana Casinos and Resorts, Managements
Discussion and Analysis of Financial Condition and Results of
Operations Tropicana Entertainment and Tropicana
Casinos and Resorts, Selected Historical
Consolidated Financial Data Aztar,
Managements Discussion and Analysis of Financial
Condition and Results of Operations Aztar and
the financial statements included elsewhere in this prospectus.
61
TROPICANA
ENTERTAINMENT
Unaudited
Pro Forma Consolidated Income Statement
Year
Ended December 31, 2006
(In thousands)
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Tropicana
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Tropicana
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Aztar
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Pro Forma
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Tropicana
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Casinos
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Casinos
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Acquisition
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for Aztar
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Casinos
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and Resorts
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and Resorts
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and Financing
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Acquisition and
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and Resorts
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Adjustments(1)
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as Adjusted
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Aztar
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Adjustments(2)
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Financing
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Operating revenues
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Casino
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$
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239,490
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$
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$
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239,490
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$
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673,929
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$
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44,414
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(a)
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$
|
957,833
|
|
Rooms
|
|
|
39,731
|
|
|
|
|
|
|
|
39,731
|
|
|
|
107,289
|
|
|
|
45,076
|
(a)
|
|
|
192,096
|
|
Food and beverage
|
|
|
41,983
|
|
|
|
|
|
|
|
41,983
|
|
|
|
58,773
|
|
|
|
58,526
|
(a)
|
|
|
159,282
|
|
Other casino and hotel
|
|
|
12,323
|
|
|
|
|
|
|
|
12,323
|
|
|
|
54,345
|
|
|
|
5,348
|
(a)
|
|
|
72,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
333,527
|
|
|
|
|
|
|
|
333,527
|
|
|
|
894,336
|
|
|
|
153,364
|
|
|
|
1,381,227
|
|
Less promotional allowances
|
|
|
(44,664
|
)
|
|
|
|
|
|
|
(44,664
|
)
|
|
|
|
|
|
|
(153,364
|
)(a)
|
|
|
(198,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
|
288,863
|
|
|
|
|
|
|
|
288,863
|
|
|
|
894,336
|
|
|
|
|
|
|
|
1,183,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
40,482
|
|
|
|
|
|
|
|
40,482
|
|
|
|
265,823
|
|
|
|
(79,001
|
)(e)
|
|
|
227,304
|
|
Rooms
|
|
|
17,647
|
|
|
|
|
|
|
|
17,647
|
|
|
|
48,258
|
|
|
|
10,995
|
(e)
|
|
|
76,900
|
|
Food and beverage
|
|
|
34,579
|
|
|
|
|
|
|
|
34,579
|
|
|
|
57,313
|
|
|
|
46,510
|
(e)
|
|
|
138,402
|
|
Other casino and hotel
|
|
|
4,141
|
|
|
|
|
|
|
|
4,141
|
|
|
|
29,200
|
|
|
|
2,303
|
(b)
|
|
|
35,644
|
|
Utilities
|
|
|
10,074
|
|
|
|
|
|
|
|
10,074
|
|
|
|
25,234
|
|
|
|
|
|
|
|
35,308
|
|
Marketing, advertising and casino promotion
|
|
|
15,513
|
|
|
|
|
|
|
|
15,513
|
|
|
|
82,025
|
|
|
|
(678
|
)(d)
|
|
|
96,860
|
|
Repairs and maintenance
|
|
|
8,322
|
|
|
|
|
|
|
|
8,322
|
|
|
|
27,254
|
|
|
|
|
|
|
|
35,576
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,475
|
|
|
|
(2,475
|
)(c)
|
|
|
|
|
Insurance
|
|
|
2,908
|
|
|
|
|
|
|
|
2,908
|
|
|
|
|
|
|
|
|
|
|
|
2,908
|
|
Property and local taxes
|
|
|
3,824
|
|
|
|
|
|
|
|
3,824
|
|
|
|
38,078
|
|
|
|
|
|
|
|
41,902
|
|
Gaming taxes and licenses
|
|
|
39,869
|
|
|
|
|
|
|
|
39,869
|
|
|
|
|
|
|
|
|
|
|
|
39,869
|
|
Administrative and general
|
|
|
16,184
|
|
|
|
|
|
|
|
16,184
|
|
|
|
88,338
|
|
|
|
(19,299
|
)(d)
|
|
|
85,223
|
|
Corporate overhead
|
|
|
5,350
|
|
|
|
|
|
|
|
5,350
|
|
|
|
|
|
|
|
7,750
|
(d)
|
|
|
13,100
|
|
Leased land and facilities
|
|
|
10,771
|
|
|
|
|
|
|
|
10,771
|
|
|
|
11,590
|
|
|
|
(614
|
)(d)
|
|
|
21,747
|
|
Depreciation and amortization
|
|
|
18,033
|
|
|
|
|
|
|
|
18,033
|
|
|
|
70,027
|
|
|
|
(7,030
|
)(f)
|
|
|
81,030
|
|
Insurance recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,229
|
)
|
|
|
|
|
|
|
(12,229
|
)
|
Casualty loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,420
|
|
|
|
|
|
|
|
5,420
|
|
Merger related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,972
|
|
|
|
(78,000
|
)(g)
|
|
|
14,972
|
|
Write off of fixed assets, deposits and other costs related to
abandoned acquisitions
|
|
|
2,588
|
|
|
|
|
|
|
|
2,588
|
|
|
|
26,021
|
|
|
|
|
|
|
|
28,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
230,285
|
|
|
|
|
|
|
|
230,285
|
|
|
|
857,799
|
|
|
|
(119,539
|
)
|
|
|
968,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
58,578
|
|
|
|
|
|
|
|
58,578
|
|
|
|
36,537
|
|
|
|
119,539
|
|
|
|
214,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,640
|
|
|
|
|
|
|
|
2,640
|
|
Interest income
|
|
|
8,918
|
|
|
|
|
|
|
|
8,918
|
|
|
|
1,849
|
|
|
|
|
|
|
|
10,767
|
|
Interest expense
|
|
|
(35,563
|
)
|
|
|
18,922
|
(a)
|
|
|
(16,641
|
)
|
|
|
(55,935
|
)
|
|
|
(175,619
|
)(h)
|
|
|
(248,195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(26,645
|
)
|
|
|
18,922
|
|
|
|
(7,723
|
)
|
|
|
(51,446
|
)
|
|
|
(175,619
|
)
|
|
|
(234,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
31,933
|
|
|
|
18,922
|
|
|
|
50,855
|
|
|
|
(14,909
|
)
|
|
|
(56,080
|
)
|
|
|
(20,134
|
)
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,247
|
)
|
|
|
29,247
|
(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interest
|
|
|
31,933
|
|
|
|
18,922
|
|
|
|
50,855
|
|
|
|
(44,156
|
)
|
|
|
(26,833
|
)
|
|
|
(20,134
|
)
|
Minority interest in net income (loss) of consolidated
subsidiaries
|
|
|
(3,224
|
)
|
|
|
|
|
|
|
(3,224
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
28,709
|
|
|
$
|
18,922
|
|
|
$
|
47,631
|
|
|
$
|
(44,156
|
)
|
|
$
|
(26,833
|
)
|
|
$
|
(23,358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
Notes to
Unaudited Pro Forma Consolidated Financial Presentation
(In thousands except as otherwise noted)
|
|
(1)
|
TROPICANA
CASINOS AND RESORTS ADJUSTMENTS
|
The following adjustments give effect to the corporate
reorganization that occurred immediately prior to the
consummation of the Aztar Acquisition as if it had occurred on
January 1, 2006.
(a) Reflects the elimination of accrued interest in respect
of the $350.2 million loan made to Tropicana Casinos and
Resorts by CSC Holdings, LLC, an affiliate of Tropicana
Entertainment controlled by Columbia Sussex, as this loan was
retained by Tropicana Casinos and Resorts in the corporate
reorganization as a liability owing to CSC Holdings, LLC, and
was not assigned to Tropicana Entertainment. The
$350.2 million loan evidences the payments by CSC Holdings,
LLC into an account a portion of which was utilized to make
payment on behalf of Tropicana Casinos and Resorts of the
$313.0 million deposit to Aztar upon the execution of the
Aztar Merger Agreement and a deposit of approximately
$37.2 million in connection with the issuance of the old
notes. The $350.2 million loan matures on May 19, 2018
and accrues interest at a rate of LIBOR plus 5% per annum,
although no principal or interest payments are due thereon until
the maturity date thereof.
|
|
(2)
|
AZTAR
ACQUISITION AND FINANCING ADJUSTMENTS
|
The following adjustments give effect to the Aztar Acquisition
and the Acquisition Financing Transactions as if they had
occurred on January 1, 2006.
(a) Aztar reflects its cash promotional offers to its
customers, including cash rebates from loyalty programs, as
reductions in casino revenues. Tropicana Casinos and Resorts
presents casino, rooms, food and beverage and other casino and
hotel revenues on a gross basis inclusive of these types of
promotional allowances, and then deducts such promotional
allowances from its total operating revenues to derive its net
operating revenues. The following table reflects the adjustments
to each of Aztars revenue components to present these
types of promotional allowances in a manner consistent with
Tropicana Casinos and Resorts revenue recognition policies:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Casino revenue
|
|
$
|
44,414
|
|
Rooms revenue
|
|
|
45,076
|
|
Food and beverage revenue
|
|
|
58,526
|
|
Other casino and hotel revenue
|
|
|
5,348
|
|
|
|
|
|
|
Total revenue adjustment
|
|
$
|
153,364
|
|
|
|
|
|
|
Promotional allowances
|
|
$
|
(153,364
|
)
|
|
|
|
|
|
63
Notes to
Unaudited Pro Forma Consolidated Financial
Presentation (Continued)
(In thousands except as otherwise noted)
(b) Aztar reflects the estimated cost of providing patrons
with complimentary food and beverage, accommodations and other
goods and services as casino expense. Tropicana Casinos and
Resorts reflects these costs as expenses of each department that
incurs the relevant costs. The following table reflects the
adjustments required to present these types of expenses in a
manner consistent with Tropicana Casinos and Resorts
expense recognition policies:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Casino expense
|
|
$
|
(75,934
|
)
|
|
|
|
|
|
Rooms expense
|
|
$
|
20,215
|
|
Food and beverage expense
|
|
|
53,416
|
|
Other casino and hotel expense
|
|
|
2,303
|
|
|
|
|
|
|
Total
|
|
$
|
75,934
|
|
|
|
|
|
|
(c) Aztar reflects its provision for doubtful accounts as a
separate line item in its income statement. Tropicana Casinos
and Resorts reflects its provision for doubtful accounts as part
of casino expense. The following table reflects the adjustments
required to present Aztars provision for doubtful accounts
as casino expense:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Casino expense
|
|
$
|
2,475
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
$
|
(2,475
|
)
|
|
|
|
|
|
(d) Following the consummation of the Aztar Acquisition,
Aztar, Tropicana Entertainments wholly-owned, indirect
subsidiary, began to make use of administrative services
provided to it by Columbia Sussex pursuant to a services
agreement entered into between it and Columbia Sussex. Under the
services agreement, Aztar has various corporate and property
administrative services (including, among others, accounting,
marketing, property management and human resources) performed on
its behalf by Columbia Sussex in exchange for a fixed payment of
$1.0 million per year, which represents a cost savings as
compared to the cost at which Aztar previously incurred similar
services at its corporate headquarters and properties. In
addition, Tropicana Entertainment closed Aztars Phoenix,
Arizona headquarters, which produced a reduction in overhead
costs. Furthermore, subsequent to the consummation of the Aztar
Acquisition, management conducted a review of Aztars
staffing practices and effected a staffing reorganization at
Aztar, which has resulted in cost savings and which management
expects to continue to produce cost savings in the future. Cost
savings with respect to administrative and general expense and
lease expense have been realized without affecting revenues
generated by Aztar because substantially all of the cost savings
that were achieved with respect to these expenses resulted from
the closure of Aztars headquarters in Phoenix, Arizona,
which headquarters were no longer needed following the
consummation of the Aztar Acquisition as we consolidated
corporate operations for our existing operations and the
operations acquired in the Aztar Acquisition at our Crestview
Hills, Kentucky headquarters. Cost savings with respect to the
other expense categories are expected to be realized without
affecting revenues because Tropicana Casinos and Resorts has
historically evidenced an ability to achieve revenue growth
while simultaneously effecting reductions in payroll and other
expenses.
64
Notes to
Unaudited Pro Forma Consolidated Financial
Presentation (Continued)
(In thousands except as otherwise noted)
The following pro forma adjustments reflect the implementation
of the cost saving measures described above:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Casino expense
|
|
$
|
(5,542
|
)
|
Rooms expense
|
|
|
(9,220
|
)
|
Food and beverage expense
|
|
|
(6,906
|
)
|
Marketing, advertising and casino promotion expense
|
|
|
(678
|
)
|
Leased land and facilities expense
|
|
|
(614
|
)
|
Administrative and general expense(i)
|
|
|
(19,299
|
)
|
Corporate overhead(i)
|
|
|
7,750
|
|
|
|
|
|
|
Total
|
|
$
|
(34,509
|
)
|
|
|
|
|
|
|
|
|
(i)
|
|
Administrative and general expense
reflects an adjustment of $(19,299), which represents Aztar
corporate costs and a reclassification of certain corporate
overhead costs. The $7,750 add back to corporate overhead
represents additional expenses in support of the acquisition in
accordance with Tropicana Casinos and Resorts expense
recognition policies and a reclassification of certain
administrative and general expenses.
|
(e) The total adjustment to casino expense reflects the
combined impact of the adjustments set forth in notes (b),
(c) and (d) above as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Note(b) reclass related to the treatment of complimentary
services
|
|
$
|
(75,934
|
)
|
Note(c) reclass related to the presentation of allowance for
doubtful accounts
|
|
|
2,475
|
|
Note(d) adjustment related to the staffing reorganization plan
|
|
|
(5,542
|
)
|
|
|
|
|
|
Total casino expense adjustment
|
|
$
|
(79,001
|
)
|
|
|
|
|
|
The total adjustment to rooms expense reflects the combined
impact of the adjustments set forth in notes (b) and
(d) above as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Note(b) reclass related to the treatment of complimentary
services
|
|
$
|
20,215
|
|
Note(d) adjustment related to the staffing reorganization plan
|
|
|
(9,220
|
)
|
|
|
|
|
|
Total rooms expense adjustment
|
|
$
|
10,995
|
|
|
|
|
|
|
The total adjustment to food and beverage expense reflects the
combined impact of the adjustments set forth in notes
(b) and (d) above as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Note(b) reclass related to the treatment of complimentary
services
|
|
$
|
53,416
|
|
Note(d) adjustment related to the staffing reorganization plan
|
|
|
(6,906
|
)
|
|
|
|
|
|
Total food and beverage expense adjustment
|
|
$
|
46,510
|
|
|
|
|
|
|
65
Notes to
Unaudited Pro Forma Consolidated Financial
Presentation (Continued)
(In thousands except as otherwise noted)
(f) Reflects adjustments to depreciation and amortization
expense resulting from purchase accounting adjustments to
reflect the estimated fair values of the assets acquired in the
Aztar Acquisition. The following table sets forth aggregate pro
forma depreciation and amortization expense based on the
estimated fair values of these assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
Useful Life
|
|
|
Annual Expense
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
873,400
|
|
|
|
30
|
|
|
$
|
29,114
|
|
Personal property
|
|
|
106,500
|
|
|
|
5
|
|
|
|
21,300
|
|
Land
|
|
|
797,400
|
|
|
|
Indefinite
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
1,777,300
|
|
|
|
|
|
|
|
50,414
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer loyalty program
|
|
|
97,100
|
|
|
|
10
|
|
|
|
9,710
|
|
Aztar trade name
|
|
|
3,900
|
|
|
|
1.5
|
|
|
|
2,600
|
|
Tropicana Atlantic City gaming license
|
|
|
4,100
|
|
|
|
15
|
|
|
|
273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortizing intangibles
|
|
|
105,100
|
|
|
|
|
|
|
|
12,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,882,400
|
|
|
|
|
|
|
$
|
62,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the adjustments to depreciation
and amortization expense for each period by comparing pro forma
depreciation and amortization expense in respect of the assets
acquired in the Aztar Acquisition for each period to the
historical depreciation and amortization expense recorded by
Aztar in respect of these assets for each period:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Historical depreciation and amortization expense
|
|
$
|
(70,027
|
)
|
Calculated depreciation and amortization expense
|
|
|
62,997
|
|
|
|
|
|
|
Adjustment to depreciation and amortization expense
|
|
$
|
7,030
|
|
|
|
|
|
|
(g) Reflects the elimination of the $78.0 million of
expense paid by Aztar in the second quarter of 2006 in
connection with a
break-up fee
and expense reimbursement to Pinnacle in connection with
Aztars termination of its merger agreement with Pinnacle
in order to enter into the Aztar Merger Agreement. This
$78.0 million payment was paid utilizing a portion of the
deposit made by affiliates of Tropicana Entertainment following
the execution of the Aztar Merger Agreement and has been
reflected by Tropicana Entertainment as a portion of the
purchase price for the Aztar Acquisition.
66
Notes to
Unaudited Pro Forma Consolidated Financial
Presentation (Continued)
(In thousands except as otherwise noted)
(h) Reflects the adjustment to interest expense in respect
of the senior secured credit facility, the Las Vegas secured
loan and the notes and the elimination of historical interest
expense in respect of Tropicana Casinos and Resorts and
Aztars historical indebtedness which was retired
concurrently with or shortly following the consummation of the
Aztar Acquisition, calculated as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Interest expense on new senior secured credit facility(i)
|
|
$
|
(115,000
|
)
|
Less interest on repayment of debt due to acquisition
termination(i)
|
|
|
13,457
|
|
Interest expense on Las Vegas secured loan(ii)
|
|
|
(32,331
|
)
|
Interest expense on the notes(iii)
|
|
|
(92,400
|
)
|
Revolving credit facility undrawn commitment fee
|
|
|
(900
|
)
|
Amortization of deferred financing costs(iv)
|
|
|
(21,021
|
)
|
|
|
|
|
|
Total pro forma interest expense on new debt financing
|
|
|
(248,195
|
)
|
|
|
|
|
|
Less: Tropicana Casinos and Resorts as adjusted interest and
amortization of historical debt(v)
|
|
|
16,641
|
|
Less: Historical Aztar interest and amortization of historical
debt(v)
|
|
|
55,935
|
|
|
|
|
|
|
Pro forma interest expense adjustment
|
|
$
|
(175,619
|
)
|
|
|
|
|
|
|
|
|
(i)
|
|
The first line reflects interest on
$1,530.0 million of borrowings under the senior secured
credit facility. The second line reflects the extent to which
interest expense was reduced under the senior secured credit
facility after giving effect to the repayment of
$167.9 million in aggregate principal amount of the term
loan under the senior secured credit facility following the
termination of the Casino Queen Acquisition Agreement. See
Prospectus Summary Recent
Developments Casino Queen Developments and
Description of Other Indebtedness. The senior
secured credit facility bears interest at a rate equal to an
applicable margin plus, at our option, either (a) a base
rate determined by reference to the higher of (x) the prime
rate announced by the administrative agent under the facility or
(y) the federal funds rate plus 0.50% or (b) a reserve
adjusted LIBOR rate. However, Tropicana Entertainment has
entered into swap agreements in the amount of $1.0 billion,
which effectively fix at 5.00% per annum the LIBOR rate
applicable to $1.0 billion of the indebtedness incurred
under the senior secured credit facility. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Tropicana
Entertainment and Tropicana Casinos and Resorts
Quantitative and Qualitative Disclosures About Market
Risk. We have calculated the amount above by applying an
interest rate of (i) 8.02%, or LIBOR plus an applicable
margin of 2.25%, to that portion of the outstanding indebtedness
under the senior secured credit facility that is not hedged
against, which reflects the interest rate in effect as of
August 31, 2007 under the senior secured credit facility,
and (ii) 7.25%, or 5.00% plus an applicable margin of
2.25%, to the $1.0 billion portion of the outstanding
indebtedness under the senior secured credit facility that is
hedged against by the swap agreement we entered into, which
reflects the effective interest rate to Tropicana Entertainment
under the senior secured credit facility after giving effect to
such hedging arrangement.
|
|
|
|
(ii)
|
|
Reflects interest on
$440.0 million of borrowings under the Las Vegas secured
loan. The Las Vegas secured loan bears interest at a rate equal
to an applicable margin plus, at our option, either (a) a
base rate determined by reference to the higher of (x) the
prime rate announced by the administrative agent under the
facility or (y) the federal funds rate plus 0.50% or
(b) a reserve adjusted LIBOR rate. However, the Las Vegas
borrower has entered into a swap agreement in the amount of
$440.0 million, which effectively fixes at 5.10% per annum
the LIBOR rate applicable to the entire balance outstanding
under the Las Vegas secured loan. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations Tropicana Entertainment and Tropicana
Casinos and Resorts Quantitative and Qualitative
Disclosures About Market Risk. We have calculated the
amount above by applying an interest rate of 7.35%, or LIBOR
plus an applicable margin of 2.25%, to the outstanding
indebtedness under the Las Vegas secured loan, which reflects
the interest rate in effect for the term of the loan after
giving effect to the hedging arrangement described above.
|
|
(iii)
|
|
Reflects interest on the notes
using a fixed annual interest rate of 9.625%.
|
67
Notes to
Unaudited Pro Forma Consolidated Financial
Presentation (Continued)
(In thousands except as otherwise noted)
|
|
|
(iv)
|
|
Reflects (a) amortization of
$68.3 million in deferred financing costs in respect of the
senior secured credit facility, which will be amortized on a
straight-line basis over the five year term of the facility,
(b) amortization of an estimated $8.7 million in
deferred financing costs in respect of the Las Vegas secured
loan, which will be amortized on a straight-line basis over the
18 month term of the facility and (c) amortization of
$12.3 million in deferred financing costs in respect of the
notes, which will be amortized on a straight-line basis over the
eight year term of the notes.
|
|
|
|
(v)
|
|
Reflects elimination of historical
and as adjusted interest expense and amortization of deferred
financing costs relating to Tropicana Casinos and Resorts
historical credit facility, which was retired concurrently with
the consummation of the Aztar Acquisition, and Aztars
historical credit facility and outstanding notes, which were
retired concurrently with the consummation of the Aztar
Acquisition and 30 days following the Aztar Acquisition,
respectively.
|
(i) Reflects elimination of historical income tax expense
of Aztar as Tropicana Entertainment is a pass-through entity for
federal and state income tax purposes.
68
SELECTED
HISTORICAL FINANCIAL DATA TROPICANA ENTERTAINMENT
AND
TROPICANA CASINOS AND RESORTS
The following table sets forth selected historical consolidated
financial data of Tropicana Entertainment and Tropicana Casinos
and Resorts, Tropicana Entertainments ultimate parent
company and predecessor.
The selected historical income statement data of Tropicana
Entertainment for the six month period ended June 30, 2007
and its selected historical balance sheet data as of
June 30, 2007 have been derived from the unaudited
consolidated financial statements of Tropicana Entertainment
included elsewhere in this prospectus which, in the opinion of
management, include all adjustments necessary for a fair
presentation of the information for those periods.
The selected historical consolidated income statement data of
Tropicana Casinos and Resorts for the 2004, 2005 and 2006 fiscal
years and its selected historical consolidated balance sheet
data as of December 31, 2005 and 2006 have been derived
from the audited consolidated financial statements of Tropicana
Casinos and Resorts included elsewhere in this prospectus. The
selected consolidated income statement data of Tropicana Casinos
and Resorts for the 2002 and 2003 fiscal years, and the selected
historical consolidated balance sheet data as of
December 31, 2002, 2003 and 2004 have been derived from the
audited consolidated financial statements of Tropicana Casinos
and Resorts not included elsewhere in this prospectus. The
selected historical income statement data of Tropicana Casinos
and Resorts for the six month period ended June 30, 2006
have been derived from the unaudited consolidated financial
statements of Tropicana Casinos and Resorts included elsewhere
in this prospectus which, in the opinion of management, include
all adjustments necessary for a fair presentation of the
information for such period.
In connection with the corporate reorganization conducted by
Tropicana Casinos and Resorts described under Prospectus
Summary Corporate Reorganization, Tropicana
Casinos and Resorts contributed to Tropicana Entertainment
substantially all of its gaming properties. In the corporate
reorganization, Tropicana Casinos and Resorts did not contribute
to Tropicana Entertainment the assets relating to its
New Orleans riverboat or the gaming assets and operations
at the Casuarina Las Vegas Casino in Las Vegas, Nevada, a casino
located in leased space in a hotel property that is managed by
Columbia Sussex and owned by an affiliate of Columbia Sussex.
Accordingly, the selected historical consolidated financial data
of Tropicana Casinos and Resorts set forth in the table below
reflects the New Orleans riverboat and the gaming assets and
operations at the Casuarina Las Vegas Casino as discontinued
operations. In addition, in accordance with FASB Interpretation
No. 46R, Consolidation of Variable Interest
Entities, the selected historical consolidated financial
data of Tropicana Casinos and Resorts through December 31,
2006 and the selected historical financial data of Tropicana
Entertainment thereafter include the results of Realty, one of
the affiliate guarantors, a variable interest entity of which
Tropicana Casinos and Resorts was the primary beneficiary prior
to the corporate reorganization and of which Tropicana
Entertainment became the primary beneficiary thereafter. For a
more detailed presentation of Realtys results, see the
financial statements of Realty included elsewhere in this
prospectus. Furthermore, on December 12, 2006, Tropicana
Casinos and Resorts acquired all equity interests in Tropicana
Pennsylvania, which is not subject to the restrictive covenants
contained in the indenture. Accordingly, the selected historical
consolidated financial data of Tropicana Casinos and Resorts set
forth in the table below reflect Tropicana Pennsylvania as a
discontinued operation.
Tropicana Casinos and Resorts, through its operating
subsidiaries and affiliates, has made several significant
acquisitions of gaming properties over the past few years,
including the River Palms in Laughlin, Nevada in September 2003,
the MontBleu in South Lake Tahoe, Nevada in June 2005 and the
Belle of Baton Rouge in Baton Rouge, Louisiana in October 2005.
These gaming properties materially increased Tropicana Casinos
and Resorts net operating revenues in the periods
following their acquisitions. The New Orleans riverboat and the
gaming assets and operations at the Casuarina Las Vegas Casino,
which were not contributed to Tropicana Entertainment as part of
the Transactions, are shown as Discontinued Operations,
Casinos to be Transferred in the consolidated financial
statements of Tropicana Casinos and Resorts contained elsewhere
in this prospectus.
69
The historical results below do not represent the results of the
restricted group under the indenture. The historical results set
forth below do not necessarily indicate results expected for any
future period, and the results of any future period do not
necessarily indicate results that may be expected for any other
period or the full fiscal year. The following historical
consolidated financial information should be read in conjunction
with Managements Discussion and Analysis of
Financial Condition and Results of Operations
Tropicana Entertainment and Tropicana Casinos and Resorts
and the consolidated financial statements of Tropicana
Entertainment and Tropicana Casinos and Resorts included
elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
|
2002(1)
|
|
|
2003(1)
|
|
|
2004(1)
|
|
|
2005(1)
|
|
|
2006(1)
|
|
|
2006(1)
|
|
|
2007(2)
|
|
|
|
(In thousands)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
61,236
|
|
|
$
|
73,426
|
|
|
$
|
100,240
|
|
|
$
|
150,040
|
|
|
$
|
239,490
|
|
|
$
|
124,922
|
|
|
$
|
443,417
|
|
Room
|
|
|
10,190
|
|
|
|
12,177
|
|
|
|
18,032
|
|
|
|
28,381
|
|
|
|
39,731
|
|
|
|
19,456
|
|
|
|
97,734
|
|
Food and beverage
|
|
|
11,930
|
|
|
|
15,736
|
|
|
|
21,829
|
|
|
|
30,032
|
|
|
|
41,983
|
|
|
|
20,402
|
|
|
|
80,668
|
|
Other casino and hotel
|
|
|
3,886
|
|
|
|
5,031
|
|
|
|
5,845
|
|
|
|
8,373
|
|
|
|
12,323
|
|
|
|
5,437
|
|
|
|
34,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
87,242
|
|
|
|
106,370
|
|
|
|
145,946
|
|
|
|
216,826
|
|
|
|
333,527
|
|
|
|
170,217
|
|
|
|
656,101
|
|
Less promotional allowance
|
|
|
(2,855
|
)
|
|
|
(16,399
|
)
|
|
|
(24,029
|
)
|
|
|
(30,184
|
)
|
|
|
(44,664
|
)
|
|
|
(22,435
|
)
|
|
|
(102,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
|
84,387
|
|
|
|
89,971
|
|
|
|
121,917
|
|
|
|
186,642
|
|
|
|
288,863
|
|
|
|
147,782
|
|
|
|
554,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
10,395
|
|
|
|
15,206
|
|
|
|
19,822
|
|
|
|
27,658
|
|
|
|
40,482
|
|
|
|
20,197
|
|
|
|
61,434
|
|
Rooms
|
|
|
3,093
|
|
|
|
4,997
|
|
|
|
8,257
|
|
|
|
12,830
|
|
|
|
17,647
|
|
|
|
8,686
|
|
|
|
40,863
|
|
Food and beverage
|
|
|
7,506
|
|
|
|
11,940
|
|
|
|
17,829
|
|
|
|
25,962
|
|
|
|
34,579
|
|
|
|
16,918
|
|
|
|
67,398
|
|
Other casino and hotel
|
|
|
21,660
|
|
|
|
21,153
|
|
|
|
27,210
|
|
|
|
44,834
|
|
|
|
79,909
|
|
|
|
42,229
|
|
|
|
123,723
|
|
Selling, general and administrative
|
|
|
17,436
|
|
|
|
10,633
|
|
|
|
16,647
|
|
|
|
23,253
|
|
|
|
37,047
|
|
|
|
17,146
|
|
|
|
96,478
|
|
Depreciation and amortization
|
|
|
4,364
|
|
|
|
5,478
|
|
|
|
6,615
|
|
|
|
9,646
|
|
|
|
18,033
|
|
|
|
6,415
|
|
|
|
43,353
|
|
Write off of fixed assets, deposits and other costs related to
abandoned acquisitions
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
2,742
|
|
|
|
2,588
|
|
|
|
979
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
64,454
|
|
|
|
69,407
|
|
|
|
96,459
|
|
|
|
146,925
|
|
|
|
230,285
|
|
|
|
112,570
|
|
|
|
433,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
19,933
|
|
|
|
20,564
|
|
|
|
25,458
|
|
|
|
39,717
|
|
|
|
58,578
|
|
|
|
35,212
|
|
|
|
120,544
|
|
Loss from early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,799
|
)
|
Interest expense (net)
|
|
|
(970
|
)
|
|
|
(741
|
)
|
|
|
(796
|
)
|
|
|
(5,511
|
)
|
|
|
(26,645
|
)
|
|
|
(7,124
|
)
|
|
|
(107,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and income taxes
|
|
|
18,963
|
|
|
|
19,823
|
|
|
|
24,662
|
|
|
|
34,206
|
|
|
|
31,933
|
|
|
|
28,088
|
|
|
|
10,150
|
|
Minority interest in net income of consolidated subsidiary
|
|
|
(2,594
|
)
|
|
|
(2,952
|
)
|
|
|
(3,873
|
)
|
|
|
(3,433
|
)
|
|
|
(3,224
|
)
|
|
|
(1,750
|
)
|
|
|
(2,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
16,369
|
|
|
|
16,871
|
|
|
|
20,789
|
|
|
|
30,773
|
|
|
|
28,709
|
|
|
|
26,338
|
|
|
|
7,833
|
|
Income tax benefit, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
384,767
|
|
Discontinued operations, casinos to be transferred
|
|
|
|
|
|
|
(852
|
)
|
|
|
(2,869
|
)
|
|
|
(8,929
|
)
|
|
|
4,705
|
|
|
|
(2,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
16,369
|
|
|
$
|
16,019
|
|
|
$
|
17,920
|
|
|
$
|
21,844
|
|
|
$
|
33,414
|
|
|
$
|
24,241
|
|
|
$
|
392,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (as of period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,400
|
|
|
$
|
21,884
|
|
|
$
|
26,339
|
|
|
$
|
41,233
|
|
|
$
|
33,023
|
|
|
$
|
62,166
|
|
|
$
|
86,648
|
|
Total assets
|
|
|
55,550
|
|
|
|
100,158
|
|
|
|
115,808
|
|
|
|
368,268
|
|
|
|
1,734,091
|
|
|
|
714,347
|
|
|
|
3,851,539
|
|
Total debt (excluding related party)
|
|
|
6,700
|
|
|
|
22,700
|
|
|
|
19,950
|
|
|
|
199,500
|
|
|
|
1,155,975
|
|
|
|
196,629
|
|
|
|
2,741,789
|
|
Stockholders equity
|
|
|
32,060
|
|
|
|
53,653
|
|
|
|
71,573
|
|
|
|
120,017
|
|
|
|
146,931
|
|
|
|
156,921
|
|
|
|
960,377
|
|
|
|
|
(1)
|
|
Reflects results of Tropicana
Casinos and Resorts.
|
|
(2)
|
|
Reflects results of Tropicana
Entertainment. Includes Aztars results of operations from
January 3, 2007, the date of its acquisition.
|
70
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TROPICANA ENTERTAINMENT AND
TROPICANA CASINOS AND RESORTS
The following managements discussion and analysis
should be read in conjunction with Selected Historical
Consolidated Financial Data Tropicana Entertainment
and Tropicana Casinos and Resorts and the consolidated
financial statements of Tropicana Entertainment and Tropicana
Casinos and Resorts included elsewhere in this prospectus. See
Forward Looking Statements and Risk
Factors for a discussion of factors that could cause
future financial condition and results of operations to be
different from those discussed below. Tropicana Casinos and
Resorts fiscal year ends on December 31 of each calendar
year, and its interim fiscal quarters end on the last day of
March, June and September of each year. Certain monetary
amounts, percentages and other figures included in this
prospectus have been subject to rounding adjustments.
Accordingly, figures shown as totals in certain tables may not
be the arithmetic aggregation of the figures that precede them,
and figures expressed as percentages in the text may not total
100% or, as applicable, when aggregated may not be the
arithmetic aggregation of the percentages that precede them.
Separate discussions and analyses of results of operations for
CP Vicksburg, JMBS Casino and Aztar are included elsewhere in
this prospectus.
Overview
and Presentation
We are a leading, diversified, multi-jurisdictional owner and
operator of gaming properties. We own or operate gaming
properties located in Nevada, New Jersey, Louisiana, Mississippi
and Indiana that are focused primarily on serving customers
within driving distance of such properties. Tropicana Casinos
and Resorts, Tropicana Entertainments ultimate parent
company and predecessor, was formed in 1990 by Mr. William
Yung to acquire the Tahoe Horizon, his initial investment in the
gaming industry. Since obtaining a gaming license in 1990,
Mr. William Yung, has built a record of successful gaming
acquisitions and development, while generating growth and
operational improvements. On June 8, 2006, in connection
with the corporate reorganization conducted by Tropicana Casinos
and Resorts as described under Prospectus
Summary Corporate Reorganization and
Business Corporate Reorganization,
Tropicana Entertainment was formed.
In the corporate reorganization completed on January 3,
2007, Tropicana Casinos and Resorts contributed to Tropicana
Entertainment five gaming properties, but did not contribute to
Tropicana Entertainment the assets relating to its New Orleans
riverboat, the gaming assets and operations at the Casuarina Las
Vegas Casino, a casino located in leased space in a hotel
property managed by Columbia Sussex and owned by an affiliate of
Columbia Sussex, or the assets relating to the Tropicana
Pennsylvania. These operations are shown as Discontinued
Operations, Casinos to be Transferred in the consolidated
financial statements of Tropicana Casinos and Resorts contained
elsewhere in this prospectus, and the following
managements discussion and analysis gives effect to such
treatment in its presentation of Tropicana Casinos and
Resorts financial condition and results of operations. In
addition, in accordance with FASB Interpretation No. 46R,
Consolidation of Variable Interest Entities, the
consolidated financial statements of Tropicana Entertainment and
Tropicana Casinos and Resorts include the results of Realty, one
of the affiliate guarantors, a variable interest entity of which
Tropicana Casinos and Resorts was the primary beneficiary prior
to the corporate reorganization and of which Tropicana
Entertainment became the primary beneficiary thereafter. For a
more detailed presentation of Realtys results, see the
financial statements of Realty included elsewhere in this
prospectus.
In light of Tropicana Entertainments limited operating
history and the fact that five of the gaming properties
comprising its present casino portfolio were previously operated
by Tropicana Casinos and Resorts, this managements
discussion and analysis presents the financial condition and
results of operations of both Tropicana Entertainment and
Tropicana Casinos and Resorts so as to provide a more complete
understanding of Tropicana Entertainments business than
would be afforded by a presentation of the financial condition
and results of operations of Tropicana Entertainment alone.
71
Acquisition
of Aztar
On January 3, 2007, affiliates of Tropicana Entertainment
acquired all of the outstanding equity interests in Aztar for
approximately $2.1 billion in cash. As part of the
corporate reorganization completed substantially concurrently
with the acquisition, Aztar became a wholly-owned subsidiary of
Tropicana Entertainment. For more information concerning the
Aztar Acquisition, see Prospectus Summary The
Aztar Acquisition and Business The Aztar
Acquisition. The Aztar Acquisition added four casino
properties located in Nevada, New Jersey and Indiana to the
holdings of Tropicana Entertainment.
The Aztar Acquisition has significantly increased the revenues
of Tropicana Entertainment. Tropicana Entertainment has incurred
significant new borrowings in connection with the Acquisition
Financing Transactions that it entered into in order to finance
the Aztar Acquisition. Accordingly, Tropicana
Entertainments interest expense in future periods is
significantly higher than the historical interest expense of
Tropicana Casinos and Resorts.
The Aztar Acquisition was accounted for as a purchase and the
results of operations of the acquired company have been included
in Tropicana Entertainments results of operations from its
acquisition date. As a result of the Aztar Acquisition,
Aztars assets and liabilities were adjusted to fair value
as of the closing date of the Aztar Acquisition based on a
preliminary estimate provided by an independent third party
appraiser. The excess of the total purchase price over the fair
value of Aztars net assets at the closing of the Aztar
Acquisition was allocated to goodwill, and this indefinite-lived
asset will be subject to an impairment review on an annual basis
or as the circumstances require. The following accounting
polices and classifications used by Aztar were changed as of the
date of the Aztar Acquisition, January 3, 2007, to reflect
Tropicana Entertainments accounting policies and
classifications: (i) Operating revenues are presented gross
of promotional allowances and complimentaries offered to
customers, while Aztar presented operating revenues net of these
items. These promotional allowances and complimentaries are then
deducted from gross operating revenue to derive net operating
revenues. (ii) The cost of providing complimentary rooms,
food and beverage to customers is presented as an expense of the
department providing the service, while Aztar presented these
costs as expenses of the department that granted the
complimentary to the guest, which was primarily the casino
department. (iii) Gaming taxes and licensing fees are
presented as a separate caption in the statement of operations,
while Aztar presented these costs as part of the casino
department. (iv) Provision for doubtful accounts expense is
included as a casino department expense, while Aztar presented
provision for doubtful accounts as a separate operating expense
caption. (v) Depreciation and amortization expense after
the Aztar Acquisition will reflect useful lives which may differ
from those used by Aztar prior to the Aztar Acquisition. See
footnote 2 of the unaudited pro forma consolidated income
statement included elsewhere in this prospectus for more detail
regarding these reclassifications we have made.
Other
Recently Completed Acquisitions
Tropicana Casinos and Resorts, through its operating
subsidiaries and affiliates, has made several significant
acquisitions of gaming properties over the past few years, which
properties it contributed to Tropicana Entertainment as part of
the corporate reorganization. These acquisitions include:
|
|
|
|
|
The gaming assets and operations of the River Palms in Laughlin,
Nevada. Realty acquired the real estate and substantially all of
the non-gaming assets of the property. The acquisitions were
made in September 2003 for an aggregate cash purchase price of
$25.2 million. Tropicana Casinos and Resorts has since
invested nearly $13.6 million in hotel room renovations and
casino floor improvements at the River Palms.
|
|
|
|
The MontBleu in South Lake Tahoe, Nevada, which Tropicana
Casinos and Resorts acquired in June 2005 for an aggregate cash
purchase price of $47.2 million. During the fourth quarter
of 2005, Tropicana Casinos and Resorts commenced a
$21.0 million redevelopment of the MontBleu, which
encompassed, among other things, remodeling the common areas of
the property, including the lobby, restaurants and onsite
nightclub. The renovated MontBleu re-opened in May 2006.
|
72
|
|
|
|
|
The Argosy Riverboat Casino and related assets in Baton Rouge,
Louisiana, which Tropicana Casinos and Resorts acquired in
October 2005 for an aggregate cash purchase price of
approximately $149.7 million. The property has since been
renamed the Belle of Baton Rouge.
|
Financial
Statement Presentation
The following provides a brief description of certain items that
appear in the financial statements of Tropicana Entertainment
and Tropicana Casinos and Resorts and general factors that
impact these items:
Operating Revenue. Total operating revenue
represents gross revenues derived from casino operations, hotel
room revenues associated with hotel operations, food and
beverage, retail and other casino and hotel operations. Net
operating revenue represents total operating revenue less
promotional allowances, which include the retail value of
accommodations, food and beverage and other services provided to
casino customers without charge and cash back awards
such as cash coupons, rebates, cash complimentaries and refunds,
or complimentaries.
Casino operating revenue is derived primarily from patrons
wagering on slot machines and, to a lesser extent, table games
and other gaming operations. Table games include blackjack,
craps, roulette, and specialty games. Casino operating revenue
is defined as the net win from gaming activities, computed as
the difference between gaming wins and losses, not the total
amount wagered. Table game drop and slot
handle are casino industry-specific terms used to identify
the amount wagered by patrons for a casino table game or slot
machine, respectively. Table game hold and
slot hold represent the percentage of the total
amount wagered by patrons that the casino has won. Casino
operating revenue is recognized as earned at the time the
relevant services are provided.
Hotel room revenue is derived from hotel rooms and suites rented
to guests. Hotel room revenue is recognized at the time the
hotel rooms are provided to guests.
Food and beverage revenues are derived from food and beverage
sales in the food outlets of the casino properties, including
restaurants, room service and banquets. Food and beverage
revenue is recognized at the time the relevant food
and/or
beverage service is provided to guests.
Revenue from other casino and hotel operations is obtained from
ancillary hotel operations such as telephone service sales, gift
shop sales, arcade revenues, retail amenities, concessions,
entertainment offerings and show room sales and certain other
ancillary activities conducted at the casino properties.
Casino operating revenues vary from time to time due to table
game hold, slot hold, the amount of gaming activity, as well as
variations in the odds for different games of chance. Hotel room
revenues vary depending upon the occupancy levels at the hotels
and the rates that can be charged. Casino operating revenues,
hotel room revenues, food and beverage revenues, and other
revenues vary due to general economic conditions and competition.
Operating Expense. Operating expense
represents the direct costs associated with, among other things,
operating casinos, rooms departments, food and beverage outlets
and other casino and hotel operations (including retail
amenities, concessions, entertainment offerings and certain
other ancillary activities conducted at the casino properties),
and also includes the cost of providing complimentaries. These
direct operating costs primarily relate to payroll, supplies
and, in the case of food and beverage operations, the cost of
goods sold. Operating expenses also take account of utility
costs, marketing and advertising, repairs and maintenance,
insurance, administrative and general expenses, land and
building leases, gaming taxes, and real estate and property
taxes. Finally, operating expenses include depreciation of
property and equipment used at the various operations and
amortization of intangibles and other assets.
Among the costs described above, gaming taxes and licenses,
casino expenses and food and beverage expenses account for a
significantly greater proportion of the aggregate expenses
constituting operating expenses than the others. Expenses
associated with gaming taxes and licenses reflect amounts
payable to authorities in connection with gaming operations and
are computed in various ways
73
depending on the type of gaming or activity involved. Gaming
license fees and taxes are based upon such factors as a
percentage of the gross revenues or net gaming proceeds
received, the number of gaming devices and table games operated
and franchise fees for riverboat casinos operating on certain
waterways. In many jurisdictions, gaming tax rates are graduated
such that they increase as gross revenues increase. Gaming
license fees and taxes may also vary with changes in applicable
legislation. Casino expense includes, among other things, costs
associated with payroll, fixtures and equipment and other
similar costs. Casino expense varies depending on amounts
expended in connection with such costs, which may depend on
staffing and equipment requirements and the implementation of
cost saving measures. Food and beverage expense varies on the
basis of the cost of certain food items and generally increases
in relation to increases in food and beverage sales.
Operating Income. Operating income represents
the net of operating revenues and operating expenses and
excludes other items that are not related to operations, such as
income earned from the investment of excess funds and minority
interest allocations.
Income from Continuing Operations. Income from
continuing operations represents operating income plus interest
income and other non-operating income, less interest expense and
minority interest income.
Net Income (Loss). Net income (loss)
represents income from continuing operations less discontinued
operations or casinos held directly by Tropicana Casinos and
Resorts (rather than Tropicana Entertainment) following the
corporate reorganization.
Results
of Operations
The results of operations for Tropicana Entertainment for the
six months ended June 30, 2007 are summarized below. In
addition, the results of operations for Tropicana Casinos and
Resorts, Tropicana Entertainments ultimate parent company
and predecessor, for the years ended December 31, 2004,
2005 and 2006 and the six months ended June 30, 2006 are
summarized below. The results are reported by segment. The
Nevada segment is comprised of the Tahoe Horizon, MontBleu and
River Palms. The Mississippi River basin segment is comprised of
the Lighthouse Point Casino and the Belle of Baton Rouge.
With the consummation of the Aztar Acquisition, four casino
properties located in Nevada, New Jersey and Indiana were
added to Tropicana Entertainments holdings. Tropicana
Express is now part of the Nevada segment. Casino Aztar
Evansville is now part of the Mississippi River basin segment.
Tropicana Atlantic City and Tropicana Las Vegas are each
separate reporting segments.
74
Net
Operating Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Nevada Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tahoe Horizon
|
|
$
|
47,074
|
|
|
$
|
47,614
|
|
|
$
|
44,138
|
|
|
$
|
19,964
|
|
|
$
|
18,793
|
|
MontBleu(1)
|
|
|
|
|
|
|
33,374
|
|
|
|
49,953
|
|
|
|
21,486
|
|
|
|
24,893
|
|
River Palms
|
|
|
47,378
|
|
|
|
50,316
|
|
|
|
52,101
|
|
|
|
28,221
|
|
|
|
27,189
|
|
Tropicana Express(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nevada
|
|
|
94,452
|
|
|
|
131,304
|
|
|
|
146,192
|
|
|
|
69,671
|
|
|
|
117,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi River Basin Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lighthouse Point
|
|
|
27,465
|
|
|
|
29,041
|
|
|
|
28,426
|
|
|
|
15,395
|
|
|
|
15,511
|
|
Belle of Baton Rouge(2)
|
|
|
|
|
|
|
26,297
|
|
|
|
114,245
|
|
|
|
62,716
|
|
|
|
53,519
|
|
Casino Aztar Evansville(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mississippi River Basin
|
|
|
27,465
|
|
|
|
55,338
|
|
|
|
142,671
|
|
|
|
78,111
|
|
|
|
136,145
|
|
Tropicana Atlantic City(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,982
|
|
Tropicana Las Vegas(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,408
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
121,917
|
|
|
$
|
186,642
|
|
|
$
|
288,863
|
|
|
$
|
147,782
|
|
|
$
|
554,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenue for casinos held for the entire period
|
|
$
|
121,917
|
|
|
$
|
126,971
|
|
|
$
|
124,665
|
|
|
$
|
147,782
|
|
|
$
|
140,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects results since
June 10, 2005 acquisition.
|
|
(2)
|
|
Reflects results since
October 25, 2005 acquisition.
|
|
(3)
|
|
Reflects results since
January 3, 2007 acquisition.
|
75
Operating
Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Nevada Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tahoe Horizon
|
|
$
|
9,929
|
|
|
$
|
9,361
|
|
|
$
|
8,236
|
|
|
$
|
2,376
|
|
|
$
|
835
|
|
MontBleu(1)
|
|
|
|
|
|
|
4,614
|
|
|
|
(4,077
|
)
|
|
|
(5,406
|
)
|
|
|
572
|
|
River Palms
|
|
|
6,868
|
|
|
|
7,895
|
|
|
|
9,154
|
|
|
|
7,029
|
|
|
|
5,875
|
|
Tropicana Express(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nevada
|
|
|
16,797
|
|
|
|
21,870
|
|
|
|
13,313
|
|
|
|
3,999
|
|
|
|
19,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi River Basin Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lighthouse Point
|
|
|
10,943
|
|
|
|
12,616
|
|
|
|
11,376
|
|
|
|
6,389
|
|
|
|
6,091
|
|
Belle of Baton Rouge(2)
|
|
|
|
|
|
|
10,828
|
|
|
|
39,241
|
|
|
|
26,089
|
|
|
|
16,922
|
|
Casino Aztar Evansville(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mississippi River Basin
|
|
|
10,943
|
|
|
|
23,444
|
|
|
|
50,617
|
|
|
|
32,478
|
|
|
|
34,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tropicana Atlantic City(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,578
|
|
Tropicana Las Vegas(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Totals
|
|
|
27,740
|
|
|
|
45,314
|
|
|
|
63,930
|
|
|
|
36,477
|
|
|
|
132,170
|
|
Corporate
|
|
|
(2,282
|
)
|
|
|
(5,597
|
)
|
|
|
(5,352
|
)
|
|
|
(1,265
|
)
|
|
|
(11,626
|
)
|
Minority interest net income of consolidated subsidiaries
|
|
|
(3,873
|
)
|
|
|
(3,433
|
)
|
|
|
(3,224
|
)
|
|
|
(1,750
|
)
|
|
|
(2,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,585
|
|
|
$
|
36,284
|
|
|
$
|
55,354
|
|
|
$
|
33,462
|
|
|
$
|
118,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income for casinos held for the entire period
|
|
$
|
21,585
|
|
|
$
|
20,842
|
|
|
$
|
20,190
|
|
|
$
|
33,462
|
|
|
$
|
16,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects results since
June 10, 2005 acquisition.
|
|
(2)
|
|
Reflects results since
October 25, 2005 acquisition.
|
|
(3)
|
|
Reflects results since
January 3, 2007 acquisition.
|
76
Segment
Adjusted EBITDA and Income from Continuing
Operations(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Nevada Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tahoe Horizon
|
|
$
|
13,202
|
|
|
$
|
13,051
|
|
|
$
|
12,649
|
|
|
$
|
3,906
|
|
|
$
|
2,747
|
|
MontBleu(1)
|
|
|
|
|
|
|
5,917
|
|
|
|
640
|
|
|
|
(2,975
|
)
|
|
|
2,492
|
|
River Palms
|
|
|
8,611
|
|
|
|
10,649
|
|
|
|
13,012
|
|
|
|
8,244
|
|
|
|
8,056
|
|
Tropicana Express(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nevada
|
|
|
21,813
|
|
|
|
29,617
|
|
|
|
26,301
|
|
|
|
9,175
|
|
|
|
29,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi River Basin Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lighthouse Point
|
|
|
12,621
|
|
|
|
14,320
|
|
|
|
12,957
|
|
|
|
7,218
|
|
|
|
6,340
|
|
Belle of Baton Rouge(2)
|
|
|
|
|
|
|
11,752
|
|
|
|
45,291
|
|
|
|
27,478
|
|
|
|
19,763
|
|
Casino Aztar Evansville(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mississippi River Basin
|
|
|
12,621
|
|
|
|
26,072
|
|
|
|
58,248
|
|
|
|
34,696
|
|
|
|
42,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tropicana Atlantic City(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,435
|
|
Tropicana Las Vegas(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
|
|
34,434
|
|
|
|
55,689
|
|
|
|
84,549
|
|
|
|
43,871
|
|
|
|
156,751
|
|
Corporate
|
|
|
(2,282
|
)
|
|
|
(3,584
|
)
|
|
|
(5,350
|
)
|
|
|
(1,265
|
)
|
|
|
(6,666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
32,152
|
|
|
|
52,105
|
|
|
|
79,199
|
|
|
|
42,606
|
|
|
|
150,085
|
|
Write off of fixed assets and deposits related to abandoned
acquisition
|
|
|
(79
|
)
|
|
|
(2,742
|
)
|
|
|
(2,588
|
)
|
|
|
(979
|
)
|
|
|
(263
|
)
|
Construction accident insurance recoveries, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,075
|
|
Depreciation and amortization
|
|
|
(6,615
|
)
|
|
|
(9,646
|
)
|
|
|
(18,033
|
)
|
|
|
(6,415
|
)
|
|
|
(43,353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
25,458
|
|
|
|
39,717
|
|
|
|
58,578
|
|
|
|
35,212
|
|
|
|
120,544
|
|
Interest income
|
|
|
113
|
|
|
|
482
|
|
|
|
8,918
|
|
|
|
886
|
|
|
|
6,483
|
|
Interest expense
|
|
|
(909
|
)
|
|
|
(5,993
|
)
|
|
|
(35,563
|
)
|
|
|
(8,010
|
)
|
|
|
(114,078
|
)
|
Loss from early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,799
|
)
|
Minority interest in net income of consolidated subsidiaries
|
|
|
(3,873
|
)
|
|
|
(3,433
|
)
|
|
|
(3,224
|
)
|
|
|
(1,750
|
)
|
|
|
(2,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax
|
|
$
|
20,789
|
|
|
$
|
30,773
|
|
|
$
|
28,709
|
|
|
$
|
26,338
|
|
|
$
|
7,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA for casinos held for the entire period
|
|
$
|
32,152
|
|
|
$
|
34,436
|
|
|
$
|
33,268
|
|
|
$
|
42,606
|
|
|
$
|
32,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects results since
June 10, 2005 acquisition.
|
|
(2)
|
|
Reflects results since
October 25, 2005 acquisition.
|
|
(3)
|
|
Reflects results since
January 3, 2007 acquisition.
|
|
(4)
|
|
Segment Adjusted EBITDA is net
income before interest expense, interest income, depreciation,
amortization, corporate expenses, write offs of fixed assets and
deposits related to abandoned acquisition and minority interest
in net income of consolidated subsidiary. Segment Adjusted
EBITDA should not be construed as a substitute for either
operating income or net income as they are determined in
accordance with GAAP. Management uses Segment Adjusted EBITDA as
a measure to compare operating results between segments and
accounting periods. Management manages cash and finances
Tropicana Entertainments operations at the corporate
level. Management manages the allocation of capital among
segments at the corporate level. Management accordingly believes
that Segment Adjusted EBITDA is useful as a measure of operating
results at the segment level because it reflects the results of
operating decisions at that level separated from the effects of
financing decisions that are managed at the corporate level.
Management also uses Segment Adjusted EBITDA as an important
operating performance measure in bonus programs for managers and
executive officers. Management also believes that Segment
Adjusted EBITDA is a commonly used measure of operating
performance in the gaming industry and is an important basis for
the valuation of gaming companies. Managements
|
77
|
|
|
|
|
calculation of Segment Adjusted
EBITDA may not be comparable to similarly titled measures
reported by other companies and, therefore, any such differences
must be considered when comparing performance among different
companies. While management believes that Segment Adjusted
EBITDA provides a useful perspective for some purposes, Segment
Adjusted EBITDA has material limitations as an analytical tool.
For example, among other things, although depreciation,
amortization and write off of fixed assets and deposits related
to abandoned acquisition are non-cash charges, the assets being
depreciated, amortized and written off may have to be replaced
in the future, and Segment Adjusted EBITDA does not reflect the
requirements for such replacements. Interest expense, interest
income, and minority interest in net income of consolidated
subsidiary are also not reflected in Segment Adjusted EBITDA.
Therefore, management does not consider Segment Adjusted EBITDA
in isolation, and it should not be considered as a substitute
for measures determined in accordance with GAAP. A
reconciliation of Segment Adjusted EBITDA with operating income
and net income as determined in accordance with GAAP is
reflected in the table above.
|
Tropicana
Entertainments Six Months Ended June 30, 2007
Compared to Tropicana Casinos and Resorts Six Months Ended
June 30, 2006
On January 3, 2007, the Aztar Acquisition was consummated
and Aztar became a wholly-owned subsidiary of Tropicana
Entertainment. The Aztar Acquisition added four casino
properties located in Nevada, New Jersey and Indiana to the
holdings of Tropicana Entertainment and significantly increased
the revenues of Tropicana Entertainment as compared to the
revenues recorded by Tropicana Casinos and Resorts, Tropicana
Entertainments ultimate parent and predecessor, in the
periods preceding the Aztar Acquisition. As a result of the
Aztar Acquisition, Tropicana Express was added to the Nevada
reporting segment, Casino Aztar Evansville was added to the
Mississippi River basin reporting segment and Tropicana Atlantic
City and Tropicana Las Vegas each became independent reporting
segments. In addition, Tropicana Entertainment incurred
significant new borrowings in connection with the Acquisition
Financing Transactions that it and certain of its affiliates
entered into in order to finance the Aztar Acquisition.
Accordingly, Tropicana Entertainments interest expense is
significantly higher than the historical interest expense of
Tropicana Casinos and Resorts.
Results of operations in this section of Managements
Discussion and Analysis of Financial Condition and Results of
Operations Tropicana Entertainment and Tropicana
Casinos and Resorts are reported by comparing the financial
performance of Tropicana Entertainment, or its individual
reporting segments, in the six months ended June 30, 2007
to the financial performance of Tropicana Casinos and Resorts,
or its individual reporting segments, in the six months ended
June 30, 2006.
Net operating revenue increased by $406.3 million, or
274.9%, to $554.1 million in the six months ended
June 30, 2007 from $147.8 million in the six months
ended June 30, 2006. Operating expenses increased by
$320.9 million, or 285.0%, to $433.5 million in the
six months ended June 30, 2007 from $112.6 million in
the six months ended June 30, 2006. Correspondingly,
operating income increased by $85.3 million, or 242.3%, to
$120.5 million in the six months ended June 30, 2007
from $35.2 million in the six months ended June 30,
2006. Net income increased by $368.4 million to
$392.6 million in the six months ended June 30, 2007
from $24.2 million in the six months ended June 30,
2006. These period over period increases in net operating
revenue and expense resulted principally from the acquisition of
Aztar in January 2007. The effect of the Aztar Acquisition on
the period over period performance of the individual operating
segments is described in greater detail below. In addition, the
period over period increase in net income principally reflects
the effect of two unusual items: In the second quarter of 2007,
Tropicana Entertainment elected Sub-Chapter S status for
Federal income tax purposes for the Aztar entities it acquired.
This resulted in a one-time credit of $399.1 million to
income tax expense. In addition, during the second quarter,
Tropicana Entertainment settled lawsuits arising out of the
collapse of a garage at its Atlantic City property and incurred
certain costs associated therewith, recording net proceeds of
$15.5 million as a result.
Net operating revenues for the casino properties that Tropicana
Entertainment owned and operated at June 30, 2007 and
Tropicana Casinos and Resorts owned and operated at
June 30, 2006 (which we refer to as same store properties)
declined by $7.7 million, or 5.2%, to $140.1 million
in the six months ended June 30, 2007 as compared to
$147.8 million in the six months ended June 30, 2006.
Comparisons of same store revenues for each of the operating
segments during both periods are set forth in greater detail
below.
78
Nevada
Properties
Principally as a result of the inclusion of the newly acquired
Tropicana Express in the Nevada properties segment following its
acquisition, net operating income for the Nevada properties
increased $15.1 million, or 377.6%, to $19.1 million
in the six months ended June 30, 2007 from
$4.0 million in the six months ended June 30, 2006.
Net operating revenue and net operating income for the Tropicana
Express in Laughlin, Nevada was $46.4 million and
$11.8 million, respectively in the period beginning
January 3, 2007 and concluding June 30, 2007. As in
the case of our other casino property in this market, the River
Palms, the Tropicana Express is experiencing intense competition
from a competing casino resort that was recently acquired and
renovated and which is seeking to gain market share. This
increased competition is putting pressure on revenue levels and
encouraging increased promotional expenditures at the Tropicana
Express. Offsetting this effect on net operating revenues, we
are reducing operating costs at the property principally through
payroll cost reductions as a result of the introduction of our
enterprise-wide operating standards at our newly acquired
properties. In conjunction with the Aztar Acquisition and the
implementation of these standards, Tropicana Express incurred
approximately $0.2 million in transition and termination
costs during the period beginning January 3, 2007 and
concluding June 30, 2007.
Net operating revenue increased at the same store Nevada
properties by $1.2 million, or 1.7%, to $70.9 million
in the six months ended June 30, 2007 from
$69.7 million in the six months ended June 30, 2006.
Of this increase, MontBleu contributed $3.4 million due
primarily to the completion of major renovations in June 2006.
During the six months ended June 30, 2006, MontBleu
experienced disruptions relating to ongoing construction at the
property, while the six months ended June 30, 2007 revealed
the effects of a completely renovated casino, updated restaurant
and spa amenities. The River Palms period over period net
operating revenues declined by $1.0 million, or 3.5%, as a
result of reduced market share due to increased marketing
efforts and promotional spending from a newly acquired and
remodeled competitor, as well as increased promotional spending
incurred by the River Palms to effectively compete in these
market conditions.
Mainly driven by the results of MontBleu, operating expenses at
the same store Nevada properties decreased by $2.1 million,
or 3.2%, to $63.6 million in the six months ended
June 30, 2007 from $65.7 million in the six months
ended June 30, 2006. MontBleus period over period
expenses decreased by $2.6 million, principally as a result
of a $0.6 million reduction in labor costs and a decline of
$1.6 million in advertising, promotional and entertainment
spending from its heightened level in the 2006 period when such
spending included grand re-opening and re-branding promotions as
well as higher advertising expenses.
As a result of the factors discussed above, net operating income
for the same store Nevada properties increased $3.3 million
to $7.3 million in the six months ended June 30, 2007
from $4.0 million in the six months ended June 30,
2006.
Mississippi
River Basin Properties
Principally as a result of the inclusion of the recently
acquired Casino Aztar Evansville in the Mississippi River basin
properties segment following its acquisition, net operating
income for the Mississippi River basin properties increased
$1.7 million, or 5.2%, to $34.2 million in the six
months ended June 30, 2007 from $32.5 million in the
six months ended June 30, 2006. Net operating revenue for
the Casino Aztar Evansville in Evansville, Indiana was
$67.1 million in the period beginning January 3, 2007
and concluding June 30, 2007 and its net operating income
was $11.1 million during that period. Revenues and net
operating income at this property were adversely affected by the
introduction of a new gaming property in French Lick, Indiana
opened by a competitor during the fourth quarter of 2006. The
opening at the Casino Aztar Evansville in the fourth quarter
2006 of additional dining and entertainment venues and a new
96-room
boutique hotel has helped to offset some of the loss in business
attributable to the operations of the competing property in
French Lick, Indiana. In addition, Casino Aztar
Evansvilles results have benefited from labor cost savings
arising out of the implementation of our enterprise-wide
operational standards at the property following its acquisition.
In conjunction with the acquisition and the
79
implementation of these standards, the Casino Aztar Evansville
incurred approximately $0.2 million in transition and
termination payments during the period beginning January 3,
2007 and concluding June 30, 2007.
Net operating revenue at the same store Mississippi River basin
properties declined by $9.1 million, or 11.7%, to
$69.0 million in the six months ended June 30, 2007
from $78.1 million in the six months ended June 30,
2006. This included a decrease of $9.2 million at the Belle
of Baton Rouge resulting from the re-opening of casino
properties along the Gulf Coast and the return to that region
from our operating areas of a portion of the population
displaced following Hurricane Katrina in August 2005.
Operating expenses remained relatively flat at same store
Mississippi River basin properties at $46.0 million and
$45.6 million in the six months ended June 30, 2007
and 2006 respectively. Belle of Baton Rouges period over
period expenses were unchanged at $36.6 million. The lower
payroll costs ($1.5 million) and lower gaming taxes
($1.8 million) related to the decrease in revenues
discussed above were offset by an increase in insurance costs
($0.7 million), due to higher insurance rates charged by
insurance carriers following Hurricane Katrina, and higher
advertising and promotional expenses ($2.6 million). The
Lighthouse Point Casino experienced a period over period
increase in operating expenses of $0.4 million due
primarily to higher insurance costs, equipment rental costs,
property taxes and outside services, each of which items
increased by $0.1 million.
As a result of the factors discussed above, operating income for
the Mississippi River basin same store properties decreased by
$9.4 million, or 28.9%, to $23.1 million in the six
months ended June 30, 2007 from $32.5 million in the
six months ended June 30, 2006.
Tropicana
Atlantic City
As a result of the Aztar Acquisition, Tropicana Atlantic City
became an independent reporting segment. Tropicana Atlantic City
recorded net operating revenue of $218.0 million for the
period beginning January 3, 2007 and concluding
June 30, 2007. Operating income at Tropicana Atlantic City
was $55.6 million for the period beginning January 3,
2007 and concluding June 30, 2007. The Tropicana Atlantic
City is currently experiencing significant competitive pressure
from gaming operations recently opened in Pennsylvania and New
York, which are vying aggressively for traditional Atlantic City
customers residing in New Jersey, Pennsylvania and New York.
In addition, increased promotional spending by our competitors
in the Atlantic City market coupled with disruptions to our
operations at the Tropicana Atlantic City as a result of
construction we were undertaking in the first and second
quarters of 2007 in our casino and hotel have also adversely
affected revenues for the period beginning January 3, 2007
and concluding June 30, 2007. Offsetting this downward
effect on net operating revenues, we began the implementation of
our planned operating standards at this property, which were
designed to improve operating efficiencies and lower operating
costs. In conjunction with the acquisition of the property and
the implementation of these standards, the Tropicana Atlantic
City incurred approximately $1.1 million in transition and
termination payments during the period beginning January 3,
2007 and concluding June 30, 2007. In addition, during the
period beginning January 3, 2007 and concluding
June 30, 2007, the Tropicana Atlantic City realized a net
gain of $14.1 million related to insurance recoveries arising
out of the 2003 construction accident on the site of the
property, which gain was net of defense and other costs. See
Business Legal Proceedings
Litigation matters relating to Aztars October 30,
2003 garage collapse accident.
Tropicana
Las Vegas
As a result of the Aztar Acquisition, Tropicana Las Vegas became
an independent reporting segment. Tropicana Las Vegas recorded
net operating revenue of $82.4 million during the period
beginning January 3, 2007 and concluding June 30,
2007. Operating income at Tropicana Las Vegas was
$23.4 million during the period beginning January 3,
2007 and concluding June 30, 2007. We have introduced new
operational standards at the property to more closely align its
operations with our enterprise-wide standards. The new
operational standards implemented include adjustments to
staffing levels that have achieved more efficient
80
and cost-effective operations. In conjunction with the
acquisition of the property and the implementation of these
standards, Tropicana Las Vegas incurred approximately
$0.1 million in transition and termination payments during
the period beginning January 3, 2007 and concluding
June 30, 2007.
Corporate
Corporate expenses increased by $10.3 million to
$11.6 million in the six months ended June 30, 2007
from $1.3 million in the six months ended June 30,
2006 as a result of the amortization of intangible assets,
incremental payroll costs, audit costs and other operating
expenses associated with the growth of Tropicana Entertainment
as a result of the Aztar Acquisition.
Tropicana
Casinos and Resorts Year Ended December 31, 2006
Compared to its Year Ended December 31, 2005
Net operating revenue in 2006 increased 55% to
$288.9 million from $186.6 million in 2005.
Correspondingly, operating expenses increased 57% to
$230.3 million in 2006 from $146.9 million in 2005. As
a result, operating income increased 48% to $58.6 million
from $39.7 million in 2006 as compared to 2005. Net income
in 2006 was $33.4 million as compared to $21.8 million
in 2005. These increases principally resulted from the
acquisitions in 2005 of the MontBleu and the Belle of Baton
Rouge and the other factors discussed below.
Nevada
Properties
Net operating revenue increased at the Nevada properties by
$14.9 million, or 11%, to $146.2 million during 2006
from $131.3 million in 2005. The MontBleu, which was
acquired on June 10, 2005, contributed $16.6 million
to this increase, while the net operating revenue at Tahoe
Horizon decreased by $3.5 million and net operating revenue
at River Palms increased by $1.8 million period over
period. The period over period decrease in net operating revenue
at the Tahoe Horizon was primarily the result of a decline in
casino revenue, which experienced a decrease of
$2.3 million, although all other departments experienced
declines in net operating revenue as well. These decreases were
mainly attributable to reduced occupancy at the hotel due
primarily to the diminished appearance and approachability of
the property resulting from a renovation project to replace the
outside surface of the building. The period over period increase
at the River Palms was due to an increase in casino revenue of
$1.0 million and a decrease in promotional allowances given
to gaming patrons of another $1.0 million, offset by small
decreases in food and beverage revenues. Slot win at the River
Palms was up $1.5 million due to an increase in hold
percentage of 0.7%, but offset by a drop in slot handle of 8%.
Table games and other casino revenue at the River Palms were
down due to lower table game drop, although the hold percentage
increased slightly.
The decrease in promotional allowances mentioned above was tied
to the decrease in table game drop and slot handle, along with
improved control over the issuance of complimentaries.
Operating expenses at the Nevada properties increased
$23.5 million, or 21%, to $132.9 million in 2006 from
$109.4 million in 2005. Of this increase,
$25.3 million was due to expenses incurred at the MontBleu,
which included marketing and startup costs of $4.2 million
related to the re-branding of the property from Caesars Tahoe to
the MontBleu. In addition, the MontBleu expensed demolition
costs and write-offs of assets in the amount of
$1.2 million related to the renovation in 2006. Period over
period operating expenses at the Tahoe Horizon decreased by
$2.3 million. Operating expenses for the casino, hotel and
food and beverage departments declined by $1.6 million,
consistent with the declines in the related revenue category,
and insurance costs decreased by $1.5 million due to better
control of claim costs. These decreases were partly offset by an
increase in depreciation expense of $0.7 million due to
additional depreciation on equipment purchases. Period over
period operating expenses at the River Palms increased by
$0.5 million resulting from increases in depreciation and
fixed asset write-offs, which were partly offset by decreases in
casino operating expenses and marketing costs.
As a result of the changes discussed above, operating income for
the Nevada properties declined $8.6 million to
$13.3 million in 2006 from $21.9 million in 2005. The
MontBleu accounted for $8.7 million
81
of the decrease in operating income for the Nevada properties.
Operating income declined $1.1 million at the Tahoe
Horizon. These declines were partly offset by increases at the
River Palms of $1.3 million in operating income.
Mississippi
River Basin Properties
Net operating revenue increased at the Mississippi River basin
properties by $87.4 million, or 158%, to
$142.7 million in 2006 from $55.3 million in 2005. Net
operating revenues achieved by the Belle of Baton Rouge, which
was acquired on October 25, 2005, increased by
$87.9 million to $114.2 million in 2006 from
$26.3 million for that portion of 2005 following the
acquisition of the property, which increase was a significant
factor contributing to the surge in net operating revenues at
the Mississippi River basin segment in 2006. The Belle of Baton
Rouge experienced significant increases in table game drop and
slot handle, hotel room revenues and food and beverage revenues
because of the effects of population shifts caused by Hurricane
Katrina, which struck the Gulf Coast region on August 25,
2005, and the resulting closure of many competing casinos in the
Gulf Coast region. This revenue upsurge began to tail off in
September 2006 as more casinos opened or re-opened in the
region and the transient population created by Hurricane Katrina
appeared to shift back, in part, to New Orleans and other Gulf
Coast areas. Net operating revenue at the Lighthouse Point
Casino declined slightly during 2006 to $28.4 million from
$29.0 million in 2005. This decline in net operating
revenue of the Lighthouse Point Casino was caused by an increase
in promotional allowances of over $0.8 million.
Operating expenses at the Mississippi River basin properties
increased $60.2 million to $92.1 million in year ended
December 31, 2006 from $31.9 million in year ended
December 31, 2005. The Belle of Baton Rouge, which was
acquired on October 25, 2005, accounted for
$59.5 million of this increase. Operating expenses at the
Lighthouse Point Casino increased by $0.6 million period
over period, primarily due to an increase in insurance costs and
increased beverage department costs resulting from the issuance
of more complimentaries.
Operating income at the Mississippi River basin properties
increased $27.2 million to $50.6 million in year ended
December 31, 2006 from $23.4 million in year ended
December 31, 2005. The Belle of Baton Rouge accounted for
$28.4 million of this increase while the Lighthouse Point
Casino experienced a period over period decrease of
$1.2 million.
Corporate
Corporate operating expenses decreased slightly during 2006 to
$5.4 million from $5.6 million in 2005. Corporate
operating expenses in 2005 included $2.6 million related to
the write-off of deposits and other costs, including legal and
other professional fees, related to the abandonment of the
previously contemplated acquisition of the President Casino
St. Louis and subsequent litigation. Excluding these costs
from 2005, corporate operating expenses increased
$2.4 million from 2005 to 2006. The principal cause of this
increase was an increase in professional fees related to our
ongoing legal dispute with Park Cattle, the lessor of the Tahoe
Horizon and the MontBleu properties, which totaled
$1.1 million in year ended December 31, 2006,
increases in corporate level personnel costs in anticipation of
the Aztar Acquisition, which totaled $0.4 million, and
increased audit fees.
Interest expense for Tropicana Casinos and Resorts was
$35.6 million in 2006 compared to $6.0 million in
2005. This increase was due to interest accrued under Tropicana
Casinos and Resorts then outstanding credit facility,
which credit facility was used to partially finance the
acquisitions of the MontBleu and the Belle of Baton Rouge
properties and interest accrued (which totaled
$18.9 million) on the related party loan from CSC Holdings,
LLC, an affiliate of Columbia Sussex, to Tropicana Casinos and
Resorts, which funded the $313.0 million deposit made in
connection with the Aztar Acquisition. Interest income also
increased during 2006, from $0.5 million to
$8.9 million, as a result of interest earned on funds
escrowed in connection with the Aztar Acquisition.
Net income for 2006 was affected by Minority Interest in
Net Income of Consolidated Subsidiaries of
$3.2 million, which was down slightly from the
$3.4 million recorded during 2005. Minority interest in
82
net income of consolidated subsidiaries includes the 16%
economic interest in Greenville Riverboat (which owns the
Lighthouse Point Casino) owned by others and the 100% interest
in Realty, which owns the real estate and substantially all of
the non-gaming assets of River Palms, which is owned by an
affiliated company. See Note 11 to the consolidated
financial statements of Tropicana Casinos and Resorts for a
discussion of Realtys status as a variable interest entity
under FIN 46R. Net income was also affected by
Discontinued Operations, Casinos to be Transferred,
which increased from a loss of $8.9 million in 2005 to a
profit of $4.7 million in 2006. The caption
Discontinued Operations, Casinos to be Transferred
includes the operations of the Casuarina Las Vegas Casino, a
casino located in leased space in a hotel property owned by an
affiliate of Columbia Sussex and managed by Columbia Sussex, the
New Orleans riverboat, and the Tropicana Pennsylvania entities,
which own land held for sale associated with an abandoned casino
development project in Allentown, Pennsylvania (See Note 2
to Tropicana Casinos and Resorts 2006 audited financial
statements included elsewhere in this prospectus). The Casuarina
Las Vegas Casino improved from a loss of $2.7 million in
2005 to a loss of $1.2 million in 2006 due to an increase
in net operating revenue of $0.5 million, negotiation of
reduced rent under the lease for the property (the lease
counter-party is an affiliate of Tropicana Casinos and Resorts),
which resulted in a decrease in rent expense of
$0.6 million, and reductions in expenses for marketing and
promotions, administrative and general costs. Tropicana Casinos
and Resorts New Orleans riverboat, acquired in June 2005,
was damaged by Hurricane Katrina and temporarily shut down for
repairs. The period June 10, 2005 (date of acquisition)
through December 31, 2005 included costs associated with
continuing to pay employees for sixty days after the storm and
for other storm related costs that totaled $3.6 million,
which contributed to a net loss of $7.1 million in 2005.
During 2006, the property continued to incur fixed costs
totaling $3.2 million, wrote-off the estimated damage to
the vessel of $7.7 million, incurred additional repair
costs of $1.9 million, and received insurance proceeds of
$22.6 million, which resulted in net income of
$9.8 million. Tropicana Pennsylvania wrote-off costs
associated with the abandoned casinos development project in
Allentown, Pennsylvania and adjusted the carrying value of land
held for sale to its estimated fair market value. These charges
to operations totaled $5.5 million in 2006.
Tropicana
Casinos and Resorts Year Ended December 31, 2005
Compared to its Year Ended December 31, 2004
Net operating revenue increased in 2005 by $64.7 million,
or 53%, to $186.6 million from $121.9 million in 2004.
The MontBleu and the Belle of Baton Rouge, which were acquired
in June 2005 and October 2005, respectively, together
contributed $59.7 million to the increase. At the
properties we owned prior to the acquisition of the MontBleu and
the Belle of Baton Rouge, net operating revenue increased by
$5.0 million. Operating expenses in 2005 increased by
approximately $50.4 million, or 52%, to $146.9 million
from $96.5 million in 2004. The MontBleu and the Belle of
Baton Rouge contributed $44.2 million to this increase.
Included in operating expenses in 2005 were expenses of
$2.0 million related to the abandonment of the previously
contemplated acquisition of the President Casino in
St. Louis, Missouri. Operating income increased by
$14.3 million in 2005. The MontBleu and the Belle of Baton
Rouge together contributed $15.4 million to the increase in
operating income.
Nevada
Properties
Net operating revenue at the Nevada properties increased
$36.9 million to $131.3 million in 2005 from
$94.4 million in 2004. The MontBleu property, which was
acquired on June 10, 2005, accounted for $33.4 million
of the increase. Net operating revenue at the River Palms
property increased $2.9 million to $50.3 million. Of
the increase at the River Palms, $2.4 million was due to
increased casino revenues, most of which resulted from increases
in net win from slot machines. The increase in slot machine net
win was the result of an increase in hold percentage of 0.3%,
which was offset partially by a decrease in slot handle of
$4.2 million. The remaining increase in net operating
revenue at the River Palms resulted from an increase in hotel
room revenues due to a year over year increase in occupancy from
66.8% to 70.7%. At the Tahoe Horizon, net operating revenue
increased $0.5 million to $47.6 million. The increase
in revenue at the Tahoe Horizon was due to an increase in casino
net win of $1.5 million, offset by a decline in other
revenues of approximately $1.0 million caused, in part, by
the diminished appearance and approachability of
83
the property resulting from the renovation work to replace the
outside surface of the property which began in the fourth
quarter. The increase in casino net win was due to an increase
in slot machine revenue of $1.7 million, which was, in
turn, attributable to an increase in slot handle of 3.8% as
partially offset by a decrease in hold of 1.4%. The decline in
other revenues was due primarily to a decrease in room revenue
of $0.7 million, which resulted principally from a decrease
in room rates of 6.1%.
Operating expenses at the Nevada properties increased
$31.7 million to $109.4 million in 2005 from
$77.7 million in 2004. The MontBleu accounted for
$28.8 million of this increase. Operating expenses at the
River Palms increased $1.9 million to $42.4 million in
2005 from $40.5 million in 2004. The increase at the River
Palms was due to increases in casino operating expense
(including gaming taxes) of $0.5 million, increases in
room, food and beverage operating expenses of $0.4 million,
increases in administrative and general operating expenses of
$0.5 million and an increase in depreciation expense of
$0.5 million due to capital additions of in excess of
$5.0 million in 2004 and 2005. Operating expenses at the
Tahoe Horizon increased $1.1 million in 2005. Of this
increase, $0.7 million resulted from increases in operating
expenses associated with hotel room and food and beverage
operations. The remaining increase of $0.4 million in
operating expenses at the Tahoe Horizon was due primarily to
repair costs associated with the dispute with Park Cattle, the
lessor of the Tahoe Horizon and the MontBleu properties.
Operating income at the Nevada properties was $21.9 million
in 2005, an increase of $5.1 million from
$16.8 million in 2004, with the MontBleu accounting for
$4.6 million of this increase. Operating income at the
River Palms increased $1.0 million while operating income
at Tahoe Horizon experienced a decrease of $0.6 million.
Mississippi
River Basin Properties
Net operating revenue at the Mississippi River basin properties
increased $27.9 million to $55.3 million in 2005 from
$27.5 million in 2004, representing a 101% increase. The
Belle of Baton Rouge, which was acquired in October 2005,
accounted for $26.3 million of this increase. The
Lighthouse Point Casino had net operating revenue of
$29.0 million in 2005, compared to $27.4 million in
2004, an increase of $1.6 million. The increase in net
operating revenue at Lighthouse Point Casino was due primarily
to an increase of $1.5 million in casino net win. The
increase in casino net win was attributable almost entirely to
an increase in slot machine net win, which resulted from an
increase in hold percentage of 0.5%, offset by a decline in slot
handle of $9.9 million.
Operating expenses at the Mississippi River basin properties
increased $15.4 million in 2005 to $31.9 million from
$16.5 million in 2004. The Belle of Baton Rouge accounted
for a $15.5 million increase in operating expenses.
However, at the Lighthouse Point Casino, increases in gaming
taxes and casino operating costs of $0.3 million,
consistent with the increase in net operating revenue, were
offset by a decline in marketing and promotion expenses of
$0.4 million.
As a result of the foregoing, operating income for the
Mississippi River Basin properties increased $12.5 million
to $23.4 million in 2005, with the Belle of Baton Rouge
accounting for $10.8 million of the increase and the
Lighthouse Point Casino accounting for the remaining
$1.7 million.
Corporate
Corporate operating expense increased $3.3 million to
$5.6 million in 2005 from $2.3 million in 2004. The
write-off of deposits and other costs, including legal and other
professional fees of $2.6 million related to the
abandonment of the previously contemplated acquisition of the
President Casino St. Louis and subsequent litigation,
increased professional fees of $0.2 million related to the
acquisition of the MontBleu and the Belle of Baton Rouge, and a
general increase in corporate expenses due to the addition of
new properties to the portfolio under management, all
contributed to the increase in corporate operating expense.
Tropicana Casinos and Resorts interest expense was
$6.0 million in 2005, an increase of $5.0 million from
2004. This increase was due to accrued interest under Tropicana
Cas