SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1996
or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 001-12419
Showboat Marina Casino Partnership
(Exact name of registrant as specified in its charter)
Indiana 35-1978576
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 E. Chicago Ave., East Chicago, Indiana 46312
(Address of principal executive offices) (Zip Code)
(219) 392-1111
(Registrant's telephone number, including area code)
Showboat Marina Finance Corporation
(Exact name of registrant as specified in its charter)
Nevada 88-0356197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 E. Chicago Ave., East Chicago, Indiana 46312
(Address of principal executive offices) (Zip Code)
(219) 392-1111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes [X] No
<PAGE>
Indicate the number of shares outstanding of each of the
issuers' classes of common stock, as of the latest practicable
date.
Showboat Marina Casino Partnership
Not applicable.
Showboat Marina Finance Corporation
1,000 shares of common stock, $1.00 par value as of
October 31, 1996.
2
<PAGE>
PAGE
PART I Financial Information 4
Item 1.Financial Statements 4
Consolidated Balance Sheet as of September
30, 1996 and March 31, 1996 4
Consolidated Statements of Operations
for the three months ended September 30,
1996, the period from March 29, 1996
(commencement of development) through
September 30, 1996 and for the period
from January 31, 1994 (inception) through
Sept. 30, 1996 5
Consolidated Statement of Partners' Capital
for the period from March 29, 1996
(commencement of development) through
September 30, 1996 6
Consolidated Statements of Cash Flows
for the period from March 29, 1996
(commencement of development) through
September 30, 1996, the period from
January 1, 1996 through March 28, 1996
(Predecessor) and the period from January
31, 1994 (inception) through September 30,
1996 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
PART II Other Information 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
3
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP
(A DEVELOPMENT STAGE ENTITY)
Consolidated Balance Sheet as of September 30, 1996 and
March 31, 1996
ASSETS
September 30,
1996
(Unaudited) March 31, 1996
(in thousands)
<S> <C> <C>
Cash held in escrow $ 101,590 $ 157,295
Interest receivable 1,118 59
Property and equipment:
Land improvements 2,123 2,123
Furniture, fixtures and equipment 1,529 482
Construction in progress 65,332 16,251
Total property and equipment 68,984 18,856
Economic development costs 4,814 1,120
Other assets 3,188 2,752
$ 179,694 $ 180,082
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 1,085 $ 946
Accrued expenses 2,518 152
Long-term debt 140,000 140,000
Total liabilities 143,603 141,098
Commitments and contingencies (Note 3)
Partners' capital (includes deficit
accumulated during the development stage
of $2,909,000 and $16,000 respectively). 36,091 38,984
$ 179,694 $ 180,082
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP
(A DEVELOPMENT STAGE ENTITY)
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1996, THE PERIOD FROM MARCH 29,
1996 (COMMENCEMENT OF DEVELOPMENT) THROUGH SEPTEMBER 30,
1996 AND FOR THE PERIOD FROM JANUARY 31, 1994 (INCEPTION)
THROUGH SEPTEMBER 30, 1996
For the period For the period
For the three from March 29, from January 31,
months ended 1996 through 1994 (inception)
September 30, September 30, through
1996 1996 September 30,
(Unaudited) (Unaudited) 1996 (Unaudited)
(in thousands)
<S> <C> <C> <C>
Interest income $ 1,730 $ 3,784 $ 3,784
Interest expense 4,725 9,602 9,602
Less: Interest capitalized (1,941) (2,909) (2,909)
Net interest expense 2,784 6,693 6,693
Net loss accumulated
during the development $ (1,054) $ (2,909) $ (2,909)
stage
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP
(A DEVELOPMENT STAGE ENTITY)
Consolidated Statement of Partners' Capital
For the Period from March 29, 1996 (commencement of
development) through September 30, 1996
SHOWBOAT
SHOWBOAT MARINA
MARINA INVESTMENT
PARTNERSHIP PARTNERSHIP TOTAL
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(in thousands)
<S> <C> <C> <C>
Balance at beginning of period $ - $ - $ -
Capital contributions 21,897 390 22,287
Net loss accumulated during the
development stage (2,880) (29) (2,909)
Transfer of net assets from
Showboat Marina Partnership 16,713 - 16,713
Balance at September 30, 1996 $ 35,730 $ 361 $ 36,091
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (PARTNERSHIP)
(A DEVELOPMENT STAGE ENTITY)
AND SHOWBOAT MARINA PARTNERSHIP (PREDECESSOR)
Consolidated Statements of Cash Flows for the period
from March 29, 1996 (commencement of development) through
September 30, 1996, the period from
January 1, 1996 through March 28, 1996 and the period from
January 31, 1994
(inception) through September 30 1996
PARTNERSHIP PREDECESSOR CUMULATIVE
PERIOD FROM
MARCH 29, 1996 PERIOD FROM
(COMMENCEMENT JANUARY 31, 1994
OF DEVELOPMENT (INCEPTION)
THROUGH PERIOD FROM THROUGH
SEPTEMBER 30, JANUARY 1, 1996 SEPTEMBER 30,
1996 THROUGH 1996
(UNAUDITED) MARCH 28, 1996 (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss $ (2,909) $ - $ (2,909)
Interest receivable (1,117) - (1,117)
Licensing costs - (276) (2,372)
Other assets (435) (68) (816)
Accounts payable 139 443 1,085
Accrued expenses 2,518 - 2,518
Net cash provided by (used
in) operating activities (1,084) 99 (3,611)
Cash flows from investing
activities:
Economic development costs (3,694) (7) (4,814)
Purchase of land improvements -- (286) (2,123)
Purchase of property and
equipment (1,047) (198) (1,529)
Payments for construction in
progress (48,597) (5,246) (59,228)
Advance to affiliate - (1)
Net cash used in investing
activities (53,338) (5,738) (67,694)
Cash flows from financing
activities:
Proceeds from issuance of
notes payable, net of
issuance costs 134,445 (550) 133,895
Loan from affiliate - 28,118
Capital contributions 22,287 (22,287) 39,000
Net cash provided by
financing activities 156,732 5,281 172,895
Net increase (decrease) in
cash 101,590 (358) 101,590
Cash at beginning of period - 359 -
Cash at end of period $ 101,590 $ 1 $ 101,590
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP
(A DEVELOPMENT STAGE ENTITY)
Notes to Consolidated Financial Statements
September 30, 1996
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The accompanying consolidated financial statements present
the financial position, results of operations and cash flows
of Showboat Marina Casino Partnership (a development stage
entity) (Partnership) and its wholly owned subsidiary,
Showboat Marina Finance Corporation (Finance Corporation) as
of September 30, 1996 and March 31, 1996, and for the periods
from July 1, 1996, through September 30, 1996, and March 29,
1996 (commencement of development) through September 30,
1996. These financial statements also present the cash
flows of Showboat Marina Partnership (Predecessor) for
the period from January 1, 1996 through March 28, 1996,
and the cumulative cash flows of the Partnership and the
Predecessor from January 31, 1994 (inception) through
September 30, 1996. The Predecessor had no operations through
March 28, 1996 other than development and licensing
activities, the cost of which were capitalized and
subsequently contributed to the Partnership as described
below. Therefore a statement of operations is not applicable.
Partnership is a general partnership and was formed as of
March 1, 1996 for the purpose of developing a riverboat
casino complex in East Chicago, Indiana to be operated on
Lake Michigan. The complex will consist of a gambling cruise
vessel and a land based support facility (the East Chicago
Showboat ). The East Chicago Showboat vessel is expected to
contain approximately 51,000 square feet of gaming space with
approximately 1,700 slot machines and approximately 86 table
games. The land based facility is expected to consist of a
pavilion, garage and surface parking. The pavilion will be
approximately 100,000 square feet and will include a
buffet/coffee shop, lounge, gift shop, ticket/promotions area
as well as administrative offices. The current design
includes an 1,800 space parking garage and 1,000 surface
parking spaces. Finance Corporation was incorporated on
March 7, 1996 to assist the Partnership in financing the East
Chicago Showboat. The Predecessor was formed on January 31,
1994 and had been developing the project prior to the
formation of the Partnership.
The Partnership is owned 99% by the Predecessor and 1% by
Showboat Marina Investment Partnership. The Partnership is
effectively owned 55% by Showboat, Inc. (Showboat) and 45% by
Waterfront Entertainment and Development, Inc. (Waterfront)
through various partnership interests.
The Predecessor applied for the sole riverboat gaming license
allocated to East Chicago, Indiana and was granted a
certificate of suitability (Certificate of Suitability) by
the Indiana Gaming Commission on January 8, 1996. On March
20, 1996, the Predecessor received approval to transfer the
Certificate of Suitability to the Partnership. As of March
27, 1996, the Predecessor contributed the Certificate of
Suitability, and on March 28, 1996 all of its
(continued)
8
<PAGE>
assets (except for the capital stock of East Chicago Second
Century, Inc.), liabilities and obligations were contributed
to the Partnership.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been
consolidated or omitted. These consolidated financial
statements should be read in conjunction with the financial
statement and notes thereto included in the Partnership's
Amendment No. 2 to Registration Statement on Form S-4
effective July 11, 1996.
The accompanying unaudited consolidated financial statements
contain all adjustments which are only of a recurring nature,
in the opinion of management, necessary for a fair statement
of the results of the interim period. The results of
operations for the interim periods are not indicative of
results of operations for an entire year. Certain prior
period balances have been reclassified to conform to the
current period's presentation.
(2) LONG-TERM DEBT
On March 28, 1996, the Partnership and Finance Corporation
issued $140.0 million (the "Offering") in the aggregate
principal amount of 13 1/2% Series A First Mortgage Notes due
2003 (the Old Notes) through a private placement. The
proceeds from the Offering were approximately $133.9 million,
net of underwriting discounts and commissions. The net
proceeds are being used to develop the East Chicago Showboat.
On August 12, 1996 the Partnership and Finance Corporation
exchanged the Old Notes with registered notes, the 13 1/2%
Series B First Mortgage Notes due 2003 (the New Notes).
The Old Notes were, and the New Notes have been issued under
the Indenture dated as of March 26, 1996 (the Note
Indenture) between the Partnership, the Finance Corporation
and American Bank National Association as Trustee (in such
capacity, the Trustee or Registrar). The form and terms
of the New Notes are identical in all material respects to
the form and terms of the Old Notes. The New Notes and the
Old Notes are collectively referred to as the "Notes."
Interest is payable on the Notes semiannually on March 15,
and September 15 of each year commencing September 15, 1996.
The Notes will not be redeemable prior to March 15, 2000,
except as otherwise required by a gaming authority. On and
after March 15, 2000, the Notes will be redeemable at the
option of the Partnership, in whole or in part, at redemption
prices ranging from 106.750% in 2000 through 100.000% in 2002
and thereafter, as defined in the Note Indenture for the
Notes, plus accrued and unpaid interest and liquidated
damages, if any.
The Note Indenture places significant restrictions on the
incurrence of additional indebtedness, the creation of
additional liens on the collateral securing the Notes,
transactions with affiliates and payment of certain
restricted payments.
(continued)
9
<PAGE>
(3) COMMITMENTS AND CONTINGENCIES
Atlantic Marine, Inc. has been retained to build and equip
the riverboat vessel. The current contract price is $38.5
million, but is subject to adjustments, if any, as set forth
in the contract.
Tonn & Blank, Inc., in joint venture with KLM Construction,
Inc., has been retained to build and construct the
approximately $40.0 million land based facilities of the East
Chicago Showboat. The general construction contract provides
for payment of a basic fee of $1.7 million and general
conditions of $1.2 million for the general contractor
services. In addition, the joint venture may bid on the
subcontracts for construction at the East Chicago Showboat.
As of October 31, 1996 the joint venture has been selected
as the subcontractor for the construction of building
concrete, structural steel erection and pilecaps for the East
Chicago Showboat, at a construction cost of approximately
$3.4 million.
Luhr Bros., Inc., has been retained to build the breakwater,
mooring/fending bulkhead and to perform basin dredging
necessary for the marina operations of the East Chicago
Showboat. The contract is a fixed price contract for $14.5
million and is subject to adjustments based on design changes
related to the development.
International Gaming Technology - North America and Casino
Data Systems have been contracted to supply slot machines
for $9.5 million and an electronic gaming tracking system for
$1.5 million, respectively.
The Hillier Group has been retained by the Partnership as the
project architect for the pavilion, garage, water treatment
plant facade, vessel, and sitework. The Hillier Group will
provide the basic services related to the following five
phases of the development and construction of the Casino:
Schematic Design Phase, Design Development Phase,
Construction Documents Phase, Bidding or Negotiation Phase,
and the Construction Phase. The compensation for these basic
services is time and materials estimated to be approximately
$2 million.
The Partnership has entered into numerous agreements and
financial commitments for the construction of leasehold
improvements as well as to promote the economic development
of the City of East Chicago that must be completed whether or
not an owner's license is issued to the Partnership. In the
event an owner's license is not issued, the fulfillment of
these commitments as well as the realization of the costs
already expended could have a material adverse impact on the
financial condition, results of operations and liquidity of
the Partnership.
(4) PARTNERS' CAPITAL
Showboat, beneficial owner of 55% of the Partnership, has
committed to a standby equity commitment of up to $30.0
million and a completion guarantee of up to $30.0 million.
The terms of these agreements are as follows:
The standby equity commitment provides that if during any of
the first three full four-quarter periods after the riverboat
is operating the Partnership's combined cash flow is less than
$35.0 million for any such full fiscal four-quarter period,
Showboat will cause to be contributed additional capital
contributions that will result in net cash proceeds to the
(continued)
10
<PAGE>
Partnership of not less than the difference between $35.0
million and the combined cash flow for the period; provided,
however, that in no event shall Showboat be required to cause
to be contributed more than $15.0 million in respect of any
one such full fiscal four-quarter period or more than $30.0
million in the aggregate.
Showboat has also agreed to complete the East Chicago
Showboat so that it becomes operational and will guarantee the
payment of all project costs owing prior to such completion.
The completion guarantee will be subject to certain
limitations, qualifications and exceptions. This obligation
goes into effect only in the event there are insufficient
funds to meet the costs of developing, constructing and
opening the riverboat and is limited to $30.0 million in the
aggregate.
(5) RELATED PARTY TRANSACTIONS
As discussed in Note 3, the East Chicago Showboat has
entered into a construction contract with Tonn & Blank, Inc.
in joint venture with KLM Construction, Inc. for the purpose
of serving as general contractors for the development.
Nikos Kefolidis, the President of KLM, beneficially owns
3.0% of the Partnership.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OR PLAN OF
OPERATION
DEVELOPMENT ACTIVITIES
The operations of Showboat Marina Casino Partnership (the
"Partnership"), and of Showboat Marina Partnership (the
"Predecessor"), which contributed all of its assets (except for
the capital stock of Second Century) and liabilities to the
Partnership as of March 28, 1996, have been limited to applying
for appropriate gaming licenses and securing the land for,
arranging for construction of, finalizing the design of,
constructing and developing and obtaining financing for a
riverboat gaming complex (the "East Chicago Showboat"). East
Chicago Showboat will contain approximately 51,000 square feet
of gaming space with approximately 1,700 slot machines and
approximately 86 table games. The land based facility is
expected to consist of a pavilion, garage and surface parking.
The pavilion will be approximately 100,000 square feet and
will include a buffet/coffee shop, lounge, gift shop,
ticket/promotions area as well as administrative offices. The
current design includes an 1,800 space parking garage and 1,000
surface parking spaces. Subject to obtaining the necessary gaming
licenses, other permits and financing, the Partnership expects
gaming operations at East Chicago Showboat to commence sometime
during the Second Quarter of 1997.
RESULTS OF OPERATIONS
The Partnership is in the development stage and has capitalized
all costs, except for some interest expense. Accordingly, the
Partnership does not have any historical operating income. The
Finance Corporation is wholly-owned by the Partnership and was
incorporated to assist the Partnership in financing the East
Chicago Showboat. The capitalized costs consist primarily of
land improvements, economic development payments, vessel design
and construction, legal, audit, consulting and design fees,
financing and commitment fees, interest on qualifying assets, and
gaming application fees, all associated with the development of
East Chicago Showboat. The Partnership anticipates that the
results of its first twelve months of operations will be
adversely affected by expensing of preopening costs and should
not be indicative of future operations. Future operating results
will be subject to significant business, economic, regulatory and
competitive uncertainties and contingencies, many of which are
beyond the control of the Partnership. While the Partnership
believes that East Chicago Showboat will be able to attract a
sufficient number of customers and achieve the level of activity
necessary to permit the Partnership and the Finance Corporation
to meet their obligations, there can be no assurance with respect
thereto.
MATERIAL CHANGES IN FINANCIAL CONDITION
Since its inception, the Partnership has met its capital
requirements through the $39.0 million capital contribution (the
"Capital Contribution") and the $133.9 million net proceeds from
the offering (the "Offering") of its 13 1/2% Series A First
Mortgage Notes due 2003 (the "Old Notes"). On August 12,
1996 the Partnership and Finance Corporation exchanged the Old
Notes with registered notes, the 13 1/2% Series B First Mortgage
Notes due 2003 (the "New Notes"). The Old Notes were,
and the New Notes have been issued under the Indenture dated
as of March 26, 1996 (the "Note Indenture") between the
Partnership, the Finance Corporation and American Bank
(continued)
12
<PAGE>
National Association as Trustee (in such capacity, the "Trustee"
or "Registrar"). The form and terms of the New Notes are
identical in all material respects to the form and terms of the
Old Notes. The New Notes and the Old Notes are collectively
referred to as the "Notes."
The funds necessary to design, develop, construct, equip
and open the East Chicago Showboat is expected to be derived
from the Capital Contribution, the proceeds from the Offering,
and capital lease financing. The Partnership has authorized an
increase in the budget of up to $5.0 million to be used for
interior upgrades including an upscale restaurant and additional
additional funding for employee training thereby increasing
the budget for the construction of the East Chicago Showboat to
$200.0 million. The Partnership is currently negotiating with
its capital lease providers to secure a commitment for the
additional funds required for the additional improvements.
Management believes that it has sufficient sources of funds
for the construction of the East Chicago Showboat. The funds
provided by these sources are expected to be sufficient to
develop and commence operations of commence operations of East
Chicago Showboat. However, there can be no assurance that such
funds in themselves will be sufficient for the development and
construction of East Chicago Showboat.
The Partnership has entered into a fixed price contract for the
construction of the casino vessel and other portions of the East
Chicago Showboat. Fixed or guaranteed maximum price contracts
are subject to price adjustments if the plans and specifications
are changed. The unspent portion of the Capital Contribution
and the net proceeds of the Offering have been deposited into
the Escrow Account and invested in cash equivalents and will be
disbursed pursuant to the Escrow and Disbursement Agreement
for the construction of East Chicago Showboat. Showboat, Inc.
("Showboat") has entered into a completion guarantee (the
"Completion Guarantee") committing up to $30.0 million,
subject to certain exceptions, qualifications and limitations,
to complete the Minimum Facilities (as defined in the
Completion Guarantee). Showboat also provided the standby
equity commitment pursuant to which it has agreed to cause to
be made up to an aggregate of $30.0 million in additional
capital contributions to the Partnership during the first three
Operating Years (as defined in the Standby Equity Commitment
Agreement) if the Partnership's Combined Cash Flow (as defined
in the Standby Equity Commitment) does not reach $35.0 million
in any one such Operating Year, subject to certain terms and
conditions; however, in no event shall Showboat be required to
contribute more than $15.0 million in respect of any one such
Operating Year.
(continued)
13
<PAGE>
The Notes mature on March 15, 2003. Interest payment dates under
the Notes are March 15 and September 15, commencing September 15,
1996. The Notes are senior secured obligations of the
Partnership. The Notes rank PARI PASSU, or on a parity with, in
right of payment with all existing and future senior indebtedness
of the Partnership and senior in right of payment to all future
Subordinated Indebtedness of the Partnership. The Notes are
without recourse to the general partners of the Partnership or to
Showboat.
The Notes may be redeemed at the option of the Partnership, in
whole or in part, at any time on and after March 15, 2000, at the
redemption prices set forth in the Note Indenture, plus accrued
and unpaid interest and liquidated damages thereon, if any,
through the redemption date.
Upon a Change of Control, each holder of Notes will have the
right to require the Partnership to repurchase all or part of
such holder's Notes at a price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and
liquidated damages thereon, if any, to the date of repurchase.
The Note Indenture contains certain covenants that, among other
things, limit the ability of the Partnership and its Restricted
Subsidiaries to incur additional Indebtedness and issue
Disqualified Stock, pay dividends or make other distributions,
repurchase Equity Interests or Subordinated Indebtedness, engage
in certain lease transactions, create certain liens, enter into
transactions with affiliates, sell assets, issue or sell certain
Equity Interests of the Partnership's subsidiaries or enter into
certain mergers and consolidations.
Following the commencement of operations of East Chicago
Showboat, the Partnership expects to fund its operating debt
service and capital needs from operating cash flow. Based upon
the Partnership's anticipated future operations, management
believes that available cash flow from East Chicago
Showboat's future operations, together with the proceeds
from the offering and the capital contribution, will be
adequate to meet the Partnership's anticipated future
requirements for working capital, capital expenditures
and scheduled payments of principal, interest and liquidated
(continued)
14
<PAGE>
damages, if any, on the Notes for the foreseeable future. No
assurance can be given, however, that operating cash flow will be
sufficient for that purpose. The Partnership intends to
establish initial working capital reserves to provide for
anticipated short-term liquidity needs. Although no additional
financing is contemplated, the Partnership will seek, if
necessary and to the extent permitted under the Indenture,
additional financing through bank borrowings, debt or equity
financings. There can be no assurance that additional financing,
if needed, will be available to the Partnership, or that, if
available, the financing will be on terms favorable to the
Partnership. There is no assurance that the Partnership's
estimate of its reasonably anticipated liquidity needs is
accurate or that new business developments or other unforeseen
events will not occur, resulting in the need to raise additional
funds.
SEASONALITY
The Partnership has no operating history. The Partnership
anticipates that activity at East Chicago Showboat will be
affected by weather conditions and that most business
activity will be from May through September rather than October
through April when East Chicago experiences harsher weather.
Accordingly, the Partnership's results of operations may
fluctuate from quarter to quarter and the results for any fiscal
quarter may not be indicative of results for future fiscal
quarters.
15
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
Exhibit DESCRIPTION
NUMBER
<S> <C>
10.01 Equipment Lease Commitment dated as of
August 26, 1996 by and between Showboat
Marina Casino Partnership and PDS Financial
Corporation.
27.01 Financial Data Schedule.
</TABLE>
(B) REPORTS ON FORM 8-K
None.
16
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrants have duly caused this report to be
signed on their behalf by the undersigned thereunto duly
authorized.
SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana general
partnership
By: SHOWBOAT MARINA INVESTMENT By: SHOWBOAT MARINA PARTNERSHIP,
PARTNERSHIP, an Indiana an Indiana general
general partnership, a partnership, a general
general partner partner
By: SHOWBOAT INDIANA INVESTMENT By: SHOWBOAT INDIANA INVESTMENT
LIMITED PARTNERSHIP, a Nevada LIMITED PARTNERSHIP, a
limited partnership, a Nevada limited partnership,
general partner a general partner
By: SHOWBOAT INDIANA, INC., a By: SHOWBOAT INDIANA, INC., a
Nevada corporation, its Nevada corporation, its
general partner general partner
By: /s/ J. Keith Wallace By: /s/ J. Keith Wallace
J. Keith Wallace J. Keith Wallace
President and Chief Executive President and Chief
Officer Executive Officer
By: /s/ Joseph G. O'Brien, III By: /s/ Joseph G. O'Brien, III
Joseph G. O'Brien III Joseph G. O'Brien III
Vice President Finance and Vice President Finance and
Chief Financial Officer Chief Financial Officer
By: WATERFRONT ENTERTAINMENT AND By: WATERFRONT ENTERTAINMENT AND
DEVELOPMENT, INC., an Indiana DEVELOPMENT, INC., an
corporation, a general Indiana corporation, a
partner general partner
By: /s/ Michael A. Pannos By: /s/ Michael A. Pannos
Michael A. Pannos Michael A. Pannos
President President
By: /s/ Thomas S. Cappas By: /s/ Thomas S. Cappas
Thomas S. Cappas Thomas S. Cappas
Treasurer (principal Treasurer (principal
financial officer) financial officer)
17
<PAGE>
SHOWBOAT MARINA FINANCE
CORPORATION, a Nevada corporation
By: /s/ Michael A. Pannos
Michael A. Pannos
Secretary
By: /s/ Joseph G. O'Brien, III
Joseph G. O'Brien, III
Vice President Finance and
Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
SEQUENTIAL PAGE
EXHIBIT DESCRIPTION NUMBER
10.01 Equipment Lease Commitment 19
dated as of August 26, 1996 by
and between Showboat Marina
Casino Partnership and PDS
Financial Corporation.
27.01 Financial Data Schedule. 25
August 26, 1996
VIA FACSIMILE (219) 398-0144 & FEDEX
Mr. Joseph G. O'Brien
Vice President Finance
Showboat Marina Casino Partnership
2001 East Columbus Drive
East Chicago, IN 46312
Re: Equipment Lease Commitment (Seventh Revised)
Dear Mr. O'Brien:
PDS Financial Corporation ("PDS") is pleased to present the
following revised lease commitment to Showboat Marina Casino
Partnership ("SMCP") for the purpose of providing $8,000,000.00
in lease financing for gaming equipment (as hereafter defined),
to be placed on or used in connection with a proposed riverboat
gaming vessel to be located in East Chicago, Indiana (the
"Enterprise").
The following represents the basic terms of our commitment:
PARTIES:
Lessee: Showboat Marina Casino Partnership
2001 E. Columbus Drive
East Chicago, IN 46312
Lessor: PDS Financial Corporation
(or, its successors or assigns)
6442 City West Parkway
Suite 300
East Prairie, MN 55344
MASTER AGREEMENT TERMS:
Structure: Non-cancelable master lease agreement
("Lease") with individual schedule
("Lease Schedule") attachments per
the terms of a pre-determined
funding schedule. Lessor shall
<PAGE>
Mr. Joseph G. O'Brien
Showboat Marina Casino Partnership
August 26, 1996
Page 2
have a precautionary first priority
perfected purchase money security
interest in the equipment outlined in
each Lease Schedule, which may
include a preferred ship mortgage
limited to PDS' interest in the
Gaming Equipment located and/or
installed on the SMCP riverboat
gaming vessel (the "Vessel").
Equipment: New IGT Slot machines (hereinafter
"Gaming Equipment") to be identified
at a later date and acceptable to
Lessee.
Location of Equipment: The Vessel which is owned and
operated by SMCP and based in East
Chicago, Indiana.
Equipment Cost: $8,000,000.00
Term: 48 months
Rate: To be fixed two (2) weeks prior to
closing of each Lease Schedule at
four hundred fifty (450) basis points
over the four (4) year Treasury Note
rate as published daily in the WALL
STREET JOURNAL. For purposes of the
rental factor calculation below the
rate is 11.10%.
Monthly Rental Factor: .025657
Lease Schedule Funding: Funding shall be subject to the terms
of individual Lease Schedules. Each
Lease Schedule will be for a minimum
amount of $1,000,000. The entire
lease facility, as outlined herein,
must be fully utilized by July 1,
1997.
Purchase Option: At the end of the term of each Lease
Schedule, Lessee will have the option
to purchase the Gaming Equipment
included in such Lease Schedule for
$1.00.
Advance Payment: Due at closing of each Lease
Schedule, thereafter in forty-seven
(47) remaining rental payments due on
the first of each month.
Anticipated Closing First Lease Schedule to be Closed on
Date: or before July 1, 1997.
<PAGE>
Mr. Joseph G. O'Brien
Showboat Marina Casino Partnership
August 26, 1996
Page 3
Miscellaneous Covenants: A) During the term of any Lease
Schedule, SMCP shall comply with
Section 4.07, Restricted Payments, of
its Indenture with American Bank
National Association dated as of
March 28, 1996. Section 4.07 of the
Indenture is incorporated herein by
this reference as if it was fully set
forth herein.
B) Lessor will require the approval
of various regulatory gaming
authorities, including the Indiana
Gaming Commission, in the State of
Indiana to obtain legal ownership of
the Gaming Equipment. In the event
of default, prior to the Lessor being
able to exercise any ownership rights
over the Gaming Equipment, the Lessor
must obtain approval from the Indiana
Gaming Commission, which may include
requiring the Lessor to become
licensed as a supplier pursuant to IC
4-33 and 68 IAC2-2.
C) SMCP must have all necessary
licenses to own and operate the
Enterprise.
ADDITIONAL REQUIREMENTS:
Commitment Fee: The $30,000.00 Commitment Fee
forwarded by SMCP on October 5, 1995,
will be applied against; (i) any
legal and transaction fees incurred
by PDS during negotiation and
drafting of definitive documentation
in preparation for closing, up to a
maximum of $20,000.00; and (ii) as a
credit toward the first months
payment due under the lease.
Consistent with the Proposal the
Commitment Fee has been deemed earned
and non-refundable with the issuance
of this commitment letter.
Costs & Expenses: SMCP agrees to pay all of PDS' out-of-
pocket costs and expenses incurred by
PDS in connection with the Lease
transaction contemplated by this
proposal including, without
limitation, (i) the fees and costs
costs of legal counsel retained by
<PAGE>
Mr. Joseph G. O'Brien
Showboat Marina Casino Partnership
August 26, 1996
Page 4
PDS; (ii) all other out-of-pocket
expenses incurred by or on behalf
of PDS in connection with the
transaction contemplated by this
proposal; and (iii) all costs with
respect to management and operation
of the escrow account (if any) in
accordance with the transaction
contemplated by this proposal. The
total legal fees and transaction
expenses are not to exceed
$20,000.00. These fees shall be
deducted from the Commitment Fee, as
defined above, upon execution of the
first Lease Schedule.
Insurance: SMCP shall provide PDS with marine,
casualty, and property damage
insurance from a carrier or carriers
acceptable to PDS for the full
replacement cost of the Gaming
Equipment acquired from proceeds of
this Lease.
Cross Default: It shall be an event of default under
the Lease contemplated hereunder if a
material event of default occurs
under any mortgage, indenture or
instrument under which there may be
issued or by which there may be
secured or evidenced any indebtedness
of SMCP for money borrowed, whether
such indebtedness now exists or shall
be created hereafter, which event of
default is not cured within thirty
(30) days or, in the event of a non-
monetary default, within such
reasonable period of time as may be
agreed upon by the parties hereto.
Governing Law: The transaction contemplated hereby
shall be governed by the laws of the
State of Indiana.
Termination: PDS' commitment may be withdrawn at
PDS' option in any of the following
events:
1) If SMCP at any time defaults in
any of their undertakings
hereunder;
2) If any representation or
warranty made by SMCP in
connection with the financing
shall prove untrue;
<PAGE>
Mr. Joseph G. O'Brien
Showboat Marina Casino Partnership
August 26, 1996
Page 5
3) If all terms and conditions of
this commitment have not been
complied with;
4) If SMCP shall have discontinued
or suspended their businesses;
5) Any material adverse change
financial, business, or
otherwise) in SMCP or any of
its affiliates;
6) Any attempt to assign SMCP's
rights under this commitment;
7) If any material facts or
information have not been
provided to PDS or have been
misrepresented or misstated to
PDS and such facts or
information would have been
relevant in PDS's decision to
provide the Lease;
8) Failure to receive all
necessary documentation
acceptable to PDS or PDS's
funding sources, in their sole
discretion.
Delay in the exercise of PDS's
rights to terminate shall not be
construed a waiver of such right to
terminate with regard to the
occurrence of any specific event
referenced to above.
Proposal Expiration: This finance commitment expires on
August 28, 1996, if not accepted by
SMCP or extended in writing by PDS.
If the foregoing terms and conditions are acceptable, please
acknowledge your acceptance by having duly authorized
representatives of SMCP execute this commitment in the spaces
provided below and return the original, to PDS Financial
Corporation, 6442 City West Parkway, Suite 300, Eden Prairie, MN
55344.
<PAGE>
Mr. Joseph G. O'Brien
Showboat Marina Casino Partnership
August 26, 1996
Page 6
If this commitment is unacceptable in any way, please contact me
directly at (612) 996-8701. Thank you in advance for your
anticipated cooperation and assistance.
Sincerely,
PDS Financial Corporation
/s/ Johan P. Finley
Johan P. Finley
Chief Executive Officer
AGREED AND ACCEPTED this 28TH day
of AUGUST, 1996
SHOWBOAT MARINA CASINO PARTNERSHIP
By: /s/ J. Keith Wallace
Its: President and CEO
cc: David Mylrea
Robert Mann
David Larson
Brad Straub (via facsimile (609) 823-7811)
Mike Rodriquez (vis facsimile (609) 823-7811)
Kay Fleming (via facsimile (317) 233-0047)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the consolidated
financial statements of Showboat Marina Casino Partnership for the period from
July 1, 1996 through September 30, 1996, and is qualified in its entirety by
references to such financial statements.
</LEGEND>
<CIK> 0001013788
<NAME> SHOWBOAT MARINA CASINO PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 101,590
<SECURITIES> 0
<RECEIVABLES> 1,118
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 102,708
<PP&E> 68,984
<DEPRECIATION> 0
<TOTAL-ASSETS> 179,694
<CURRENT-LIABILITIES> 3,603
<BONDS> 140,000
0
0
<COMMON> 0
<OTHER-SE> 36,091
<TOTAL-LIABILITY-AND-EQUITY> 179,694
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,730)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,784
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,054)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
