UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: 6/30/98
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: 333-17795
WATERFORD GAMING, L.L.C.
------------------------
(Exact name of Registrant as specified in its charter)
Delaware 06-1465402
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
914 Hartford Turnpike, P.O. Box 715
Waterford, CT 06385
------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860)442-4559
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 requirements for the past 90 days. Yes X No .
WATERFORD GAMING, L.L.C.
INDEX TO FORM 10-Q
Page
Number
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Report of Independent Accountants 1
Financial Information 2
Condensed Balance Sheets of Waterford Gaming, L.L.C. as of
June 30, 1998 (unaudited) and December 31, 1997 3
Condensed Statements of Operations of Waterford Gaming, L.L.C.
for the three months and six months ended June 30, 1998
(unaudited) and June 30,1997 (unaudited) 4
Condensed Statements of Changes in Member's Deficiency of
Waterford Gaming, L.L.C. for the six months ended
June 30, 1998 (unaudited) and June 30, 1997 (unaudited) 5
Condensed Statements of Cash Flows of Waterford Gaming, L.L.C.
for the six months ended June 30, 1998 (unaudited) and
June 30, 1997 (unaudited) 6
Notes to Condensed Financial Statements for Waterford
Gaming, L.L.C. 7-9
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-18
Item 3 -- Quantitative and Qualitative Disclosures about
Market Risk 19
Part II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings 19
ITEM 2 -- Changes in Securities 19
ITEM 3 -- Defaults upon Senior Securities 19
ITEM 4 -- Submission of Matters to a Vote of Security Holders 19
ITEM 5 -- Other Information 19
ITEM 6 -- Exhibits and Reports on Form 8-K 20-22
Signatures - Waterford Gaming, L.L.C. 23
Report of Independent Accountants
---------------------------------
To the Members of Waterford Gaming, L.L.C.:
We have reviewed the condensed balance sheet of Waterford Gaming, L.L.C.
(the "Company") as of June 30, 1998, and the related condensed statements of
operations for the three months and six months ended June 30, 1998 and 1997,
and the related condensed statements of changes in members' deficiency and
cash flows for the six months ended June 30, 1998 and 1997. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1997, and the related
statements of operations, changes in member's equity (deficiency) and cash
flows for the year then ended (not presented herein); and in our report dated
March 6, 1998, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the condensed balance
sheet as of December 31, 1997, is fairly stated , in all material respects, in
relation to the balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
Hartford, Connecticut
August 3, 1998
1
Part I -- FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
The unaudited condensed financial information as of June 30, 1998, and for
the three months and six months ended June 30, 1998, included in this report
was reviewed by PricewaterhouseCoopers LLP, independent public accountants,
in accordance with the professional standards and procedures established for
such reviews be the American Institute of Certified Public Accountants.
2
WATERFORD GAMING, L.L.C.
CONDENSED BALANCE SHEETS
June 30, 1998 (Unaudited) and December 31, 1997
----------
ASSETS
June 30, December 31,
1998 1997
------------ ------------
Current assets:
Cash $ 2,264,823 $ 232,759
Cash in escrow --- 5,000,000
Temporary investments 2,485,849 4,383,379
Due from Trading Cove Associates 901,170 293,923
Other assets 26,589 70,206
------------ ------------
Total current assets 5,678,431 9,980,267
------------ ------------
Trading Cove Associates -
equity investment 9,281,553 10,384,292
Beneficial interest - Leisure Resort
Technology, Inc. 4,634,175 ---
15% subordinated notes receivable 29,822,807 27,742,146
Completion guarantee subordinated
note receivable 2,539,583 2,548,162
Deferred financing costs, net of
accumulated amortization of $760,245
and $518,076 at June 30, 1998 and
December 31, 1997, respectively 2,716,365 2,702,744
------------ ------------
Total assets $ 54,672,914 $ 53,357,611
============ ============
LIABILITIES AND MEMBERS' DEFICIENCY
Current liabilities:
Accrued expenses $ 14,530 $ 78,328
Accrued interest on senior notes
payable 1,002,715 1,002,715
------------ ------------
Total current liabilities 1,017,245 1,081,043
12-3/4% senior notes payable 61,471,000 61,471,000
------------ ------------
Total liabilities 62,488,245 62,552,043
------------ ------------
Members' deficiency (7,815,331) (9,194,432)
------------ ------------
Total liabilities and
members' deficiency $ 54,672,914 $ 53,357,611
============ ============
The accompanying notes are an integral part of the financial statements.
3
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF OPERATIONS
for the three months and six months ended June 30, 1998 and June 30, 1997
(Unaudited)
----------
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Interest and dividend income $ 1,187,003 $ 1,151,298 $ 2,330,108 $ 2,247,710
Subordinated notes fee income -
Trading Cove Associates 1,556,267 842,699 1,556,267 1,285,039
Completion guarantee note fee
income-Trading Cove Associates 212,500 --- 233,750 ---
Management services income -
Trading Cove Associates 1,022,804 --- 2,836,563 ---
------------ ------------ ------------ ------------
Total revenue 3,978,574 1,993,997 6,956,688 3,532,749
------------ ------------ ------------ ------------
Expenses:
Interest expense 1,959,388 2,078,375 3,918,776 4,150,250
General and administrative 20,843 (16,236) 115,547 44,934
Amortization on beneficial interest -
Leisure Resort Technology, Inc. 218,729 --- 423,036 ---
Amortization on deferred financing
costs 126,651 111,040 242,169 212,728
------------ ------------ ------------ ------------
Total expenses 2,325,611 2,173,179 4,699,528 4,407,912
------------ ------------ ------------ ------------
1,652,963 (179,182) 2,257,160 (875,163)
Equity in loss of Trading Cove
Associates (434,801) (454,565) (878,059) (859,965)
------------ ------------ ------------ ------------
Net income (loss) $ 1,218,162 $ (633,747) $ 1,379,101 $ (1,735,128)
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
4
</TABLE>
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF CHANGES IN MEMBERS' DEFICIENCY
for the six months ended June 30, 1998 and June 30, 1997
(Unaudited)
-----------
For the six months ended For the six months ended
June 30, 1998 June 30, 1997
-------------------------- --------------------------
Slavik LMW Slavik LMW
Suites Investments Total Suites Investments Total
Inc. Inc. Inc. Inc.
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1 $(6,154,626) $(3,039,806) $(9,194,432) $(5,412,165) $(2,687,138) $(8,099,303)
Net income (loss) 934,985 444,116 1,379,101 (1,176,360) (558,768) (1,735,128)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30 $(5,219,641) $(2,595,690) $(7,815,331) $(6,588,525) $(3,245,906) $(9,834,431)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
5
</TABLE>
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1998 and June 30, 1997
(Unaudited)
----------
For the six For the six
months ended months ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,379,101 $ (1,735,128)
------------- -------------
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating activities:
Amortization 665,205 212,728
Equity in loss of Trading Cove Associates 878,059 859,965
Changes in operating assets
and liabilities:
Accrued interest on temporary
investments --- 27,819
Accrued interest receivable -
15% subordinated notes receivable (2,080,661) (1,798,410)
Accrued interest receivable -
completion guarantee subordinated
note receivable 8,154 ---
Due from Trading Cove Associates (607,247) (32,699)
Other assets 43,617 (2,717)
Accrued expenses (63,798) (20,410)
Accrued interest on senior
notes payable --- (161,146)
------------- -------------
Total adjustments (1,156,671) (914,870)
------------- -------------
Net cash provided by(used in)
operating activities 222,430 (2,649,998)
------------- -------------
Cash flows from investing activities:
Beneficial interest - Leisure Resort
Technology, Inc. (5,057,211) ---
Release of cash in escrow 5,000,000 ---
Contributions to Trading Cove Associates (75,000) ---
Distributions from Trading Cove Associates 299,680 4,894
Purchases and sales of temporary
investments - net 1,897,530 717,127
Return on investment in completion guarantee
subordinated note receivable 425 ---
Return on investment in 15% subordinated
notes receivable --- 1,957,660
------------- -------------
Net cash provided by
investing activities 2,065,424 2,749,681
------------- -------------
Cash flows from financing activities:
Deferred financing costs (255,790) (78,538)
------------- -------------
Net cash used in financing
activities (255,790) (78,538)
------------- -------------
Net increase in cash 2,032,064 21,145
Cash at beginning of period 232,759 841,512
------------- -------------
Cash at end of period $ 2,264,823 $ 862,657
============= =============
Supplemental disclosure of cash
flow information:
Cash paid during the period
for interest $ 3,918,776 $ 4,311,396
============= =============
Supplemental disclosure of non-cash
financing activities:
Deferred financing costs funded
through accrued expenses $ --- $ 122,433
============= =============
The accompanying notes are an integral part of the financial statements.
6
</TABLE>
WATERFORD GAMING, L.L.C.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
-----------
1. Basis of Presentation:
The unaudited condensed interim financial statements have been prepared in
accordance with the policies described in the Company's 1997 audited
financial statements and should be read in conjunction with the Company's
1997 audited financial statements within the Company's Annual Report for
the fiscal year ended December 31, 1997 on Form 10-K as filed with the
Securities and Exchange Commission (the "Commission") File No. 333-17795
on March 30, 1998. The condensed Balance Sheet at December 31, 1997,
contained herein, was derived from audited financial statements, but does
not include all disclosures contained in the Form 10-K and required by
generally accepted accounting principles.
The unaudited condensed interim financial statements include normal and
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of June 30, 1998, and,
the results of operations, for the three months and six months ended June
30, 1998, the statement of members' deficiency and cash flows for the six
months ended June 30, 1998. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
The Company together with its wholly-owned subsidiary, Waterford Gaming
Finance Corp. ("Finance") has issued 12-3/4% senior notes payable which
mature November 15, 2003 (the "Senior Notes").
2. Trading Cove Associates - Equity Investment:
As of June 30, 1998 and June 30, 1997, the following summary information
relates to Trading Cove Associates ("TCA"). Total revenues and net loss
are for the six months ended June 30, 1998 and June 30, 1997:
June 30, June 30,
1998 1997
------------ ------------
Total assets $ 9,109,872 $ 8,437,137
Total liabilities (4,694,920) (2,155,133)
------------ ------------
Partners' capital $ 4,414,952 $ 6,282,004
============ ============
Total revenue $ 26,657,896 $ 11,993,681
============ ============
Net loss $ (223,586) $ (187,401)
============ ============
Company's interest:
Trading Cove Associates -
equity investment, beginning of period $ 10,384,292 $ 12,682,469
Contributions 75,000 ---
Distributions (299,680) (74,894)
------------ ------------
10,159,612 12,607,575
------------ ------------
Loss from Trading Cove Associates (111,793) (93,700)
Amortization of interests purchased (766,266) (766,265)
------------ ------------
Equity in loss of
Trading Cove Associates (878,059) (859,965)
------------ ------------
Trading Cove Associates -
equity investment $ 9,281,553 $ 11,747,610
============ ============
7
3. Beneficial Interest - Leisure Resort Technology, Inc.
On January 6, 1998, the Company paid $5,000,000 to Leisure Resort
Technology, Inc. ("Leisure") whereby Leisure gave up its beneficial interest
in 5% of certain fees and excess cash flows, as defined, of TCA and any
other claims it may have had against the Company, TCA and TCA's partners and
former partners. On August 6, 1997, Leisure, a former partner of TCA, had
filed a lawsuit against TCA, the Company and its owners, Sun Cove Limited
("Sun Cove") and former partner of TCA, RJH Development Corp., claiming
breach of contract, breach of fiduciary duties and other matters in
connection with the development of the Mohegan Sun Casino ("Mohegan Sun") by
TCA. The Company agreed to acquire Leisure's contractual rights and settle
all matters. The Company no longer has the obligation to pay to Leisure 5%
of the Organizational and Administrative Fee, as defined in the
Organizational and Administrative Services Agreement, and 5% of TCA's Excess
Cash, as defined in TCA's partnership agreement.
The $5,000,000 cost is amortized on a straight-line basis over the
remaining term of TCA's Management Agreement, as defined. Accumulated
amortization at June 30, 1998 amounts to $423,036.
4. 15% Subordinated Notes Receivable:
On November 8, 1996, the Company purchased a 15% subordinated note
receivable from the Mohegan Tribal Gaming Authority (the"Authority") which
matures November 15, 2003, in the principal amount of $19,150,000 from Sun
International Hotels Limited ("Sun International"). The Company also
purchased the related accrued interest, deferred interest and subordinated
notes fee amounts, as of November 8,1996, totaling $5,922,543. In
addition, on November 8, 1996, the Company received a distribution from TCA
of an additional 15% subordinated note receivable from the Authority in the
principal amount of $850,000, together with accrued interest of $148,406.
As of December 31, 1997 and December 31, 1996, $0 and $1,957,660,
respectively, related to subordinated notes fee amounts that were owed by
TCA on the 15% subordinated notes. During the six months ended June 30,
1998, the Company received $1,556,267 in subordinated notes fee payment from
TCA. During the six months ended June 30, 1997, the Company received
$3,210,000 and accrued $32,699 totaling $3,242,699 in subordinated notes fee
payments from TCA. These subordinated note fee payments were netted against
the $1,957,660, which resulted in recognition of $1,285,039 in subordinated
notes fee income during the six months ended June 30, 1997.
At June 30, 1998 and December 31, 1997, the 15% subordinated notes
receivable included accrued interest receivable of $9,822,807 and
$7,742,146, respectively.
5. Completion Guarantee Subordinated Note Receivable:
On September 22, 1997, the Company purchased a completion guarantee
subordinated note receivable from the Authority which matures November 15,
2003, in the principal amount of $2,500,000 from Sun International. The
Company also purchased the related accrued interest and deferred interest
amounts which have not been paid by TCA totaling $106,875 and completion
guarantee note fee amounts totaling $191,250. As of December 31, 1997,
$425 related to completion guarantee note fee amounts owed by TCA on the
completion guarantee subordinated note. During the six months ended June
30, 1998, the Company received $234,175 in completion guarantee note fee
payments from TCA. These completion guarantee note fee payments were netted
against the $425, resulting in recognition of $233,750 in completion
guarantee note fee income during the six months ended June 30, 1998.
At June 30, 1998 and December 31, 1997, the completion guarantee
subordinated note receivable includes accrued interest receivable of $39,583
and $47,737, respectively, and completion guarantee note fee amounts of
$0 and $425, respectively.
8
6. 12-3/4% Senior Notes Payable:
The Senior Notes payable at June 30, 1998 and December 31, 1997 consist of
$61,471,000 aggregate principal amount of the Senior Notes issued on
November 8, 1996 by the Company and Finance which mature November 15, 2003.
The Senior Notes bear interest at a rate of 12-3/4% per annum, payable
semi-annually in arrears on May 15 and November 15 of each year, which
commenced on May 15, 1997. The Senior Notes will be redeemable at the
option of the Company in whole or in part at any time on or after November
15, 1999. Accrued interest payable on the Senior Notes totaled $1,002,715
as of June 30, 1998 and December 31, 1997.
The Senior Notes are secured by the Company's Notes receivable (Notes 4 and
5), cash and temporary investments. The indenture, between the Company and
Waterford Gaming Finance Corp., the Issuers, and Fleet National Bank, as
Trustee, relating to $65,000,000 12-3/4% Senior Notes due November 15, 2003
(the "Indenture") prohibits the Company and Finance from incurring any
other indebtedness other than the Senior Notes.
The Company is required to make a mandatory redemption of Senior Notes on
November 15 and May 15 of each year, which commenced on November 15, 1997,
using 100% of Company Excess Cash (as defined in the Indenture) held by the
Company in excess of $10,000,000, as of the preceding September 30 and
March 31.
As a result of the proposed expansion project at the Mohegan Sun a Waiver
and Acknowledgment (the "Waiver") was delivered by the holders of the Senior
Notes and accepted by the Company, under the Indenture during April 1998.
The following is a summary of the material terms of the Waiver and is
qualified in its entirety by the actual terms of the Waiver, which has been
filed as an exhibit to the Registrant's Quarterly Report, for the quarter
ended March 31, 1998 on Form 10-Q, Commission File No. 333-17795, as
accepted by the Commission on May 14, 1998. In consideration of the
receipt of 1.5% (one hundred and fifty basis points) of the principal amount
of Senior Notes beneficially owned by the holders of the Senior Notes (the
"Fee") the holders acknowledged, declared and agreed as follows:
1. The holders of the Senior Notes are familiar with i) the Indenture,
ii) the Relinquishment Agreement, as defined, iii) the Letter, as
defined, iv) the Development Agreement, as defined, v) the Side Letter
relating to various waivers, dated February 7, 1998 between the
Authority and TCA (the "Waiver Side Letter"), and together with the
Relinquishment Agreement, as defined, the Letter, as defined, and the
Development Agreement, as defined, (the "Transaction Agreements") and
vi) the excerpt (the "Excerpt") from the Memorandum, as defined.
2. The Transaction Agreements and the Excerpt and the transactions
contemplated thereby do not terminate, amend or waive any provision of
an Operative Document in a manner adverse to the economic interest of
the Holders (as defined in the Indenture), or otherwise violate or
conflict with any provision of the Indenture.
3. The payment of the Fee ($922,065) does not violate or conflict with
any provisions of the Indenture.
4. The Company may pay up to $5,000,000 to fund certain development
expenses in connection with the proposed expansion project at the
Mohegan Sun.
5. Payment of the Fee is subject to receipt of regulatory approvals of
the Transaction Agreements. As of June 30, 1998 some of the
regulatory approvals had not been received.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
The following discussion should be read in conjunction with, and is qualified
in its entirety by, the Company's condensed financial statements and the notes
thereto included elsewhere herein.
Certain Forward Looking Statements
- ----------------------------------
Certain information included in this Form 10-Q and other materials filed or to
be filed by the Company with the Commission (as well as information included
in oral statements or other written statements made or to be made by the
Company) contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include
information relating to the Mohegan Sun including plans for future expansion
and other business development activities, financing sources and the effects of
regulation (including gaming and tax regulation) and competition. Such
forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made by or on behalf of the Company.
Development and Operational Activities
- --------------------------------------
The operation of the Company or its predecessors in its role as a managing
general partner of TCA has been to assist the Mohegan Tribe of Indians of
Connecticut (the "Tribe") and the Authority, an instrumentality of the Tribe,
in obtaining federal recognition, negotiate the tribal-state compact with the
State of Connecticut, obtain financing for the development of the Mohegan Sun
located on certain Tribal land in Uncasville, Connecticut, negotiate the Amended
and Restated Gaming Facility Management Agreement (the "Management Agreement")
and participate in the design and development of the Mohegan Sun which commenced
operations on October 12, 1996. Since the opening of the Mohegan Sun, TCA has
overseen the Mohegan Sun's day-to-day operations.
On February 7, 1998, TCA, the Tribe and the Authority finalized contract
negotiations and, subject to receipt of regulatory approvals, are prepared to
move forward with a significant expansion project at the Mohegan Sun.
Under the terms of the new agreement, TCA will continue to manage the Mohegan
Sun under the existing Management Agreement until December 31, 1999. On January
1, 2000, the Management Agreement will terminate and the Tribe will assume
day-to-day management of the Mohegan Sun. As part of this "Relinquishment
Agreement" and to compensate TCA for giving up its rights under the current
agreements, the Tribe has agreed to pay to TCA 5% of gross revenues, generated
from the Mohegan Sun and from the planned expansion, beginning January 1, 2000
and ending December 31, 2014. The effective date under the Relinquishment
Agreement is the later of (a) the date the Authority receives all required
approvals or (b) the date the Authority's $175 million, 13-1/2% senior secured
notes due 2002 (the "Authority Senior Secured Notes") are refinanced or repaid.
TCA has also negotiated a second agreement with the Tribe and the Authority
which will make TCA the exclusive developer of the planned expansion of the
property. Under this "Development Agreement", TCA will oversee the planning,
design, and construction of the expansion of the Mohegan Sun. TCA will be paid
a development fee of $14 million under the terms of the Development Agreement.
The effective date under the Development Agreement is the first day of the first
calendar month following the later of (a) the date the Authority receives all
required approvals or (b) closing of the anticipated refinancing of certain of
the Authority's existing indebtedness, together with construction financing.
All of the terms of the Relinquishment Agreement and the Development Agreement
are subject to the receipt of regulatory approvals. The parties are awaiting
receipt of final approvals with respect to the Relinquishment Agreement. On
February 27, 1998 the Development Agreement was approved by the Bureau of Indian
Affairs.
10
Certain Risk Factors
- --------------------
Lack of Operations; Dependance on the Mohegan Sun
- -------------------------------------------------
The Company does not conduct any business operations, and is prohibited by the
Indenture, from conducting any business operations, other than in connection
with its role as a managing general partner of TCA and activities incidental to
the ownership of the Subordinated Notes, as defined, and Completion Guarantee
Subordinated Notes, as defined, (collectively the "Notes") and the issuance of
the Senior Notes. The Company has no material business or assets other than its
interests in TCA, the Notes and temporary investments. The Company's primary
source of revenues is from payments from TCA and payments under the Notes that
it holds. Although the Authority has engaged the management services of TCA,
whose partners have substantial experience in the development and management of
resorts and gaming facilities, there can be no assurance that the Mohegan Sun
will continue to generate sufficient revenues for the Authority to be profitable
or to service its debt obligations (including its obligations under the Notes)
or pay management fees so that the Company will be able to meet its obligations.
The future operating results of the Mohegan Sun will depend, in part, on matters
over which the Authority and TCA have no control including, without limitation,
general economic conditions, effects of competition, political and regulatory
factors and the actual number of gaming customers and the amount wagered.
While the Company expects its future operating cash flows will be sufficient to
cover its obligations and expenses, including interest costs, the Company cannot
give any assurance that it will be able to do so.
Overview of Current and Future Cash Flows
- -----------------------------------------
The Company expects to fund its operating, debt service and capital needs from
cash flows from the Company's share of payments from TCA, the Subordinated
Notes, as defined, (to the extent interest and Subordinated Notes Fee Amounts,
as defined, are payable in cash on the Subordinated Notes, as defined, and to
the extent of principal payments on the Subordinated Notes, as defined), Non-PIK
Completion Guarantee Notes, as defined, (to the extent interest and Completion
Guarantee Notes Fee Amounts, as defined, are payable in cash on the Non-PIK
Completion Guarantee Notes, as defined) and from amounts in the Company's cash
collateral account (the "Cash Collateral Account"). Based upon the Company's
anticipated future operations, management believes that available cash flow will
be sufficient to meet the Company's anticipated requirements for future
operating expenses and future scheduled payments of principal of and interest on
the Senior Notes. No assurance, however, can be given that the operating cash
flow will be sufficient for that purpose.
Sources of Revenues
- -------------------
The Company has two primary sources of revenues: payments from TCA and payments
under the Notes that it holds.
Distributions on the Company's partnership interest in TCA
- ----------------------------------------------------------
TCA's primary source of revenue is management fees under the Management
Agreement (the "Management Fees"). The Management Fees are paid monthly and are
calculated in three tiers based upon Net Revenues, as defined, of the Mohegan
Sun set forth below (in thousands):
I II III
-------------- --------------- ---------------
40% of Net Net Revenues in Net Revenues in
Revenues up to Tier I plus Tiers I &
35% of Net II plus 30% of
Revenues Net Revenues
between above
-------------- --------------- ---------------
Year 1....... $50,546 $50,547-$63,183 $63,183
Year 2....... $73,115 $73,116-$91,394 $91,394
Year 3....... $91,798 $91,799-$114,747 $114,747
Year 4....... $95,693 $95,694-$119,616 $119,616
Year 5....... $104,107 $104,108-$130,134 $130,134
Year 6
(subject to
buyout option)..$114,335 $114,336-$142,919 $142,919
Year 7
(subject to
buyout option)..$130,944 $130,945-$163,680 $163,680
As defined in the Management Agreement, "Net Revenues" of the Mohegan Sun means
the amount of the gross revenues of the facility less operating expenses and
certain specified categories of revenue, such as income from any financing or
refinancing, taxes or charges received from patrons on behalf of and remitted to
a governmental entity, proceeds from the sale of capital assets, insurance
proceeds and interest on the capital replacement reserve. Net Revenues also
include Net Gaming Revenues, which are equal to the amount of the "net win"
from Class III Gaming operations (i.e., the difference between gaming wins and
losses) less all gaming-related operational expenses (excluding the Management
Fees).
11
In addition, TCA is required to fund $1.2 million per year ($100,000 per month)
from its Management Fees into a capital replacement reserve. The Management
Agreement has a term of seven years that commenced upon the opening of the
Mohegan Sun, subject to a right of the Authority to buy-out the Management
Agreement after the fifth year.
Pursuant to the Amended and Restated Omnibus Financing Agreement, as agreed to
by TCA, the Company and Sun International, dated September 10, 1997 (effective
as of September 29, 1995) (the "Omnibus Financing Agreement"), upon receipt of
the Management Fees, TCA is required to make a number of different types of
payments to its subcontractors. The subcontracts are primarily with TCA's
partners or their affiliates. Some of these payments are one-time
non-recurring payments (the "Non-recurring Payments") and others are required
on a continuing basis (the "Continuing Payments"). The payments marked with an
asterisk (*) below are Non-recurring Payments and the others are Continuing
Payments. One of the considerations used by the National Indian Gaming
Commission (the "NIGC") in determining whether or not to approve a management
contract is whether TCA is providing a portion of the capital required.
Accordingly, TCA agreed to provide or cause to be provided $40 million of
capital in the form of the Subordinated Notes, as defined. However, at the
time that the subordinated loan was made, the partners of TCA, including the
Company's predecessors-in-interest, did not participate in the loan in
accordance with their economic interests in TCA. Therefore, the partners of
TCA agreed that Sun International, who subscribed for almost all of the
Subordinated Notes, would be entitled to fees for agreeing to participate in
the Mohegan Sun project. Other fees payable are to compensate the recipients
for other subcontracted services provided by them to the Mohegan Sun.
As of June 30, 1998 the Authority had outstanding the following Authority
Subordinated Notes, as defined.
1. 15% subordinated notes principal amount $40,000,000 due November 2003 (the
"Subordinated Notes"). The rate of the interest payable by the Authority
on the Subordinated Notes is 15% per annum.
2. Completion guarantee subordinated notes principal amount $50,000,000 due
November 2003 (the "Completion Guarantee Subordinated Notes"). The rate of
interest payable by the Authority on the Completion Guarantee Subordinated
Notes is the prime rate per annum announced by Chemical Bank from "time to
time" plus 1% (the "Base Rate"). The Base Rate is set and revised at
intervals of six months. At June 30, 1998, the Base Rate was 9.50% per
annum.
For purposes of points (c), (d) and (e) below the Company, Sun International
and TCA have agreed that the Completion Guarantee Subordinated Notes be
split into two principal amounts of $32,500,000 Completion Guarantee
Subordinated Notes (the "Non-PIK Completion Guarantee Notes") and
$17,500,000 Completion Guarantee Subordinated Notes (the "PIK Completion
Guarantee Notes").
The following table sets forth the priority of the distribution from TCA of the
Management Fees to its partners:
(a) First, for the period ending on November 8, 1996, a maximum sum of
$938,000 will be paid from the Management Services Fee, as defined, for
expenses incurred with respect to the Mohegan Sun through such date, and
for the period commencing on November 9, 1996 and ending on September
30, 1997, and for each fiscal year of the Authority thereafter, up to
$2,000,000 per fiscal year of the Authority of the Management Services
Fee will be paid by TCA for expenses.
(b) Second, to return capital contributions made by the partners of TCA
after September 29, 1995. These capital contributions aggregate $2.35
million. $2.2 million were deemed returned at the consummation of the
offering of the Senior Notes upon the distribution by TCA of the $1.7
million in principal amount of Subordinated Notes together with accrued
interest and a cash distribution totaling $275,000, 50% to Sun Cove and
50% to the Company. $150,000 has been repaid to the partners, 50% to Sun
Cove and 50% to the Company.
(c) Third, to pay Sun International fee amounts of $2,500,000 on April 30,
1996, $2,500,000 on October 31, 1996, $2,700,000 on April 30, 1997 and
every six months thereafter, beginning October 31, 1997 an amount equal
to the product of (1) $2,300,000 and (2) a fraction, the numerator of
which is the weighted average principal amount of Subordinated Notes
outstanding including all PIK Amounts (defined as interest that is not
paid in cash by the Authority on any interest payment date, May 15 and
November 15), during the applicable Semi-Annual Period (defined as the
six month periods ending, respectively, on April 30 and October 31) and
the denominator of which is $40,000,000 (the "Subordinated Notes Fee
Amounts"). On November 8, 1996 the Company purchased from Sun
International $19,150,000 principal amount of Subordinated Notes and
Sun International assigned to the Company its right to receive
$3,850,000 of the Subordinated Notes Fee Amounts payable on April 30,
1996, October 31, 1996 and April 30, 1997 and from May 1, 1997 and every
six months thereafter each of the Company and Sun International are
entitled to one half of the Subordinated Notes Fee Amounts payable
beginning October 31, 1997.
12
(d) Fourth, i) to pay Sun International fee amounts of $525,000 on October
31, 1996, $2,600,000 on April 30, 1997 and every six months thereafter,
beginning October 31, 1997 an amount equal to the product of the number
arrived at by dividing the difference between (26 1/2% and the Base
Rate) by two (the "Multiplier") and the weighted average of principal
amount of Non-PIK Completion Guarantee Notes outstanding during the
applicable Semi-Annual Period (the "Completion Guarantee Note Fee
Amounts"), and ii) payment of an amount equal to the Base Rate on the
Non-PIK Completion Guarantee Notes to the extent the Authority is not
permitted to pay interest thereon (the "Deferred Interest Amounts").
This amount will be paid semi-annually pari passu with the amount under
paragraph (d)i)above. When the Authority can pay such interest, payment
under this paragraph (d) ii) shall be reduced accordingly.
In addition when the Authority pays Sun International any amounts
relating to the Non-PIK Completion Guarantee Notes (other than current
interest), such amounts that relate to the Deferred Interest Amounts
acquired by TCA shall be immediately paid over to TCA. Up until
October 12, 1997 any amounts paid under paragraph (d) were paid to Sun
International. After October 12, 1997 portions of these amounts are
payable to the Company as it purchases its share of the Non-PIK
Completion Guarantee Notes. When the Authority pays the Company any
amounts relating to the Non-PIK Completion Guarantee Notes (other than
current interest), such amounts that relate to the Deferred Interest
Amounts acquired by TCA shall be immediately paid over to TCA.
During September 1997 the Company purchased from Sun International $2.5
million principal amount of the outstanding first funded Completion
Guarantee Subordinated Notes and the Company is required to purchase
from Sun International on each October 12, 1998 and October 12, 1999
$2.5 million principal amount of the outstanding first funded
Completion Guarantee Subordinated Notes, at the purchase price equal to
the outstanding principal balance of the Completion Guarantee
Subordinated Notes to be purchased, plus the related accrued interest
and deferred interest amounts which have not been paid by TCA and
Completion Guarantee Note Fee Amounts.
(e) Fifth, to pay Sun International fee amounts of $80,000 on October 31,
1996, $1,350,000 on April 30, 1997 and every six months thereafter,
beginning October 31, 1997 an amount equal to the product of the
Multiplier and the weighted average of principal amount of PIK
Completion Guarantee Notes (including the applicable PIK Amounts)
outstanding during the applicable Semi-Annual Period.
*(f) Sixth, return of capital contributions made before September 29, 1995.
These capital contributions aggregated $6,715,000 (balance as of June
30, 1998 was $0 and as of December 31, 1997 was approximately $449,000
and has been repaid to the partners, 50% to the Company and 50% to Sun
Cove, from repayments by the Tribe to TCA of amounts due in terms of the
promissory note dated September 29, 1995 between TCA and the Tribe).
13
*(g) Seventh, payment of a Development Services Fee to Sun International
Management Limited ("SIML") equal to $8,280,000 constituting 3% of the
total development costs (less land acquisition costs) of the Mohegan
Sun plus $25,000. SIML has subcontracted with certain affiliates of the
Company. The fees payable by SIML to the affiliates of the Company are
equal to 20.83% of the Development Services Fee plus $25,000 (total
$1,749,724). At June 30, 1998 and June 30, 1997, $8,305,000 and $0,
respectively, had been paid by TCA as Development Services Fee.
(h) Eighth, payment of a monthly Management Services Fee (less the amounts
paid pursuant to paragraph (a) above) equal to the lesser of i) 1% of
the gross revenues of the Mohegan Sun or ii) 25% of the sum of the
Excess Cash (as defined in the Amended and Restated Partnership
Agreement of TCA)of TCA plus 25% the organizational and administrative
fee and the marketing and casino operations fee. After deducting
operating expenses (which will be the following amounts: $2.0 million
if the Mohegan Sun's EBITDA (defined as the Mohegan Sun's net income
plus depreciation, amortization, management fee expense, interest
expense and other non-cash charges less interest income) is $200.0
million or less, $3.0 million if the Mohegan's Sun's EBITDA is greater
than $200.0 million but less than $225.0 million, and $4.0 million if
the Mohegan Sun's EBITDA is greater than $225.0 million) the remaining
amounts will be distributed in equal amounts to SIML and the Company.
The Company's directors and officers are not compensated by the Company,
but will receive compensation as part of the operating expenses of TCA
as detailed above.
*(i) Ninth, payment of a fee to Sun International of $5,520,000 constituting
2% of the total development costs (less land acquisition costs) of the
Mohegan Sun.
(j) Tenth, distribution of amount equal to the state and federal income tax
liability of TCA as if it were an individual paying federal income tax
and the higher of Michigan or Connecticut taxes. This amount will be
paid 50% to Sun Cove and 50% to the Company.
(k) Eleventh, all remaining fees and Excess Cash distributed 50% to Sun
Cove and 50% to the Company.
14
On February 7, 1998, a Memorandum of Understanding (the "Memorandum") was agreed
to by the Company, Sun Cove, Sun International and TCA. The Memorandum provides
for the following:
(i) There will be no change in the existing relationship between Sun Cove
and the Company until January 1, 2000.
(ii) If the Relinquishment Agreement becomes effective, during the 7-year
period beginning January 1, 2000, the Company will not be entitled to
receive any fees or cash flows from TCA, with the exception of (a) the
existing agreement regarding annual operating expenses of TCA which
shall not exceed $2,000,000 and (b) the Company's right to receive
$2,000,000 to pay such amount to Leisure in any year until TCA has first
paid Sun Cove consideration in the amount of $5,000,000 in such year.
(iii) In terms of the Development Agreement TCA will be paid a development
fee of $14 million. TCA will subcontract with SIML who in turn will
subcontract with certain affiliates of the Company to provide certain of
the services pursuant to the Development Agreement.
For the six months ended June 30, 1998, the Company received $3,931,698 from TCA
and $901,170 was due from TCA, which represents the Company's share in terms of
the Omnibus Financing Agreement of approximately $26,600,000 in net Management
Fees earned by TCA from the Authority pursuant to the terms of the Management
Agreement for the same period. The actual amount of Management Fees earned by
TCA for any annual period ending September 30, are subject to year-end
adjustment. For the six month period ended June 30, 1997, the Company received
$3,210,000 in cash distributions from TCA and $32,699 was due from TCA, which
represents the Company's share of approximately $11,823,000 in net management
fees earned by TCA from the Authority pursuant to the terms of the Management
Agreement for the same period.
For the six months ended June 30, 1998 the Company also received $224,680 in
cash distributions from TCA which represents the Company's share of repayments
by the Tribe to TCA of amounts due in terms of the promissory note dated
September 29, 1995 between TCA and the Tribe.
The Company anticipates regular payments from TCA based on the results of the
Authority and Management Fees payment by the Authority.
15
Payments by the Authority on the Subordinated Notes, Non-PIK
- ------------------------------------------------------------
Completion Guarantee Notes and PIK Completion Guarantee Notes
- -------------------------------------------------------------
(collectively the "Authority Subordinated Notes")
- -------------------------------------------------
Interest is calculated semi-annually on the Authority Subordinated Notes.
Interest is deferred (and compounds semi-annually) until the Authority purchases
or offers to purchase at least 50% of its Authority Senior Secured Notes and
certain fixed charge coverage ratios are met. The Authority is required to
offer annually to purchase the Authority Senior Secured Notes with the sum of
(i) 50% of its Excess Cash Flow (defined as an amount equal to the cash flow of
the Authority for any given period, less (a) management fees for such period,
(b) interest expense and principal payments on indebtedness of the Authority for
such period, (c) amounts set aside in the Cash Maintenance Account (as defined
in the indenture for the Authority Senior Secured Notes) for such period, (d)
amounts for the payment of federal and state taxes for such period, and (e)
certain other amounts (not to exceed $6.8 million) for such period), (ii) 100%
of the amount of Deferred Subordinated Interest (as defined in the indenture for
the Authority Senior Secured Notes) for such period and (iii) accrued and unpaid
interest, if any, to the date of closing of such Excess Cash Purchase Offer (as
defined in the indenture for the Authority Senior Secured Notes). If the
holders of the Authority Senior Secured Notes do not accept the offer, then such
amount of the Excess Cash must be offered to purchase the Authority Subordinated
Notes. In the event that the Company receives an offer to purchase the
Company's Authority Subordinated Notes, the Indenture requires the Company to
accept such offer in the same proportion as Sun International. For the six
months ended June 30, 1998 and June 30, 1997 the Company did not receive any
cash payments on the Authority Subordinated Notes from the Authority.
On February 7, 1998, the Company, Sun International, the Authority and the Tribe
agreed to a letter of understanding (the "Letter"), regarding the repurchase of
the Authority Subordinated Notes. The Letter provides that until January 1,
2000, neither the Authority nor the Tribe shall exercise any option it may have
to redeem the Authority Subordinated Notes provided that nothing contained in
the Letter shall limit or amend the rights of the holders of the Authority
Subordinated Notes to require the Authority to redeem or repurchase the
Authority Subordinated Notes - pursuant to the Note Purchase Agreement dated as
of September 29, 1995 between the Authority and Sun International.
16
Results of Operations
- ---------------------
Comparison of operating results for the quarters ended June 30,
- ---------------------------------------------------------------
1998 and June 30, 1997
- ----------------------
Total revenue for the quarter ended June 30, 1998 was $3,978,574 compared with
$1,993,997 for the quarter ended June 30, 1997. The increase was attributable
to an increase in interest and dividend income of $35,705, an increase in
subordinated notes fee income - Trading Cove Associates, as detailed under point
(c) of the table set forth above under "Overview of Current and Future Cash
Flows", of $713,568, an increase in completion guarantee notes fee income -
Trading Cove Associates, as detailed under point (d) of the table set forth
above under "Overview of Current and Future Cash Flows", of $212,500, and an
increase in management services income - Trading Cove Associates, as detailed
under point (h) of the table set forth above under "Overview of Current and
Future Cash Flows", of $1,022,804. The payment of these fees can be attributed
directly to the profitable operations of the Mohegan Sun.
Total expenses for the three months ended June 30, 1998 were $2,325,611 compared
with $2,173,179 for the three months ended June 30, 1997. Interest expense
decreased by $118,987, as a result of the redemption of $3,529,000 principal
amount of Senior Notes on November 15, 1997, general and administrative costs
increased by $37,079, primarily attributable to a reclassification during the
quarter ended June 30, 1997, of certain charges that had previously been
expensed to deferred financing costs, amortization on beneficial interest -
Leisure Resort Technology, Inc. increased by $218,729 and amortization on
deferred financing costs increased by $15,611, due to additional deferred
financing costs incurred.
Equity in loss of Trading Cove Associates for the three months ended June 30,
1998 was $(434,801) compared with $(454,565) for the three months ended June
30, 1997.
As a result of the foregoing factors the Company experienced net income of
$1,218,162 for the quarter ended June 30, 1998 compared with a net loss of
$(633,747) for the quarter ended June 30, 1997.
Comparison of operating results for the six months ended June 30,
- -----------------------------------------------------------------
1998 and June 30, 1997
- ----------------------
Total revenue for the six months ended June 30, 1998, was $6,956,688 compared
with $3,532,749 for the six months ended June 30, 1997. The increase was
attributable to an increase in interest and dividend income of $82,398, an
increase in subordinated notes fee income - Trading Cove Associates, as detailed
under point (c) of the table set forth above under "Overview of Current and
Future Cash Flows", of $271,228, an increase in completion guarantee notes fee
income - Trading Cove Associates, as detailed under point (d) of the table set
forth above under "Overview of Current and Future Cash Flows", of $233,750, and
an increase in management services income - Trading Cove Associates, as detailed
under point (h) of the table set forth above under "Overview of Current and
Future Cash Flows", of $2,836,563. The payment of these fees can be attributed
directly to the profitable operations of the Mohegan Sun.
Total expenses for the six months ended June 30, 1998 were $4,699,528 compared
with $4,407,912 for the six months ended June 30, 1997. Interest expense
decreased by $231,474, as a result of the redemption of $3,529,000 principal
amount of Senior Notes on November 15, 1997, general and administrative costs
increased by $70,613, primarily attributable to an increase in legal and
accounting fees, insurance charges and to a reclassification during the six
months ended June 30, 1997, of certain charges that had previously been expensed
to deferred financing costs, amortization on beneficial interest - Leisure
Resort Technology, Inc. increased by $423,036 and amortization on deferred
financing costs increased by $29,441 due to additional deferred financing costs
incurred.
Equity in loss of Trading Cove Associates for the six months ended June 30, 1998
was $(878,059) compared with $(859,965) for the six months ended June 30, 1997.
As a result of the foregoing factors the Company experienced net income of
$1,379,101 for the six months ended June 30, 1998 compared with a net loss of
$(1,735,128) for the six months ended June 30, 1997.
17
Liquidity and Capital Resources
- -------------------------------
The initial capital of the Company consists of the partnership interests in TCA
contributed by Slavik Suites, Inc. and LMW Investments, Inc. in forming the
Company. In connection with the offering of the Senior Notes, the Company used
approximately $25.1 million to purchase from Sun International $19.2 million in
principal amount of Subordinated Notes plus accrued and unpaid interest and
Subordinated Notes Fee Amounts. In addition, TCA distributed approximately
$850,000 in principal amount of Subordinated Notes to the Company. During
September 1997 the Company purchased from Sun International $2.5 million Non-PIK
Completion Guarantee Notes plus accrued and unpaid interest and Non-PIK
Completion Guarantee Fee Amounts (total cost approximately $2.8 million). On
January 6, 1998 the Company paid $5,000,000 to Leisure whereby Leisure gave up
its beneficial interest in 5% of certain fees and excess cash flows, as defined,
of TCA and any other claims it may have had against the Company, TCA and TCA's
partners and former partners.
For the six months ended June 30, 1998 and June 30, 1997 cash provided by
(used in) operating activities (as shown in the Condensed Statements of Cash
Flows) was $222,430 and $(2,649,998), respectively.
Current Assets decreased from $9,980,267 to $5,678,431 at June 30, 1998. The
decrease was primarily caused by purchasing the beneficial interest - Leisure
Resort Technology, Inc. out of cash in escrow and the interest payment to the
Senior Note holders of $3,918,776 on May 15, 1998.
Current Liabilities decreased from $1,081,043 to $1,017,245 at June 30,1998.
The decrease was attributable to the decrease in accrued expenses.
For the six months ended June 30, 1998 and June 30, 1997 cash provided by
investing activities (as shown in the Condensed Statements of Cash Flows) was
$2,065,424 and $2,749,681, respectively.
The Company is required to purchase from Sun International on each October 12,
1998 and October 12, 1999 $2.5 million of the outstanding first funded principal
amount of Non-PIK Completion Guarantee Notes owned by Sun International. The
purchase price which is to be paid by the Company to Sun International will be
equal to the outstanding principal balance of the Non-PIK Completion Guarantee
Notes to be purchased plus any amounts due thereon under points (d) (i) and (d)
(ii) of the table set forth above under "Overview of Current and Future Cash
Flows". As of June 30, 1998, $32.5 million principal was outstanding as Non-PIK
Completion Guarantee Notes.
The Company anticipates that up to $5,000,000 investment in TCA (as of June 30,
1998, $75,000 had been invested in TCA) may be required as detailed above under
point 4 of the Waiver as described in Note 6 to the Condensed Financial
Statements included in Item 1.
For the six months ended June 30, 1998 and June 30, 1997 cash used in financing
activities (as shown in the Condensed Statements of Cash Flows) was $(255,790)
and $(78,538), respectively, for additional disbursements that related to
deferred financing costs.
The Company is required to make a mandatory redemption on November 15 and May
15 of each year, which commenced on November 15, 1997, of Senior Notes using
100% of Company Excess Cash, as defined in the Indenture, held by the Company
in excess of $10 million, as of the preceding September 30 and March 31.
The Company has two primary sources of revenues: payments from TCA and payments
under the Notes that it holds. The Company anticipates regular payments from
TCA based on the results of the Authority and Management Fees payment by the
Authority.
18
Item 3. Quantitative and Qualitative Disclosures about Market
-----------------------------------------------------
Risk
----
NOT APPLICABLE
Part II Other Information:
------------------
Item 1 -- Legal Proceedings:
------------------
As derived from publicly filed information, the Authority is a
defendant in certain litigations incurred in the normal course of
business. In the opinion of the Authority's management, based on the
advise of counsel, the aggregate liability, if any, arising from
such litigation will not have a material adverse effect on the
Authority's financial condition or results of operations.
Item 2 -- Changes in Securities:
----------------------
NONE
Item 3 -- Defaults Upon Senior Securities:
--------------------------------
NONE
Item 4 -- Submission of Matters to a Vote of Security Holders:
----------------------------------------------------
NONE
Item 5 -- Other Information:
------------------
NONE
19
Item 6 -- Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits
--------
Exhibit No. Description
3.1 Certificate of Formation, as amended, of
Waterford Gaming, L.L.C. (i)
3.2 Certificate of Incorporation of Waterford
Gaming Finance Corp. (i)
3.3 Bylaws of Waterford Gaming Finance Corp. (i)
4.1 Indenture, dated as of November 8, 1996,
between Waterford Gaming, L.L.C. and Waterford
Gaming Finance Corp., the issuers, and Fleet
National Bank, as trustee, relating to
$65,000,000 12-3/4% Senior Notes due 2003. (i)
4.2 Registration Rights Agreement, dated as of
November 8, 1996, among, Waterford Gaming,
L.L.C., Waterford Gaming Finance Corp., Bear,
Stearns & Co., Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. (i)
4.3 Note Pledge Agreement, dated as of November 8,
1996, between Waterford Gaming, L.L.C. and
Fleet National Bank, as trustee. (i)
4.4 Cash Collateral and Disbursement Agreement,
dated as of November 8, 1996, among Fleet
National Bank, as trustee, Fleet National Bank
as disbursement agent, and Waterford Gaming,
L.L.C. (i)
4.5 Specimen Form of 12-3/4% Senior Notes due 2003
(the "Private Notes") (included in Exhibit
4.1). (i)
4.6 Specimen Form of 12-3/4% Senior Notes due 2003
(the "Exchange Note") (included in Exhibit
4.1). (i)
10.1 Omnibus Financing Agreement, dated as of
September 21, 1995, between Trading Cove
Associates and Sun International Hotels
Limited. (i)
10.2 First Amendment to the Omnibus Financing
Agreement, dated as of October 19, 1996, among
Trading Cove Associates, Sun International
Hotels Limited and Waterford Gaming, L.L.C.
(i)
10.2.1 Amended and Restated Omnibus Financing
Agreement dated September 10, 1997. (ii)
20
10.3 Amended and Restated Partnership Agreement of
Trading Cove Associates, dated as of September
21, 1994, among Sun Cove Limited, RJH
Development Corp., Leisure Resort Technology,
Inc., Slavik Suites, Inc., and LMW
Investments, Inc. (i)
10.4 First Amendment to Amended and Restated
Partnership Agreement of Trading Cove
Associates, dated as of October 22, 1996,
among Sun Cove Limited, Slavik Suites, Inc.,
RJH Development Corp., LMW Investments, Inc.
and Waterford Gaming, L.L.C. (i)
10.5 Purchase Agreement, dated as of November 5,
1996, among Waterford Gaming, L.L.C.,
Waterford Gaming Finance Corp., Bear, Stearns
& Co., Inc. and Merrill Lynch, Pierce, Fenner
and Smith Incorporated. (i)
10.5.1 Agreement with Respect to Redemption or
Repurchase of Subordinated Notes, dated
September 10, 1997. (ii)
10.6 Limited Liability Company Agreement of
Waterford Gaming, L.L.C., dated as of
September 30, 1996, among Slavik Suites, Inc.,
LMW Investments, Inc. and Waterford Gaming,
L.L.C. (i)
10.7 Note Purchase Agreement, dated as of October
19, 1996, among Sun International Hotels
Limited, Waterford Gaming, L.L.C. and Trading
Cove Associates. (i)
10.8 Note Purchase Agreement, dated as of September
29, 1995, between the Mohegan Tribal Gaming
Authority and Sun International Hotels Limited
relating to the Subordinated Notes. (i)
10.9 Management Agreement, dated as of July 28,
1994, between the Mohegan Tribe of Indians of
Connecticut and Trading Cove Associates. (i)
10.10 Management Services Agreement, dated September
10, 1997. (ii)
10.11 Development Services Agreement, dated
September 10, 1997. (ii)
10.12 Subdevelopment Services Agreement, dated
September 10, 1997. (ii)
10.13 Completion Guarantee and Investment Banking
and Financing Arrangement Fee Agreement, dated
September 10, 1997. (ii)
10.14 Settlement and Release Agreement, dated
January 6, 1998, by and among Leisure Resort
Technology, Inc., Lee R. Tyrol, Trading Cove
Associates, Slavik Suites, Inc., LMW
Investments, Inc., RJH Development Corp.,
Waterford Gaming, L.L.C. and Sun Cove
Limited. (iii)
21
10.15 Waiver and Acknowledgment of Noteholder. (iv)
21.1 Subsidiaries of Waterford Gaming, L.L.C. (i)
21.2 Subsidiaries of Waterford Gaming Finance
Corp. (i)
27 Financial Data Schedule (v)
(i) Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 333-17795,
declared effective on May 15, 1997.
(ii) Incorporated by reference to the Registrant's quarterly
report on Form 10-Q for the period ended September 30, 1997,
Commission File No. 333-17795, as accepted by the Commission
on November 14, 1997.
(iii) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997,
Commission File No. 333-17795, as accepted by the Commission
on March 30, 1998.
(iv) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1998,
Commission File No. 333-17795, as accepted by the Commission
on May 14, 1998.
(v) Included in Edgar filing only.
(b) No form 8-K filings.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 1998 By: /s/Len Wolman
Len Wolman, Chief Executive Officer
Date: August 13, 1998 By: /s/Del Lauria
Del Lauria, Chief Financial Officer
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Waterford Gaming, L.L.C.
All amounts are unaudited.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,264,823
<SECURITIES> 0
<RECEIVABLES> 901,170
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,678,431
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 54,672,914
<CURRENT-LIABILITIES> 1,017,245
<BONDS> 61,471,000
0
0
<COMMON> 0
<OTHER-SE> (7,815,331)
<TOTAL-LIABILITY-AND-EQUITY> 54,672,914
<SALES> 0
<TOTAL-REVENUES> 6,956,688
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 780,752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,918,776
<INCOME-PRETAX> 1,379,101
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,379,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,379,101
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
