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: 6/30/99
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, 1999 (unaudited) and December 31, 1998 3
Condensed Statements of Operations of Waterford Gaming, L.L.C.
for the three months and six months ended June 30, 1999
(unaudited) and June 30, 1998 (unaudited) 4
Condensed Statements of Changes in Members' Deficiency of
Waterford Gaming, L.L.C. for the six months ended
June 30, 1999 (unaudited) and June 30, 1998 (unaudited) 5
Condensed Statements of Cash Flows of Waterford Gaming, L.L.C.
for the six months ended June 30, 1999 (unaudited) and
June 30, 1998 (unaudited) 6
Notes to Condensed Financial Statements for Waterford
Gaming, L.L.C. 7
ITEM 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
ITEM 3 -- Quantitative and Qualitative Disclosures about
Market Risk 26
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings 26
Item 2 -- Changes in Securities 26
Item 3 -- Defaults upon Senior Securities 26
Item 4 -- Submission of Matters to a Vote of Security Holders 26
Item 5 -- Other Information 26
Item 6 -- Exhibits and Reports on Form 8-K 27
Signatures - Waterford Gaming, L.L.C. 30
Report of Independent Accountants
---------------------------------
To the Member of Waterford Gaming, L.L.C.:
We have reviewed the accompanying condensed balance sheet of Waterford
Gaming, L.L.C. ("the Company") as of June 30, 1999, and the related condensed
statements of operations for the six months ended June 30, 1999 and 1998,
and the related condensed statements of changes in member's deficiency and
cash flows for the six months ended June 30, 1999 and 1998. 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 accompanying financial statements 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, 1998, and the related
statements of operations and changes in member's deficiency and cash flows
for the year then ended (not presented herein); and in our report dated
February 24, 1999, 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, 1998, is fairly stated, in all material
respects, in relation to the balance sheet from which it has been derived.
PricewaterhouseCoopers, LLP
August 3, 1999
1
PART I -- FINANCIAL INFORMATION
---------------------
Item 1. -- Financial Statements
--------------------
The unaudited condensed financial information as of June 30, 1999 and 1998,
and for the three months and six months ended June 30, 1999 and 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 by the American
Institute of Certified Public Accountants.
2
WATERFORD GAMING, L.L.C.
CONDENSED BALANCE SHEETS
June 30, 1999 (Unaudited) and December 31, 1998
----------
June 30, December 31,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,004,157 $ 2,783,344
Temporary investments --- 2,045,430
Restricted investments 12,039,205 ---
Due from Trading Cove
Associates 1,921,187 1,611,288
Other assets 61,084 19,299
------------ ------------
Total current assets 26,025,633 6,459,361
------------ ------------
Trading Cove Associates
-equity investment 8,337,920 8,662,198
Beneficial interest - Leisure
Resort Technology, Inc. 5,864,557 4,191,909
Investment in 15% subordinated
notes receivable 34,463,981 32,059,517
Investment in completion
guarantee subordinated
notes receivable 5,072,917 5,075,000
Deferred financing costs,
net of accumulated
amortization of $109,030
and $1,058,895 at June 30,1999
and December 31, 1998,
respectively 4,002,888 3,339,780
Fixed assets, net of accumulated
depreciation of $4,492 and $0
at June 30, 1999 and December
31, 1998, respectively 49,426 ---
------------ ------------
Total assets $ 83,817,322 $ 59,787,765
============ ============
LIABILITIES AND MEMBERS' DEFICIENCY
Current liabilities:
Accrued expenses $ 252,023 $ 35,172
Accrued interest on
senior notes payable 3,430,556 1,002,715
------------ ------------
Total current liabilities 3,682,579 1,037,887
12-3/4% senior notes payable --- 61,471,000
9-1/2% senior notes payable 125,000,000 ---
------------ ------------
Total liabilities 128,682,579 62,508,887
------------ ------------
Members' deficiency (44,865,257) (2,721,122)
------------ ------------
Total liabilities and
members' deficiency $ 83,817,322 $ 59,787,765
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
3
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF OPERATIONS
for the three months and six months ended June 30, 1999 and June 30, 1998
(Unaudited)
-----------
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Interest and dividend
income $ 1,587,248 $ 1,187,003 $ 2,946,830 $ 2,330,108
Subordinated notes fee
income-Trading Cove
Associates 1,798,460 1,556,267 1,798,460 1,556,267
Completion guarantee notes
fee income-Trading Cove
Associates 437,500 212,500 437,500 233,750
Management services
income-Trading Cove
Associates 506,437 1,022,804 1,171,792 2,836,563
Organization and
administrative fee income-
Trading Cove Associates 2,141,906 --- 7,781,392 ---
------------- ------------- ------------- ------------
Total revenue 6,471,551 3,978,574 14,135,974 6,956,688
------------- ------------- ------------- ------------
Expenses:
Interest expense 2,935,764 1,959,388 12,917,150 3,918,776
General and administrative 37,599 20,843 217,468 115,547
12-3/4% senior notes
tender expense (26,000) --- 622,486 ---
Amortization of beneficial
interest-Leisure Resort
Technology, Inc. 94,239 218,729 327,352 423,036
Amortization on deferred
financing costs 93,235 126,651 3,448,810 242,169
Depreciation 3,219 --- 4,492 ---
------------- ------------- ------------- ------------
Total expenses 3,138,056 2,325,611 17,537,758 4,699,528
------------- ------------- ------------- ------------
3,333,495 1,652,963 (3,401,784) 2,257,160
Equity in income of
Trading Cove Associates (65,229) (434,801) 143,381 (878,059)
------------- ------------- ------------- ------------
Net income (loss) $ 3,268,266 $ 1,218,162 $ (3,258,403) $ 1,379,101
============= ============= ============= ============
The accompanying notes are an integral part of these condensed financial statements.
4
</TABLE>
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF CHANGES IN MEMBERS' DEFICIENCY
for the six months ended June 30, 1999 and June 30, 1998
(Unaudited)
----------
for the six months ended
June 30, 1999
---------------
Slavik Suites Inc. LMW Investments Inc. Waterford Group, L.L.C. Total
------------------ -------------------- ----------------------- -----------
<S> <C> <C> <C> <C>
Balance, January 1 $ (1,765,936) $ (955,186) $ $(2,721,122)
Contributions-
January 1-March 17 33,220 15,780 49,000
Distributions-
January 1-March 17 (1,277,787) (606,945) (1,884,732)
Net loss-
January 1-March 17 (5,050,221) (2,398,845) (7,449,066)
Transfer of interest 8,060,724 3,945,196 (12,005,920) ---
Distributions --- --- (37,050,000) (37,050,000)
Net income-
March 17-June 30 --- --- 4,190,663 4,190,663
------------------ -------------------- ----------------------- -----------
Balance, June 30 $ --- $ --- $ (44,865,257) $(44,865,257)
================== ==================== ======================= ===========
</TABLE>
<TABLE>
for the six months ended
June 30, 1998
-------------
<S> <C> <C> <C>
Slavik Suites Inc. LMW Investments Inc. Total
------------------ -------------------- -------------
Balance, January 1 $ (6,154,626) $ (3,039,806) $ (9,194,432)
Net income-
January 1-June30 934,985 444,116 1,379,101
------------------ -------------------- -------------
Balance, June 30 (5,219,641) (2,595,690) (7,815,331)
================== ==================== =============
The accompanying notes are an integral part of these condensed financial
statements.
5
</TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1999 and June 30, 1998
(Unaudited)
-----------
For the six For the six
months ended months ended
June 30, 1999 June 30, 1998
------------- -------------
Cash flows from operating
activities:
Net income (loss) $ (3,258,403) $ 1,379,101
------------- -------------
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Amortization 3,776,162 665,205
Depreciation 4,492 -
Equity in (income) loss of
Trading Cove Associates (143,381) 878,059
Changes in operating assets and
liabilities:
Accrued interest receivable-15%
subordinated notes receivable (2,404,464) (2,080,661)
Accrued interest receivable-
completion guarantee subordinated
notes receivable 2,083 8,154
Due from Trading Cove Associates (309,899) (607,247)
Other assets (41,785) 43,617
Accrued expenses 86,851 (63,798)
Accrued interest on senior notes
payable 2,427,841 ---
------------- -------------
Total adjustments 3,397,900 (1,156,671)
------------- -------------
Net cash provided by
operating activities 139,497 222,430
------------- -------------
Cash flows from investing activities:
Beneficial interest-Leisure Resort
Technology, Inc. (2,000,000) (5,057,211)
Release of cash in escrow --- 5,000,000
Contributions to Trading Cove
Associates (300,000) (75,000)
Distributions from Trading Cove
Associates 767,659 299,680
(Purchases) and sales of temporary
investments-net 2,045,430 1,897,530
(Purchases) and sales of restricted
investments-net (12,039,205) ---
Return on investment in completion
guarantee subordinated notes
receivable --- 425
Furniture and fixtures (21,505) ---
Leasehold improvements (32,413) ---
------------- -------------
Net cash (used in) provided
by investing activities (11,580,034) 2,065,424
------------- -------------
Cash flows from financing activities:
Redemption of 12-3/4% senior notes (61,471,000) ---
Proceeds from 9-1/2% senior notes
issuance 125,000,000 ---
Deferred financing costs (3,981,918) (255,790)
Contributions by members 49,000 ---
Distributions to members (38,934,732) ---
------------- -------------
Net cash provided by
(used in) financing
activities 20,661,350 (255,790)
------------- -------------
Net increase in cash 9,220,813 2,032,064
Cash and cash equivalents at
beginning of period 2,783,344 232,759
------------- -------------
Cash and cash equivalents at end
of period $ 12,004,157 $ 2,264,823
============= =============
Supplemental disclosure of cash
flow information:
Cash paid during the period
for interest $ 10,489,309 $ 3,918,776
============= =============
Supplemental disclosure of non-cash
financing activities:
Deferred financing costs funded
through accrued expenses $ 130,000 $ ---
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
6
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 1998 audited financial statements and should be read in
conjunction with the Company's 1998 audited financial statements
within the Company's Annual Report for the fiscal year ended
December 31, 1998 on Form 10-K/A as filed with the Securities and
Exchange Commission (the "Commission") File No. 333-17795 on March
8, 1999. The condensed Balance Sheet at December 31, 1998,
contained herein, was derived from audited financial statements,
but does not include all disclosures contained in the Form 10-K/A
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, 1999, and the results of operations for
the three months and six months ended June 30, 1999 and the
statements of member's deficiency and cash flows for the six
months ended June 30, 1999. Results of operations for the period
are not necessarily indicative of the results to be expected for
the full year. In March 1999, the Company with its wholly-owned
subsidiary Waterford Gaming Finance Corp. ("Finance") has issued
$125 million 9-1/2% senior notes payable which mature March 15,
2010 (the "$125 Million Senior Notes") in connection with the
redemption of the Company's and Finance's $65 million 12-3/4%
senior notes (the "$65 Million Senior Notes").
2. Trading Cove Associates - Equity Investment:
As of June 30, 1999 and 1998, the following summary information
relates to Trading Cove Associates ("TCA"). Total revenues and
net income are for the six months ended June 30, 1999 and 1998:
June 30, June 30,
1999 1998
------------ ------------
Total assets $ 9,503,663 $ 9,109,872
Total liabilities (4,457,163) (4,694,920)
------------ ------------
Partners' capital $ 5,046,500 $ 4,414,952
============ ============
Total revenue $ 31,769,756 $ 26,657,896
============ ============
Net income (loss) $ 1,273,043 $ (223,586)
============ ============
Company's interest:
Trading Cove Associates -
equity investment,
beginning of period $ 8,662,198 $ 10,384,292
Contributions 300,000 75,000
Distributions (767,659) (299,680)
------------ ------------
8,194,539 10,159,612
------------ ------------
Income (loss) from Trading Cove
Associates 636,521 (111,793)
Amortization of interests
purchased (493,140) (766,266)
------------ ------------
Equity in income (loss)of
Trading Cove Associates 143,381 (878,059)
------------ ------------
Trading Cove Associates -
equity investment $ 8,337,920 $ 9,281,553
============ ============
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 partner. On August
6, 1997, Leisure, a former partner of TCA, had filed a lawsuit
against TCA, Sun Cove Limited ("Sun Cove"), former partner of TCA,
RJH Development Corp. and the Company and its owners, claiming
breach of contract, breach of fiduciary duties and other matters
in connection with the development of the Mohegan Sun Casino (the
"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 Company is now
entitled to such cash flow. If, at any time, TCA or any of its
partners, affiliates, related entities, or any related person
enters into an agreement with the Mohegan Tribe of Indians of
Connecticut (the "Tribe"), or any of its affiliates or any other
related party, pursuant to which TCA's management or operation of,
or any involvement of any kind with the enterprises is amended,
restated, extended or renewed, or if a new agreement or related
arrangement is entered into between TCA and the Tribe, the Company
shall pay an additional $2,000,000 to Leisure on the earliest to
occur of (i) the retirement of the $65 Million Senior Notes, (ii)
any renewal, extension, refinancing or refunding of, or amendment,
modification or supplement to, the $65 Million Senior Notes, and
(iii) November 30, 2003. On March 17, 1999, the $65 Million
Senior Notes were retired and on March 18, 1999, the Company paid
$2,000,000 to Leisure.
The Leisure payments plus associated costs were amortized on a
straight-line basis over the remaining term of TCA's Management
Agreement through March 17, 1999. As a result of the
Relinquishment Agreement becoming effective, the remaining balance
will be amortized over 189 months beginning March 18, 1999.
Accumulated amortization at June 30, 1999 and 1998 amounts to
$1,192,654 and $423,036, respectively.
4. 15% Subordinated Notes Receivable:
On November 8, 1996, the Company purchased a 15% subordinated note
receivable due from the Mohegan Tribal Gaming Authority (the
"Authority") an instrumentality of the Tribe, 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. The 15%
subordinated notes receivable from the Authority bear interest at
15% per annum.
At June 30, 1999 and December 31, 1998, the 15% subordinated notes
receivable included accrued interest receivable of $14,463,981 and
$12,059,517, respectively.
8
5. Completion Guarantee Subordinated Notes Receivable:
On September 22, 1997, and on October 12, 1998, the Company
purchased a completion guarantee subordinated note receivable
issued by the Authority which matures on November 15, 2003, in the
aggregate principal amount of $5,000,000 from Sun International.
The Company also purchased the related accrued interest and
deferred interest amounts which had not been paid by TCA totaling
$106,875 as of September 22, 1997 and October 12, 1998, and
completion guarantee note fee amounts totaling $191,250 as of
September 22, 1997 and October 12, 1998. As of December 31, 1997,
$425 related to completion guarantee note fee amounts that were
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
notes fee income during the six months ended June 30, 1998.
The rate of interest payable by the Authority on the completion
guarantee subordinated notes is the prime rate per annum announced
by Chase Manhattan 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, 1999, the Base Rate was 8.75% per annum and
at June 30, 1998, the Base Rate was 9.50% per annum.
At June 30, 1999 and December 31, 1998, the completion guarantee
subordinated notes receivable includes accrued interest receivable
of $72,917 and $75,000, respectively.
6. $65 Million 12-3/4% Senior Notes Payable:
The $65 Million Senior Notes payable at June 30, 1999 and December
31, 1998, consist of $0 and $61,471,000, respectively, aggregate
principal amount of the $65 Million Senior Notes issued on
November 8, 1996 by the Company and Finance.
The $65 Million Senior Notes were redeemed as part of the
Company's and Finance's $125 Million Senior Notes offering which
was completed on March 17, 1999.
7. $125 Million 9-1/2% Senior Notes Payable:
On March 17, 1999, the Company and Finance, issued $125 Million
Senior Notes. Payment of the principal of, and interest on, the
$125 Million Senior Notes is subordinate in right of payment to
all of their existing and future secured debts.
Interest is payable semi-annually in arrears on March 15 and
September 15 at a rate of 9-1/2% per annum commencing on September
15, 1999.
The principal amount of the $125 Million Senior Notes is payable
on March 15, 2010. The Company and Finance may elect to redeem
the $125 Million Senior Notes at any time after March 15, 2004 at
a redemption price equal to a percentage (105.182% after March 15,
2004 and declining to 104.318% after March 15, 2005, 103.455%
after March 15, 2006, 102.591% after March 15, 2007, 101.727%
after March 15, 2008, 100.864% after March 15, 2009, and to 100%
after March 15, 2010) of the principal amount thereof plus accrued
interest. The $125 Million Senior Notes provide that upon the
occurrence of a Change of Control (as defined), the holders
thereof will have the option to require the redemption of the $125
Million Senior Notes at a redemption price equal to 101% of the
principal amount thereof plus accrued interest.
If the Company and Finance have any excess cash, as defined, they
must redeem the $125 Million Senior Notes (on a semi-annual basis
on March 15 and September 15) equal to a percentage (109.500%
after March 15, 1999 and declining to 108.636% after March 15,
2000, 107.773% after March 15, 2001, 106.909% after March 15,
2002, 106.045% after March 15, 2003, 105.182% after March 15,
2004, 104.318% after March 15, 2005, 103.455% after March 15,
2006, 102.591% after March 15, 2007, 101.727% after March 15,
2008, 100.864% after March 15, 2009 and to 100.000% after March
15, 2010). In some circumstances, if either the Company or its
partner in TCA exercises the option to buy or sell partnership
interests in TCA, the Company and Finance must redeem the $125
Million Senior Notes.
The indenture relating to the $125 Million Senior Notes (the
"Indenture") contains certain affirmative and negative covenants
customarily contained in agreements of this type, including
without limitation, covenants that restrict, subject to specified
exceptions the Company's and Finance's ability to (i) borrow
money, (ii) pay dividends on stock or make certain other
restricted payments, (iii) use assets as security in other
transactions, (iv) make investments, (v) sell other assets or
merge with other companies and (vi) engage in any business except
as currently conducted or contemplated or amend their relationship
with TCA. The Indenture also provides for customary events of
default and the establishment of a restricted investment fund with
a trustee for interest reserves.
9
8. Change of Ownership:
In connection with the Company's and Finance's recently completed
issuance of $125 Million Senior Notes, each of Slavik Suites, Inc.
("Slavik") and LMW Investments, Inc. ("LMW") have contributed
their respective interests in the Company as of March 17, 1999 to
a Delaware Limited Liability Company, Waterford Group, L.L.C. (The
"Waterford Group"). The Waterford Group is now the sole member of
the Company. Slavik and LMW own Waterford Group in the same
respective interest as they had in the Company.
9. Related Party Agreements:
The Company paid an affiliate for accounting services in the
amount of $95,200 during the six months ended June 30, 1999 and
$0 for the six months ended June 30, 1998.
On September 28, 1998, the Company entered into an employment
agreement with Len Wolman. The employment agreement provides for
a base annual salary of $250,000 reduced by any amounts Mr.
Wolman receives as a salary from TCA for such period. Pursuant
to such employment agreement, the Company shall pay to Mr. Wolman
an amount equal to 0.05% of the revenues of the Mohegan Sun
including the expansion to the extent Mr. Wolman has not received
such amounts from TCA. On and after January 1, 2004, the Company
shall pay to Mr. Wolman incentive compensation based on the
revenues of the Mohegan Sun, including the expansion, as a
percentage (ranging from .00% to .10%) to be determined using a
formula attached to the employment agreement which compares
actual revenues to predetermined revenue targets.
Waterford Group, Slavik and the other principals of the Company
have interests in and may acquire interests in hotels in
southeastern Connecticut which have or may have arrangements with
the Mohegan Sun to reserve and provide hotel rooms to patrons of
the Mohegan Sun.
10
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. Any
forward-looking statements included herein do not purport to be
predictions of future events or circumstances. Forward-looking
statements can be identified by, among other things, the use of
forward-looking terminology such as "believes", "expects", "may",
"will", "should", "seeks", "pro forma", "anticipates", "intends" or
the negative of any thereof or other variations thereon or comparable
technology. 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.
11
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 Tribe and the
Authority 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 and the Tribe and the Authority finalized
contract negotiations and are moving forward with a significant
expansion project (the "Project") at the Mohegan Sun.
Under the terms of the new agreement (the "Relinquishment Agreement"),
TCA will continue to manage the Mohegan Sun under the existing
Management Agreement until the Relinquishment Date (the later of (a)
January 1, 2000 or (b) the Effective Date). 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 senior secured notes, in the original principal amount of
$175,000,000, and due 2002 (the "Authority Senior Notes"), are
refinanced or repaid. The final required approval was received during
February 1999 and the Authority's refinancing was completed during
March 1999. Accordingly, the Relinquishment Date has been determined
to be January 1, 2000. On the Relinquishment Date, the existing
Management Agreement will terminate and the Tribe will assume day-to-
day management of the Mohegan Sun. As part of the 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 revenues,
as defined, (the "Relinquishment Fees") beginning on the
Relinquishment Date and ending on the day immediately preceding the
fifteenth (15th) annual anniversary of the Relinquishment Date. The
Relinquishment Fees will be divided into senior relinquishment
payments and junior relinquishment payments, each of which will be
2.5% of revenues, as defined. Senior relinquishment payments will be
payable quarterly in arrears commencing on April 25, 2000, for the
quarter ended March 31, 2000 and the junior relinquishment payments
will be payable semi-annually in arrears commencing on July 25, 2000,
for the six months ended June 30, 2000.
TCA has also negotiated a second agreement with the Tribe and the
Authority (the "Development Agreement"), which has made TCA the
exclusive developer of the Project. Under this Development Agreement,
TCA will oversee the planning, design, and construction of the
Project. TCA will be paid a development fee (the "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. The Development Agreement
became effective April 1, 1999. The Development Fee shall be paid as
follows: on January 15, 2000 and thereafter within fifteen (15) days
following the end of each calendar quarter until the Project is
completed, the Authority shall pay TCA a percentage of the Development
Fee equal to the completed percentage of the Project as of December
31, 1999 and on the incremental completed percentage at the end of
each successive calendar quarter.
12
Certain Risk Factors
- --------------------
Lack of Operations; Dependance on the Mohegan Sun
- -------------------------------------------------
The Company does not conduct any business operations other than in
connection with its role as a managing general partner of TCA and
activities incidental to the Company's ownership of the Authority
Subordinated Notes, as defined, the issuance of the $125 Million
Senior Notes and the making of temporary investments. The Company is
prohibited by the terms of the Indenture from engaging in any other
business activities. The Company intends to fund its operating, debt
service and capital needs from cash flows from TCA and until January
1, 2000, payments of principal and interest under the Authority
Subordinated Notes, as defined, to the extent that such payments are
payable in cash.
TCA has one current source of revenue, management fees under the
Management Agreement (the "Management Fees"). After January 1, 2000,
TCA will no longer be entitled to receive such Management Fees, but
will be entitled to receive Relinquishment Fees. Although, TCA is
entitled to a $14.0 million Development Fee under the Development
Agreement, it has entered into a subcontract with Sun International
Management Limited ("SIML") who in turn has entered into a subcontract
with affiliates of the Company to provide the services required by
such agreement and is to pay such subcontractors a development
services fee and incur expenses equal to 3% of the Project. Based
upon the estimated cost of the Project, $800 million, such fees and
expenses are expected to be approximately $24 million. Such fees are
only payable to the extent of available cash flow. Thus, ultimately
TCA may pay more in development services fees and expenses to its
subcontractors than it will receive under the Development Agreement.
Although the Authority has passed a resolution that the total costs of
the Project cannot exceed $800 million, the actual costs of the
Project may exceed such amounts. If the total costs of the Project
increase, then the total development services fees and expenses paid
by TCA will increase proportionately, which reduces the cash flow
distributable to the Company.
Commencing on January 1, 2000, TCA will receive Relinquishment Fees
based on a percentage of gross revenues generated by the Mohegan Sun.
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
Authority Subordinated Notes, as defined, or to pay Management Fees
and/or Relinquishment Fees. The Company is entirely dependent upon
the performance of the Mohegan Sun, which is subject to matters over
which the Authority, TCA and the Company have no control including,
without limitation, general economic conditions, effects of
competition, political, regulatory and other 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 expenses, including interest costs, the
Company cannot give any assurance that it will be able to do so.
13
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 and to the extent of principal payments on the
Subordinated Notes), 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 to the extent of principal payments on the Non-
Pik Completion Guarantee Notes, as defined) and from the Company's
available cash. 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, future scheduled payments of principal and
interest on the $125 Million Senior Notes and additional investments
in TCA that may be required in connection with the Project. 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 Authority Subordinated Notes, as defined, that it
holds. The Company anticipates regular payments from TCA based on the
results of the Mohegan Sun and Management Fees payments by the
Authority until January 2000 and then from Relinquishment Fees
payments by the Authority.
Distributions on the Company's Partnership Interest in TCA
- ----------------------------------------------------------
TCA's primary source of revenue for 1999 is 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
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).
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.
14
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. 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, 1999, 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").
2. Completion guarantee subordinated notes principal amount
$50,000,000 due November 2003 (the "Completion Guarantee
Subordinated Notes").
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").
15
The following table sets forth the priority of the distribution from
TCA of the Management Fees to its partners or TCA's subcontractors:
(a) First, for each fiscal year of the Authority, up to $2,000,000
of the Management Services Fee, as defined, will be paid by TCA
for expenses. A portion of the Management Services Fee, as
defined, will be used to pay the compensation of the officers
and directors of the Company.
(b) Second, to return capital contributions made by the partners of
TCA after September 29, 1995. These capital contributions
aggregated approximately $3,672,000 and were repaid to the
partners, 50% to the Company and 50% to Sun Cove. As of June
30, 1999, no capital contributions remain outstanding.
TCA anticipates making monthly capital calls to fund expenses
related to the development of the Project and these capital
calls will be repaid, based on cash flow, in the month
following the month made.
(c) Third, to pay to the Company and Sun International every six
months, 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 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"). The Company and Sun
International are entitled to one half of the Subordinated
Notes Fee Amounts. For the six months ended June 30, 1999 and
1998, $3,596,921 and $3,112,533, respectively, had been paid by
TCA in terms of this third priority. When the Authority's
Subordinated Notes are redeemed on January 1, 2000, payments
under this priority will cease.
(d) Fourth, i) to pay every six months 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
Notes 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.
When the Authority's Subordinated Notes are redeemed on January
1, 2000 payments under this priority will cease.
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.
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 and on October 12, 1998, the Company
purchased from Sun International $2.5 million principal amount
of the outstanding first funded Non-Pik Completion Guarantee
Notes and the Company is required to purchase from Sun
International on October 12, 1999 $2.5 million principal amount
of the outstanding first funded Non-Pik Completion Guarantee
Notes owned by Sun International, at the purchase price equal
to the outstanding principal balance of the Non-Pik Completion
Guarantee 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.
For the six months ended June 30, 1999 and 1998, $4,306,250
($662,500 to the Company and $3,643,750 to Sun International)
and $4,745,500 ($365,037 to the Company and $4,380,463 to Sun
International), respectively, had been paid by TCA in terms of
this fourth priority.
16
(e) Fifth, to pay Sun International every six months 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.
For the six months ended June 30, 1999 and 1998, $1,836,026 and
$3,177,251, respectively, had been paid by TCA in terms of this
fifth priority. When the Authority's Subordinated Notes are
redeemed on January 1, 2000 payments under this priority will
cease.
(f) Sixth, return of capital contributions made before September
29, 1995. These capital contributions aggregated $6,715,000
(unreturned balance as of June 30, 1999 and 1998 was $0).
(g) Seventh, payment of a Development Services Fee Phase I to 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, 1999 and 1998,
$8,305,000 had been paid by TCA as Development Services Fee
Phase I.
(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, as defined, and the
Marketing and Casino Operations Fee, as defined. 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. A portion of the Management Services Fee will
be used to pay the compensation of the officers and directors
of the Company.
For the six months ended June 30, 1999 and 1998, $2,827,702
($1,413,851 to SIML, $242,059 to affiliates of the Company and
$1,171,792 to the Company) and $5,890,609 ($2,945,305 to SIML,
$108,741 to affiliates of the Company and $2,836,563 to the
Company), respectively, had been paid by TCA in terms of this
eighth priority.
(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. At June 30, 1999 and
1998, $5,520,000 and $2,530,661, respectively, had been paid by
TCA in terms of this ninth priority.
(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
state income taxes. This amount will be paid 50% to Sun Cove
and 50% to the Company. For the six months ended June 30, 1999
and 1998, $935,317 and $0, respectively, had been paid by TCA
in terms of this tenth priority.
17
(k) Eleventh, payment of the Organizational and Administrative Fee
to the Company and the Marketing and Casino Operations Fee to
SIML which fees will be paid in equal amounts to the Company
and SIML. These fees are equal to 1.5% of the gross revenues
of the Mohegan Sun if the Mohegan Sun's fiscal year ending
September 30 gross revenues equal or exceed $300 millions and
2% of the gross revenues of the Mohegan Sun if the Mohegan
Sun's fiscal year ending September 30 gross revenues equal or
exceed $400 million. For the six months ended June 30, 1999 and
1998, $15,562,784 and $0, respectively, 50% to the Company and
50% to SIML, had been paid by TCA in terms of this eleventh
priority.
(l) Twelfth, all excess cash distributed 50% to Sun Cove and 50% to
the Company.
The Company has the obligation to purchase from Sun International on
October 12, 1999, $2.5 million of the outstanding principal amount of
Non-Pik Completion Guarantee Subordinated Notes owned by Sun
International.
On March 18, 1999, the Omnibus Termination Agreement (the "Omnibus
Termination Agreement") was entered into by TCA, Sun International,
the Company, SIML, LMW, Sun Cove, Slavik and Wolman Construction,
L.L.C.; which (i) terminated the memorandum of understanding dated
February 7, 1998; and (ii) effective January 1, 2000 provided that the
Relinquishment Agreement is in full force and effect will terminate a)
the Omnibus Financing Agreement; b) completion guarantee and
investment banking and financing arrangement fee agreement (the
"Financing Arrangement Agreement"); c) the management services
agreement; d) the organizational and administrative services
agreement; e) the marketing services agreement; and f) a letter
agreement relating to expenses dated October 19, 1996.
In consideration for the termination of such agreements, TCA will use
its cash to pay the following obligations in the priority set forth
below:
(a) First, to pay all unpaid amounts which may be due under
the terminated letter agreement and to pay certain
affiliates of the Company and to Sun Cove a percentage of
an annual fee of $2.0 million less the actual expenses
incurred by TCA. Such annual fee shall be payable in
equal quarterly installments beginning March 31, 2000 and
ending December 31, 2014.
(b) Second, to return all capital contributions made by the
partners of TCA after September 29, 1995.
(c) Third, to pay any accrued amounts for obligations
performed prior to January 1, 2000 under the Financing
Arrangement Agreement.
(d) Fourth, to make the payments set forth in the agreement
relating to development services and the local
construction services agreement.
(e) Fifth, to pay Sun International an annual fee of $5.0
million payable in equal quarterly installments of $1.25
million beginning March 31, 2000 and ending December 31,
2006.
(f) Sixth, to pay any accrued amounts for obligations
performed with respect to periods prior to January 1, 2000
under the management services agreement, the
organizational and administrative services agreement and
the marketing services agreement.
(g) Seventh, for the period beginning March 31, 2000 and
ending December 31, 2004, to pay each of SIML and the
Company twenty-five percent (25%) of the relinquishment
payments.
(h) Eighth, to distribute all excess cash.
18
Notwithstanding the foregoing, on the date TCA receives any funds from
Sun International or the Company pursuant to the last sentence of
Section 3 of the Financing Arrangement Agreement, as detailed under
point (d) of the table set forth above under "Overview of Current and
Future Cash Flows" TCA shall immediately distribute such amounts
equally to its partners.
In addition, TCA shall not make any distributions pursuant to the
Omnibus Termination Agreement until it has annually distributed to its
partners pro rata, the amounts related to its partners tax obligations
as described in Section 3.03a (1) of the Partnership Agreement less
twice the amount of all other funds paid or distributed to the Company
during such year pursuant to the Omnibus Termination Agreement.
To the extent TCA does not have adequate cash to make the payments
pursuant to the Omnibus Termination Agreement, such amounts due shall
be deferred without the accrual of interest until TCA has sufficient
cash to pay them.
On February 9, 1998, the Development Services Agreement (the
"Development Services Agreement") was entered into between TCA and
SIML. Pursuant to the Development Services Agreement, TCA
subcontracted with SIML and SIML agreed to perform those services
assigned to SIML by TCA in order to facilitate TCA's fulfillment of
its duties and obligations to the Authority under the Development
Agreement. TCA shall pay to SIML a fee, as subcontractor, (the
"Development Services Fee Phase II") equal to 3% of the development
costs of the Project (less land acquisition costs and capitalized
interest), less all costs incurred by TCA in connection with the
Project. The Development Services Fee Phase II shall be paid in three
installments on December 31, 1999, 2000, and 2001.
SIML has subcontracted with certain affiliates of the Company to
provide certain of the services pursuant to the Development Services
Agreement for a fee equal to approximately 20% of the Development
Services Fee Phase II.
For the six months ended June 30, 1999, the Company received
$10,261,362 from TCA and $1,920,441 was due from TCA, which represents
the Company's share in terms of the Omnibus Financing Agreement of
approximately $30,445,000 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 of the Authority ending September 30 are subject
to year-end adjustment.
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 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.
For the six months ended June 30, 1999 and 1998, the Company also
received $0 and $224,680, respectively, 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.
19
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 Notes and certain fixed charge coverage ratios are
met. The Authority is required to offer annually to purchase the
Authority Senior 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 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 Notes).
If the holders of the Authority Senior Notes do not accept the offer,
then such amount of the Excess Cash must be offered to purchase the
Authority Subordinated Notes. For the six months ended June 30, 1999
and 1998, the Company did not receive any cash payments on the
Authority Subordinated Notes that it holds from the Authority.
Pursuant to the terms of the Omnibus Financing Agreement, TCA is
required to pay every six months 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 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 and the
denominator of which is $40,000,000. Subject to certain priorities
set forth in the Omnibus Financing Agreement, to the extent that TCA
does not receive sufficient Management Fees to pay the full amount of
any such payments due, TCA shall pay the entire Management Fees as
partial payment and any portion which remains outstanding shall be
deferred until TCA receives sufficient Management Fees. In addition,
TCA shall pay every six months beginning October 31, 1997 an amount
equal to the product of the number arrived at by dividing the
difference between the Multiplier and the weighted average of
principal amount of Non-Pik Completion Guarantee Notes outstanding
during the applicable Semi-Annual Period and 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. If
the Authority is permitted to accrue and not pay interest on its Non-
Pik Completion Guarantee Subordinated Notes, the Omnibus Financing
Agreement provides that TCA will pay the Authority's portion of such
interest on such Non-Pik Completion Guarantee Subordinated Notes.
20
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.
On December 15, 1998, Sun International, TCA, the Authority and the
Tribe agreed to amend the Letter (the "Amended Letter"). The Amended
Letter provides that the holders of the Authority Subordinated Notes
will not accept the Excess Cash purchase offer with respect to the
Authority's fiscal year 1998 and Sun International acknowledges and
agrees that the remaining Excess Cash purchase offer shall be
inapplicable following the closing of the Authority's refinancing
which was completed on March 3, 1999.
In connection with the issuance of its 8-1/2% Senior Notes due 2006
and 8-3/4% Senior Subordinated Notes due 2009, the Authority has
implemented a covenant defeasance for all of the Authority
Subordinated Notes and has deposited with the defeasance agent a
number of securities in an amount of sufficient to satisfy all
obligations of such Authority Subordinated Notes. The Authority
Subordinated Notes have been defeased to January 1, 2000 when they
will be redeemed.
Results of Operations
- ---------------------
Comparison of Operating Results for the Quarters Ended June 30,
- ---------------------------------------------------------------
1999 and June 30, 1998
- ----------------------
Total revenue for the three months ended June 30, 1999 was $6,471,551
compared with $3,978,574 for the three months ended June 30, 1998.
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", increased by $242,193, 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", increased by $225,000, 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", decreased by $516,367 and organization and administrative
fee income - Trading Cove Associates, as detailed under point (k) of
the table set forth above under "Overview of Current and Future Cash
Flows", increased by $2,141,906. In addition, interest and divided
income increased by $400,245.
Total expenses for the quarter ended June 30, 1999 was $3,138,056
compared with $2,325,611 for the quarter ended June 30, 1998.
Interest expense increased by $976,376 and amortization on deferred
financing costs decreased by $33,416 due to the redemption of the $65
Million Senior Notes and the issuance of the $125 Million Senior
Notes, general and administrative costs increased by $16,756
(primarily attributable to an increase in legal fees of approximately
$18,700, an increase in copying and printing expense of approximately
$2,000 and by a decrease in accounting fees of approximately $4,000),
a decrease in 12-3/4% senior notes tender expense of $26,000 due to an
over accrual of the expense at March 31, 1999, a decrease in
amortization of beneficial interest - Leisure Resort Technology Inc.
of $124,490, due to an increase in the period over which the asset is
amortized and by an increase in depreciation of $3,219.
Equity in income (loss) of Trading Cove Associates for the three
months ended June 30, 1999 was $(65,229) compared with $(434,801) for
the three months ended June 30, 1998 as a result of the increase in
income from Trading Cove Associates of $96,446 due to the timing of
payments pursuant to the Omnibus Financing Agreement and by a decrease
in amortization of interests purchased of $273,126 due to the increase
in the period over which the interests purchased is amortized.
As a result of the foregoing factors, the Company experienced net
income of $3,268,266 for the quarter ended June 30, 1999 compared with
net income of $1,218,162 for the quarter ended June 30, 1998.
21
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.
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 $65 Million 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 of 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, 1999 and June 30, 1998
- -------------------------------
Total revenue for the six months ended June 30, 1999 was $14,135,974
compared with $6,956,688 for the six months ended June 30, 1998.
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", increased by $242,193, 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", increased by $203,750, 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",
decreased by $1,664,771 and organization and administrative fee income
- - Trading Cove Associates, as detailed under point (k) of the table
set forth above under "Overview of Current and Future Cash Flows",
increased by $7,781,392. In addition, interest and dividend income
increased by $616,722.
Total expenses for the six months ended June 30, 1999 was $17,537,758
compared with $4,699,528 for the six months ended June 30, 1998.
Interest expense increased by $8,998,374 and amortization on deferred
financing costs increased by $3,206,641 due to the redemption of the
$65 Million Senior Notes and the issuance of the $125 Million Senior
Notes, general and administrative costs increased by $101,921
(primarily attributable to an increase in accounting fees of
approximately $91,900 (during the six months ended June 30, 1999 and
1998 the Company paid accounting fees to an affiliate totaling
approximately $95,000 and $0, respectively), sweep fees increased by
approximately $4,200, filing expense increased by approximately
$15,600, copying and printing expense increased by approximately
$2,000, trustee and disbursement agent fees increased by approximately
$4,200 and by a decrease in legal fees of approximately $15,000), an
increase in 12-3/4% senior notes tender expense of $622,486, a
decrease in amortization of beneficial interest - Leisure Resort
Technology, Inc. of $95,684, due to the increase in the period over
which the asset is amortized and by an increase in depreciation of
$4,492.
Equity in income (loss) of Trading Cove Associates for the six months
ended June 30, 1999 was $143,381 compared with $(878,059) for the six
months ended June 30, 1998, as a result of the increase in income from
Trading Cove Associates of $748,314 due to the timing of payments
pursuant to the Omnibus Financing Agreement and by a decrease in
amortization of interests purchased of $273,126 due to the increase in
the period over which the interests purchased is amortized.
As a result of the foregoing factors, the Company experienced a net
loss of $(3,258,403) for the six months ended June 30, 1999 compared
with net income of $1,379,101 for the six months ended June 30, 1998.
22
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.
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 $65 Million 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 of 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.
Liquidity and Capital Resources
- -------------------------------
The initial capital of the Company consists of the partnership
interests in TCA contributed by Slavik and LMW in forming the Company.
In connection with the offering of the $65 Million 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
and on October 12, 1998, 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 the Organizational and Administrative Fee and Excess Cash of
TCA and any other claims it may have had against the Company, TCA and
TCA's partners and former partner.
23
In connection with the offering of the $125 Million Senior Notes, the
Company used approximately $72 million to repurchase its $65 Million
Senior Notes, distributed approximately $37 million to its new parent,
Waterford Group, L.L.C. and paid the final $2 million to Leisure.
For the six months ended June 30, 1999 and 1998, cash provided by
operating activities (as shown in the Condensed Statements of Cash
Flows) was $139,497 and $222,430, respectively.
Current assets increased from $6,459,361 to $26,025,633 at June 30,
1999. The increase was caused primarily by the payment of fees and
distributions by TCA as a result of the profitable operations of the
Mohegan Sun and by the funding of the interest reserve account that is
required by the $125 Million Senior Notes Indenture.
Current liabilities increased from $1,037,887 to $3,682,579 at June
30,1999. The increase was attributable to an increase in accrued
expenses, primarily attributable to the refinancing, of $216,851 and
an increase in accrued interest on senior notes payable of $2,427,841.
For the six months ended June 30, 1999 and 1998 cash (used in)
provided by investing activities (as shown in the Condensed Statements
of Cash Flows) was ($11,580,034) and $2,065,424, respectively. The
increase was caused primarily by the payment to Leisure of $2,000,000
in March 1999, the increase in contributions to TCA of $225,000 (to
fund certain development expenses in connection with the Project at
the Mohegan Sun), an increase in distributions from TCA of $467,979 in
terms of the second, sixth and tenth priorities of the Omnibus
Financing Agreement, by the increase in (purchases) and sales of
temporary investments-net of $147,900, by the increase in (purchases)
and sales of restricted investments-net of $12,039,205 (principally
due to the funding of the interest reserve account), by the increase
in cash utilized for the purchase of furniture and fixtures of $21,505
and by the increase in cash utilized for leasehold improvements of
$32,413.
The Company is required to purchase from Sun International on October
12, 1999 $2.5 million of the outstanding 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, 1999,
$32.5 million in principal amount was outstanding as Non-Pik
Completion Guarantee Notes.
The Company anticipates that up to $5,000,000 in additional
investments in TCA (as of June 30, 1999, $700,000 had been invested in
TCA) may be required by the Company in connection with the Project at
the Mohegan Sun.
For the six months ended June 30, 1999 and 1998 cash provided by (used
in) financing activities (as shown in the Condensed Statements of Cash
Flows) was $20,661,350 and $(255,790), respectively. The increase was
caused primarily by the issuance of the $125 Million Senior Notes, the
increase in contributions by members of $49,000 and offset by the
increase in the redemption of the $65 Million Senior Notes of
$61,471,000, the increase in deferred financing costs of $3,726,128
(primarily due to the costs associated with the issuance of the $125
Million Senior Notes) and by the increase in distributions to members
of $38,934,732.
The Company is required to make a mandatory redemption on September 15
and March 15, of each year, beginning September 15, 1999, of $125
Million Senior Notes using any excess cash, as defined in the
Indenture, which the Company may have as of the preceding August 1 and
February 1.
24
Year 2000 Issues
- ----------------
The Company, with a Year 2000 issues consultant, is addressing any
Year 2000 compliance issues for TCA and itself. The Company's
management at this time believes that any issues relating to the
Company's Year 2000 compliance will not materially interrupt its
operations. The Company estimates that it will be Year 2000 compliant
by the end of September 1999; there can be no assurance that this will
be achieved. The total cost associated with any required
modifications for the Company to become Year 2000 compliant will not
have a material impact the Company's overall financial position. The
Company estimates the total cost to become Year 2000 compliant to be
approximately $20,000.
The failure to correct a material Year 2000 issue could result in an
interruption in, or a failure of, certain normal business activities
or operations. The Company has two primary sources of revenues:
payments from TCA and payments under the Authority Subordinated Notes
that it holds. Both of these sources of revenues are dependant on the
level of revenues generated by the Mohegan Sun.
As derived from publicly filed information the Authority discloses its
Year 2000 readiness as follows:
Year 2000 Date Conversion
- -------------------------
The Authority is currently working to verify system readiness for the
processing of date-sensitive information by its computerized
information systems to the end of the Century. The "Year 2000"
problem impacts computer programs and hardware timers using two digits
(rather than four) to define the applicable year. Any of the
Authority's programs that have time-sensitive functions may recognize
a date using "00" as the year 1900 rather than 2000, or not at all,
which could result in miscalculations or system failures. As a large
facility in a relatively remote location, the Mohegan Sun is heavily
dependent on a local infrastructure which may not be adequate to take
on the challenges of the Year 2000 problem. It is especially
dependent on that local infrastructure for critical services such as
incoming utilities and outgoing sewage.
The Authority, like many companies, depends on fully operational
computer systems in all areas of its business. Additionally, the
Authority is dependent upon many vendors such as food and beverage
suppliers, outside software suppliers and system integrators to
provide uninterrupted service for its operation to run effectively.
With the assistance of an outside consultant, the Authority has
implemented a Year 2000 program to provide an independent analysis of
the Authority's Year 2000 preparedness and the adequacy of the
Authority's Year 2000 plans. The program includes inventorying
entities, identifying problems, planning compliance and implementation
strategies, attempting to correct the problems and testing the
solutions.
As of March 31, 1999, the Mohegan Sun is approximately 76% in
conformance with the Gartner Group Year 2000 best practices model.
Upon review of its program, the Authority anticipates completion of
the program by July 31, 1999. Although there can be no assurance, the
Authority has stated that it believes the cost of remediation and
verification to become Year 2000 compliant will not exceed $1.0
million and will not have a material adverse impact on the Authority's
financial position, results of operations, or cash flow.
While the Authority's efforts are designed to be successful, because
of the complexity of the Year 2000 issues and the interdependence of
organizations using computer systems, there can be no assurance that
the Authority's efforts or those of a third party with whom the
Authority interacts, will be satisfactorily completed in a timely
fashion. This could result in a material adverse effect on future
operations.
Due to the general uncertainty inherent in the Year 2000 issues, and
in particular uncertainty of the Year 2000 compliance of the Mohegan
Sun, from which the Company receives its revenues, the Company is
unable to determine at this time whether the consequences of Year 2000
failures will have a material impact on its results of operations,
liquidity or financial condition.
25
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.
On December 24, 1998, Leisure wrote a letter to TCA asserting that TCA
and/or certain of TCA's partners breached various fiduciary duties to
Leisure and that TCA's conduct in negotiating the prior settlement
constituted a violation of the anti-fraud provisions of both federal
and Connecticut securities laws, as well as violations of other laws.
The Company believes that if such claims are pursued, it has
meritorious defenses; however, no litigation has been filed to date
and no assurance can be given that any ultimate claim will be decided
in the Company's favor.
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
26
Item 6 -- Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits
--------
Exhibit No. Description
3.1 Certificate of Formation, as amended, of
Waterford Gaming, LLC (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)
4.1.1 First Supplemental Indenture, dated as of
March 4, 1999, among Waterford Gaming, L.L.C.
and Waterford Gaming Finance, Corp., as
issuers, and State Street Bank and Trust
Company, as trustee, relating to $65,000,000
12-3/4% Senior Notes Due 2003. (vi)
4.2 Indenture, dated as of March 17, 1999, among
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., as issuers, and State Street
Bank and Trust Company, as trustee, relating
to $125,000,000 9-1/2% Senior Notes
due 2010. (vi)
4.3 Security and Control Agreement, dated as of
March 17, 1999, among Waterford Gaming,
L.L.C. and Waterford Gaming Finance Corp., as
pledgors and State Street Bank and Trust
Company, as securities intermediary. (vi)
4.4 Specimen Form of 9-1/2% Senior Notes due 2010
(included in Exhibit 4.2). (vi)
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)
10.2.2 Omnibus Termination Agreement, dated as of
March 18, 1999, among Sun International
Hotels Limited, Trading Cove Associates,
Waterford Gaming, L.L.C., Sun International
Management Limited, LMW Investments, Inc.,
Sun Cove Limited, Slavik Suites, Inc., and
Wolman Construction, L.L.C. (vi)
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)
27
10.5 Purchase Agreement, dated as of March 10,
1999, among Waterford Gaming, L.L.C.,
Waterford Gaming Finance Corp., Bear, Stearns
& Co., Inc. and Merrill Lynch, Pierce, Fenner
and Smith Inc. and Salomon Smith Barney. (vi)
10.5.1 Agreement with Respect to Redemption or
Repurchase of Subordinated Notes, dated
September 10, 1997 (ii)
10.6 Amended and Restated Limited Liability
Company Agreement of Waterford Gaming,
L.L.C., dated as of March 17, 1999 by
Waterford Group, L.L.C. (vi)
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)
10.15 Waiver and Acknowledgment of
Noteholder. (iv)
10.16 Relinquishment Agreement, dated February 7,
1998, between the Mohegan Tribal Gaming
Authority and Trading Cove Associates. (v)
10.17 Development Services Agreement, dated
February 7, 1998, between the Mohegan Tribal
Gaming Authority and Trading Cove
Associates. (v)
10.18 Agreement, dated September 28, 1998, by and
among, Waterford Gaming, L.L.C., Slavik
Suites, Inc., LMW Investments, Inc., Len
Wolman, Mark Wolman, Stephan F. Slavik, Sr.
and Del J. Lauria (Len Wolman's Employment
Agreement). (v)
10.19 Agreement Relating to Development Services,
dated as of February 9, 1998, between Trading
Cove Associates and Sun International
Management Limited. (vi)
10.20 Local Construction Services Agreement, dated
as of February 9, 1998 between Sun
International Management Limited and Wolman
Construction, L.L.C. (vi)
10.21 Escrow Deposit Agreement, dated as of the 3rd
day of March 1999, by and among the Mohegan
Tribal Gaming Authority and First Union
National Bank, as Defeasance Agent. (vi)
21.1 Subsidiaries of Waterford Gaming, L.L.C. (i)
21.2 Subsidiaries of Waterford Gaming Finance
Corp. (i)
27 Financial Data Schedule (vii)
28
(i) Incorporated by reference to the Registrant's
Registration Statement on Form S-4, Securities and Exchange
Commission (the "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) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the period ended September 30, 1998, Commission
File No. 333-17795, as accepted by the Commission on November
13, 1998.
(vi) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the period ended March 31, 1999, Commission
File No. 333-17795 as accepted by the Commission on May 17,
1999.
(vii) Included in Edgar filing only.
(b) No Form 8-K filings.
29
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 10, 1999 By: /s/Len Wolman
Len Wolman, Chief Executive Officer
Date: August 10, 1999 By: /s/Alan Angel
Alan Angel, Chief Financial Officer
30
<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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 12,004,157
<SECURITIES> 0
<RECEIVABLES> 1,921,187
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,025,633
<PP&E> 53,918
<DEPRECIATION> (4,492)
<TOTAL-ASSETS> 83,817,322
<CURRENT-LIABILITIES> 3,682,579
<BONDS> 125,000,000
0
0
<COMMON> 0
<OTHER-SE> (44,865,257)
<TOTAL-LIABILITY-AND-EQUITY> 83,817,322
<SALES> 0
<TOTAL-REVENUES> 14,135,974
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,620,608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,917,150
<INCOME-PRETAX> (3,258,403)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,258,403)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,258,403)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
