As filed with the Securities and Exchange Commission on December 7, 1999
Registration No. 333-81613
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------------------
POST EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------------------------------
Riviera Black Hawk, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Colorado 0000899647 86-0886265
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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444 Main Street
Black Hawk, Colorado 80422
(303) 582-1000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
---------------------------------------
William L. Westerman
Chief Executive Officer and Director
Riviera Black Hawk, Inc.
444 Main Street
Black Hawk, Colorado 80422
(303) 582-1000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
---------------------------------------
With Copies to:
Fredric J. Klink
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
(212) 698-3500
---------------------------------------
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
If any of the securities being registered on this Form are
being offered in connection with the formation of a
holding company and there is compliance with General
Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Unit (1) Price (1) Registration Fee
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% First Mortgage Notes due 2005 With Contingent
Interest....................................... $45,000,000 100% $45,000,000 $12,510
- - --------------------------------------------------------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the registration fee.
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROSPECTUS
Offer to Exchange
13% First Mortgage Notes due 2005 With Contingent Interest
for all outstanding
13% First Mortgage Notes due 2005 With Contingent Interest
of
RIVIERA BLACK HAWK, INC.
The exchange offer will expire at 5:00 P.M.,
New York City time, on January 4, 2000, unless extended.
-------------------------
Terms of the exchange offer:
- We will exchange all existing notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tenders of existing notes at any time prior to the
expiration of the exchange offer.
- We believe that the exchange of existing notes will not be a taxable
event for U.S. federal income tax purposes, but you should see "United
States Federal Income Tax Considerations" on page 64 for more
information.
- We will not receive any proceeds from the exchange offer.
- The terms of the new notes are substantially identical to the existing
notes, except that the new notes are registered under the Securities
Act of 1933 and the transfer restrictions and registration rights
applicable to the existing notes do not apply to the new notes.
- Each broker-dealer that receives new notes is required to deliver a
prospectus in connection with any resale of such note.
- Each broker-dealer that acquired existing notes as a result of market
making or other trading activities may use this exchange offer
prospectus, as supplemented or amended for resales of new notes.
- Broker-dealers that acquired the existing notes directly from us in
the initial offering and not as a result of market making or trading
activities cannot use this prospectus for the exchange offer in
connection with resales of the new notes and, absent an exemption,
must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with secondary resale of the new
notes and cannot rely on the position of the staff in Exxon Capital
Holdings Corporation (April 13, 1989).
-------------------------
See "Risk Factors" beginning on page 8 for a discussion of risks that
should be considered by holders.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The date of this prospectus is December 7, 1999.
<PAGE>
TABLE OF CONTENTS
Page Page
---- ----
Summary.............................1 Material Agreements................51
Risk Factors........................8 Management.........................54
Use Of Proceeds....................19 Principal Stockholders.............56
Capitalization.....................20 Relationships And Related
Selected Financial Information.....21 Transactions.......................58
Ratio Of Earnings To Fixed Description Of Notes...............59
Charges............................22 United States Federal Income Tax
Management's Discussion And Considerations.....................87
Analysis Of Financial Condition Plan Of Distribution...............90
And Results Of Operations..........23 Legal Matters......................91
The Exchange Offer.................28 Experts............................91
Business...........................37 Available Information..............91
Gaming And Liquor Regulatory
Matters............................45
You should rely only on the information contained in this prospectus or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may only be used where it is
legal to sell these securities. The information in this prospectus may only be
accurate on the date of this document.
ii
<PAGE>
FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" throughout this prospectus. Whenever
you read a statement that is not simply a statement of historical fact, such as
when we describe what we "believe," "expect" or "anticipate" will occur, and
other similar statements, you must remember that our expectations may not be
correct, even though we believe they are reasonable. We do not guarantee that
the transactions and events described in this prospectus will happen as
described or that they will happen at all. The forward-looking information
contained in this prospectus is generally located in the material set forth
under the headings "Summary," "Risk Factors," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" but may be found in other locations as well. These forward-looking
statements generally relate to our plans and objectives for future operations
and are based upon our management's reasonable estimates of future results or
trends. Some of the factors that may affect our expectations of our operations,
markets and services are:
o local and regional economic and business conditions;
o changes or developments in laws, regulations or taxes;
o actions taken or omitted to be taken by others, including our
customers, suppliers, competitors and stockholders, as well as
governmental authorities;
o competition;
o the loss of any licenses or permits or our failure to obtain our
gaming or liquor licenses on a timely basis;
o delays in completing the construction of the casino;
o changes in our business strategy, capital improvements or development
plans;
o the availability of additional capital to support capital improvements
and development; and
o other factors discussed under "Risk Factors" or elsewhere in this
prospectus.
You should read this prospectus completely and with the understanding that
actual future results may be materially different from what we expect..
iii
<PAGE>
SUMMARY
This summary highlights selected information from this prospectus and may
not contain all the information that is important to you. You should carefully
read this entire prospectus, including any information to which we refer you,
before deciding to purchase any of the notes. The terms "we" and "us" refer to
Riviera Black Hawk, Inc. and the terms "Riviera Black Hawk" and "our casino"
refer to the casino we are constructing in Black Hawk, Colorado. The term
"Riviera Holdings" refers to Riviera Holdings Corporation, our parent company.
The Exchange Offer
On June 3, 1999, we sold $45.0 million aggregate principal amount of 13%
First Mortgage Notes due 2005 With Contingent Interest in a transaction exempt
from the registration requirements of the Securities Act of 1933. In connection
with this offering, we entered into a registration rights agreement with the
initial purchaser of the existing notes, Jefferies & Company, Inc., in which we
agreed to complete an exchange offer for the existing notes. We are offering to
exchange the existing notes for $45.0 million aggregate principal amount of our
13% First Mortgage Notes due 2005 With Contingent Interest, which have been
registered under the Securities Act. You are entitled to exchange your existing
notes for new notes with substantially identical terms. We urge you to read the
discussions under the headings "The exchange offer" and "The new notes" in this
Summary for further information regarding the Exchange Offer and the new notes.
Riviera Black Hawk, Inc.
We are a wholly-owned subsidiary of Riviera Holdings and we are
constructing and will own and operate a casino with entertainment and parking
facilities in Black Hawk, Colorado, approximately 40 miles west of Denver. Our
casino will be the third largest in Colorado with approximately 1,000 slot
machines and 12 blackjack tables. In Colorado, each slot machine and each table
game is considered one gaming device.
We expect to open our casino in the first quarter of 2000. The total cost
for our casino, excluding capitalized interest, is expected to be $77.6 million.
Riviera Holdings owns all of our stock as a result of a $20 million equity
investment in us, excluding capitalized interest.
Our casino will be managed by a wholly-owned subsidiary of Riviera
Holdings. Riviera Holdings owns and operates the Riviera Hotel & Casino located
on the Las Vegas Strip. Upon completion, our casino will be the only casino in
the Black Hawk/Central City market developed and operated by a Las Vegas Strip
casino company.
The Black Hawk/Central City Market
Limited stakes gaming -- a maximum single bet of $5 -- is permitted in
Colorado in three historic mining towns -- Black Hawk, Central City and Cripple
Creek. 95% of Colorado gaming revenues are attributable to slot play. The Black
Hawk/Central City market primarily caters to "day-trip" customers from Denver,
Boulder, Fort Collins and Golden as well as Cheyenne, Wyoming. An adult
population of approximately 2.3 million people reside within a 100-mile radius
of the Black Hawk/Central City market.
Strengths
We believe that the following competitive strengths will contribute to
the success of our casino:
1
<PAGE>
o Our casino is located at the entrance to Black Hawk and will be one of
the first three casinos encountered when traveling from Denver to the
Black Hawk/Central City market.
o The Black Hawk/Central City market lacks adequate parking. Our casino
will feature an attached 175,000 square foot multi-level parking
facility with capacity for approximately 520 vehicles, of which 92%
will be covered. In addition to valet parking, we will offer patrons
the convenience of a self-park option. We will not charge for parking.
o Our approximately 1,000 gaming devices will be significantly larger
than the market average of 336 devices per casino as of December 31,
1998, and combined with our ability to place all gaming devices on a
single floor, we will create an atmosphere that is closer to that
found in Las Vegas casinos than that typically found in casinos in the
Black Hawk/Central City market.
o Unlike most other Central City/Black Hawk casinos, we will offer food
service through our 265-seat casual dining restaurant and
entertainment through our 7,000 square foot entertainment center.
Risk Factors
o Neither we nor Riviera Holdings has managed a casino in Colorado.
o Our attempt to stress the atmosphere of a Las Vegas casino may not be
accepted in the Black Hawk/Central City market.
o Our cash flow may be insufficient to enable us to pay the $5.85
million of fixed interest per annum on the notes after the first three
years of operation.
o Our equity is limited and Riviera Holdings has made only limited
commitments related to construction and opening and to subsidize cash
flow shortfalls and interest on the notes for the first three years of
operation.
Riviera Holdings Corporation
Riviera Holdings owns the Riviera Hotel & Casino located on the Las Vegas
Strip. Riviera Holdings will be obligated under the completion capital
commitment to contribute to us up to $10.0 million of cash if at any time there
are insufficient funds available to enable our casino to be operating by May 31,
2000. If our casino is not operating by May 31, 2000, Riviera Holdings will be
obligated to contribute on that date $10.0 million in cash less any amounts
previously contributed under the completion capital commitment. Furthermore, if
we do not have the necessary funds to make a payment of fixed interest on the
notes during our first three years of operations or our cash flow is less than
$9.0 million in any of our first three years of operations, Riviera Holdings
will be obligated under the keep-well agreement to contribute cash to us to make
up those amounts, subject to a maximum of $5.0 million for any one operating
year and $10.0 million in the aggregate. Riviera Holdings has also deposited
$5.0 million to insure a title insurance company against potential mechanics
lien claims. As of September 30, 1999, Riviera Holdings had about $44.4 million
of unrestricted cash and short term investments to support these commitments.
Riviera Holdings SEC File Number is 000-21430.
The Transactions
The existing notes were issued on June 3, 1999. The proceeds from the sale
of the existing notes was approximately $45.0 million:
2
<PAGE>
o approximately $31.9 million was deposited into a construction
disbursement account, of which $10.1 million was used to reimburse
Riviera Holdings for amounts advanced to us to cover construction and
development costs incurred prior to the sale of the existing notes,
and the remaining $21.8 million has been and will continue to be used
to finance the cost to develop, construct, equip and open the Riviera
Black Hawk;
o $5.0 million was deposited into a completion reserve account to be
held as a reserve in case there are insufficient funds in the
construction disbursement account to complete the Riviera Black Hawk;
o $5.1 million was deposited into an interest reserve account and used
to purchase government securities representing funds sufficient to pay
the first two payments of fixed interest on the notes; and
o approximately $3.0 million was used to pay fees and expenses relating
to the foregoing as well as the sale of the existing notes.
3
<PAGE>
The Exchange Offer
Securities Offered....................... Up to $45,000,000 aggregate
principal amount of 13% First
Mortgage Notes due 2005 With
Contingent Interest. The terms of
the new notes and existing notes
are identical in all material
respects.
The Exchange Offer..........................We are offering the new notes to you
in exchange for a like principal
amount of existing notes. Existing
notes may be exchanged only in
integral multiples of $1,000.
Expiration Date; Withdrawal of
Tender..................................The exchange offer will expire at
5:00 p.m., New York City time, on
January 4, 2000.
Procedures for Tendering Existing
Notes....................................If you wish to accept the exchange
offer and tender your existing
notes, you must complete, sign and
date the letter of transmittal in
accordance with its terms, and mail
or otherwise deliver the letter of
transmittal, together with your
existing notes and any other
required documentation, to the
exchange agent at the specified
address.
Exchange Agent..............................The Bank of New York is serving as
the exchange agent in connection
with the exchange offer.
Federal Income Tax Consequences.............The exchange of notes pursuant to
the exchange offer should not be a
taxable event for federal income tax
purposes.
4
<PAGE>
Consequences of Exchange Offer
Based on interpretive letters issued by the staff of the Securities and
Exchange Commission to third parties in unrelated transactions, we are of the
view that holders of existing notes who exchange their existing notes for new
notes pursuant to the exchange offer generally may offer such new notes for
resale, resell such new notes and otherwise transfer such new notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided:
o the new notes are acquired in the ordinary course of the holders'
business;
o the holders have no arrangement with any person to participate in a
distribution of such new notes;
o neither the holder nor any other person is engaging in or intends to
engage in a distribution of the new notes; and
o the holder is not our "affiliate" within the meaning of Rule 405 under
the Securities Act.
Each broker-dealer that receives new notes for its own account in
exchange for existing notes must acknowledge that it will deliver a prospectus
in connection with any resale of such new notes. In addition, the securities
laws of some jurisdictions may prohibit the offer or sale of the new notes
unless they have been registered or qualified for sale in such jurisdiction or
in compliance with an available exemption from registration or qualification. We
have agreed, pursuant to the registration rights agreement, to register or
qualify the new notes for offer or sale under the securities or blue sky laws of
such jurisdictions as any holder of the notes reasonably requests in writing. If
a holder of existing notes does not exchange such existing notes for new notes
pursuant to the exchange offer, such existing notes will continue to be subject
to the restrictions on transfer contained in the legend printed on the existing
notes. In general, the existing notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from the
Securities Act and applicable state securities laws. Holders of existing notes
do not have any appraisal or dissenters' rights under the Colorado Business
Corporation Act in connection with the exchange offer.
The existing notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages market. Prior to the
consummation of the exchange offer, the existing notes may continue to be traded
in the PORTAL market. Following expiration of the exchange offer, the new notes
will not be eligible for PORTAL trading.
5
<PAGE>
The New Notes
The terms of the new notes and the existing notes are identical in all
material respects, except for transfer restrictions and registration rights
relating to the existing notes.
Securities Offered..................$45.0 million principal amount of 13% First
Mortgage Notes due 2005 With Contingent
Interest.
Maturity Date.......................May 1, 2005.
Interest Payment Dates..............May 1 and November 1 of each year, beginning
on November 1, 1999.
Fixed Interest......................Fixed interest will be payable on the notes
at a rate of 13% per annum.
Contingent Interest.................Contingent interest will be payable on the
notes on each interest payment date after
the Riviera Black Hawk begins operating.
The amount of contingent interest will,
subject to limits, be equal to 5% of our
cash flow for the two fiscal quarters ending
prior to the record date applicable to the
relevant interest payment date.
Security............................The notes will, with exceptions, be secured
by a first priority lien on substantially
all of our existing and future assets.
Keep-Well Agreement.................If we do not have the necessary funds to
make a payment of fixed interest on the
notes during our first three years of
operations or our cash flow is less than
$9.0 million in any of our first three years
of operations, Riviera Holdings will be
obligated under the keep-well agreement to
contribute cash to us to make up those
amounts, subject to a maximum of $5.0
million for any one operating year and $10.0
million in the aggregate.
Optional Redemption.................On or after May 1, 2002, we may redeem some
or all of the notes at any time at the
redemption prices described in the section
"Description of Notes -- Optional
Redemption."
Prior to May 1, 2001, we may redeem up to
35% of the notes with the proceeds of a
public offering of our equity or the
proceeds contributed to us of offerings by
our parent company of its equity at a
redemption price of 113% of the principal
amount thereof, plus accrued and unpaid
interest.
6
<PAGE>
Change of Control...................If we experience a change of control, we
must offer to repurchase the notes at a
price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest.
Excess Cash Purchase Offers.........At the end of each four fiscal quarters
after our casino begins operating, we must
offer to repurchase the maximum principal
amount of notes that can be purchased with
50% of our excess cash flow from that four
fiscal quarter period. The price for the
repurchase will be equal to 100% of such
principal amount, plus accrued and unpaid
interest.
Basic Covenants of the Indenture....The indenture will restrict our ability to:
o borrow money;
o pay dividends on or repurchase our
capital stock;
o make investments;
o use our assets as security in other
transactions; and
o sell assets or enter into mergers or
consolidations.
7
<PAGE>
RISK FACTORS
Before you invest in the notes, you should carefully consider the
following factors, in addition to the other information contained in this
prospectus.
We will be substantially leveraged, and may incur additional debt. As a result,
we may not able to service our debt.
We will be substantially leveraged. In addition to our obligation to pay
principal and interest on the notes, we will also be incurring construction and
operating expenses for the Riviera Black Hawk.
At September 30, 1999, our total indebtedness was $45.8 million, our
stockholders' equity was $23.3 million and our debt to equity ratio was 2.0 to
1.
The indenture will permit us to incur additional indebtedness, including
up to $15.0 million of indebtedness to finance the purchase of furniture,
fixtures and equipment which will rank equal in payment preference with the
notes.
Our substantial indebtedness could have important consequences to you.
For example, it could:
o make it more difficult for us to satisfy our obligations with respect
to these notes;
o increase our vulnerability to general adverse economic and industry
conditions;
o limit our ability to fund future working capital, capital expenditures
and other general corporate requirements;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;
o limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
o place us at a competitive disadvantage compared to our competitors
that have less debt; and
o limit, along with the financial and other restrictive covenants in our
indebtedness our ability to borrow additional funds.
If our casino is not completed on time, we may not be able to make payments on
the notes.
Our ability to make payments on the notes and our other debt obligations
depends upon the timely completion of our casino. The construction of our casino
involves significant risks, including:
o cost overruns;
o shortages of materials;
o labor disputes and work stoppages;
8
<PAGE>
o unforeseen environmental or engineering conditions;
o natural disasters;
o construction scheduling problems; and
o weather interferences.
Any of these risks, if they occurred, could delay construction,
substantially increase our construction costs and impair our ability to make
payments on the notes. Furthermore, other items, including offsite improvements,
permit fees and independent testing, are not included in the construction
contract costs.
If our casino cannot generate sufficient cash flow, we may be forced to reduce
or delay planned capital expenditures, restructure or refinance our debt, or
obtain additional capital.
It is difficult for us to predict with accuracy our casino's potential
earning ability given the inherent uncertainties and variables in the factors
affecting such earning ability. The ability to generate profit from slot
machines will determine our cash flow. Table games, food and beverage and
entertainment are all loss leader adjuncts to the generation of slot machine
profits. We might not be able to implement changes in our planned capital
expenditures or restructure or refinance our debt or obtain additional equity
capital on satisfactory terms, or at all.
Successful operation will depend on prevailing economic conditions and
financial, business, regulatory and other factors, all of which may be beyond
our control.
If we cannot obtain the necessary licenses, we cannot operate our casino.
In general we, Riviera Holdings, our principal executive officers and
those of Riviera Holdings, and any of our employees who will be involved in our
gaming operations, require licenses from the State of Colorado. Colorado also
requires that significant stockholders of Riviera Holdings be licensed or
certified as suitable for licensure. None of such licenses have been obtained
and there can be no assurance that all necessary licenses will be obtained prior
to the time our casino is otherwise ready to open. The consequence of such a
failure to obtain the necessary licenses will be an inability to operate our
casino in order to generate cash flow to make payments on the notes.
The licensure process involves the filling out of a form prescribed by
the Colorado Gaming Commission, an interview of the prospective licensee and an
investigation of such licensee to the extent the staff of the Colorado Gaming
Commission deems necessary. We pay the investigation costs. If any officer,
director or employee were found to be unsuitable for licensure by the Colorado
Gaming Commission, we would have to replace such person. If the Colorado Gaming
Commission objected to our licensure or that of Riviera Holdings or its
significant stockholders, we might be forced to sell our interest in Riviera
Black Hawk and pay off the notes to the extent of the net sale proceeds. If the
objection of the Colorado Gaming Commission related to licensure or suitability
for licensure of any of Riviera Holdings' significant stockholders, Riviera
Holdings might attempt to purchase or arrange for the purchase of the Riviera
Holdings shares owned by the stockholder to which the Colorado Gaming Commission
objected. However, Riviera Holdings' ability to make such purchase is limited
and it is uncertain whether Riviera Holdings could arrange for such stock
repurchase.
9
<PAGE>
We face intense competition from other gaming facilities. If we cannot compete
effectively, we may not be able to make payments on the notes.
The Black Hawk/Central City gaming market is characterized by intense
competition. If our casino is unable to compete effectively in this market, we
may not be able to generate sufficient cash flow to satisfy our obligations
under the notes. Our competitors have more gaming experience in the Black
Hawk/Central City market and some have greater financial resources than we do.
Construction has also begun on a new casino, which is expected to feature over
600 slot machines, and on a hotel addition to the casino of one of our principal
competitors. Other projects have also been announced, proposed, discussed or
rumored for the Black Hawk/Central City market.
Currently, limited stakes gaming in Colorado is constitutionally
authorized in Central City, Black Hawk, Cripple Creek and two Native American
reservations in southwest Colorado. However, gaming could be approved in other
Colorado communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
We will also compete with other forms of gaming in Colorado, including lottery
gaming, and horse and dog racing as well as other forms of entertainment. See
the discussion under the section entitled "Business--Competition."
Our lack of operating experience in Colorado could adversely affect our ability
to make payments on the notes.
Our operations to date have been limited to development activities and
construction. We have had no earnings or operations. Riviera Gaming Management
of Colorado, Inc., which will manage our casino, has no experience operating a
gaming facility in Colorado. If our casino is not successfully marketed and
managed, we may not be able to generate sufficient cash flow to make payments of
principal and interest on the notes.
We depend on a single gaming site for cash flow.
We will be solely dependent upon our casino for our cash flow, except for
the keep-well agreement with Riviera Holdings as to the first three years of
operations. Therefore, we will be subject to greater risks than a geographically
diversified gaming company. These greater risks include those caused by:
o local economic and competitive conditions;
o inaccessibility due to road construction or closure on primary access
routes;
o changes in local and state governmental laws and regulations;
o natural and other disasters;
o a decline in the number of residents near or visitors to the Black
Hawk/Central City market; and
o a decrease in gaming activities in the Black Hawk/Central City market.
Any of such factors could have a material adverse effect on our ability
to generate sufficient cash flow to make payments on the notes.
10
<PAGE>
Adverse weather and road conditions can reduce our cash flow.
The City of Black Hawk is located in the Colorado Rocky Mountains, which
can be subject to inclement weather. Adverse weather conditions could delay the
construction of our casino, resulting in cost overruns or a delayed opening
date. In addition, severe weather conditions could adversely affect our
operations. The City of Black Hawk is serviced by a single lane winding mountain
road that requires cautious driving, particularly in bad weather. The road has
tunnels that are subject to closure. Congestion on the road leading to our
casino is not uncommon during the peak summer season, holidays and other times
of year and may discourage potential customers from traveling to our casino,
particularly if road construction is in process.
Gaming or other regulations may impede the trustee's ability to foreclose on the
collateral.
The new notes, like the existing notes, are issued under the indenture
with IBJ Whitehall Bank & Trust Company, as trustee, and are secured by a first
priority lien on substantially all of our assets. Furniture, fixtures and
equipment acquired with separate financing are excluded. IBJ Whitehall Bank &
Trust Company has assigned its interest under the indenture to The Bank of New
York. Under Colorado gaming laws, the trustee could be precluded from or
otherwise limited or delayed in exercising its rights, including selling slot
machines at a foreclosure sale, since only persons licensed by the Colorado
gaming authorities may have slot machines in their possession. In addition, the
purchaser or the operator of a gaming facility must be licensed by state
authorities or prior approval of a sale or disposition of collateral must be
obtained. If the trustee sought to operate, or retain an operator for, our
casino, the trustee or its agents would be required to be licensed under
Colorado gaming laws in order to conduct gaming operations in the casino. Such
requirements, along with other foreclosure and sale laws, could substantially
delay the ability of the trustee or any noteholder to obtain the benefit of any
collateral and could reduce the proceeds from the sale of the collateral by
reducing the number of potential purchasers. See the discussion under the
section entitled "Gaming and Liquor Regulatory Matters."
New legislation could substantially affect our business, and could impair our
ability to make payments on the notes.
Additional legalization of gaming in or near any area from which our
casino is expected to draw customers would affect the profitability of our
business and lead to a failure on our part to satisfy our obligations under the
notes.
Currently, Colorado law does not authorize video lottery terminals. This
form of gaming could compete with slot machine gaming and has been widely
promoted by various groups in Colorado recently.
New initiatives could be introduced in the state legislature or on future
statewide ballots to allow expansion of gaming in Colorado or to prohibit gaming
in the gaming market our casino would serve. Future initiatives, if passed,
could significantly increase the competition for gaming customers, thereby
adversely affecting our business. There can be no assurance against future
legislation that would create additional competition or that would impose
additional restrictions or prohibitions on, or assess additional fees with
respect to our business. See the discussion under the sections entitled
"Business--Competition" and "Gaming and Regulatory Matters--National Gambling
Impact Study Commission Report."
Any increase in federal, state or local taxes could have a negative impact on
us.
The amendment to the Colorado Constitution that legalized limited gaming
also subjects casinos in Colorado to an annual gaming tax of up to 40% of the
total amounts wagered less all payouts to players. With respect to games of
poker, the tax is calculated based on the sums wagered which are retained by the
11
<PAGE>
casino as compensation. Effective July 1 of each year, the Colorado Commission
establishes the gaming tax for the following 12 months. Currently, the gaming
tax is:
o .25% on the first $2 million of these amounts;
o 2% on amounts from $2 million to $4 million;
o 4% on amounts from $4 million to $5 million;
o 11% on amounts from $5 million to $10 million;
o 16% on amounts from $10 million to $15 million; and
o 20% on amounts over $15 million.
There can be no assurance that tax rates or fees applicable to our casino
will not be increased in the future, either by the Colorado electorate,
legislation or action by the Colorado Commission, reducing the profitability of
our operations. Additionally, from time to time, some federal legislators have
proposed the imposition of a federal tax on gaming revenues. Any such tax
increase or new tax would reduce our cash flow and could prevent us from
fulfilling our obligations under the notes.
Mechanic's liens will have priority in payment over the notes.
Colorado law provides architects, engineers, contractors, subcontractors
and material suppliers with a lien on real property being improved by their
services or materials in order to secure their right to be paid. These parties
may foreclose their liens if they are not paid in full. The priority of all
mechanic's liens arising out of a particular construction project relates back
to the date on which construction of the project first commenced. Construction
of our casino commenced prior to the recording of the deed of trust securing the
notes. Accordingly, all architects, engineers, contractors, subcontractors and
material suppliers who provide services or materials in connection with our
casino and otherwise comply with the applicable requirements of Colorado law
will have a lien on the project senior in priority to the lien of the deed of
trust securing the notes.
We are subject to potential environmental liabilities which could impair our
ability to make payments on the notes.
The site of our casino is located in a 400-square mile watershed basin
that was designated in 1983 by the United States Environmental Protection Agency
as a "National Priorities List" Study Area under the Comprehensive Environmental
Response, Compensation and Liability Act, sometimes also called the Superfund
Act. The Study Area received this designation because of hazardous substance
contamination in the soil, groundwater and surface water caused by historical
mining activity. The EPA has identified several areas of contamination within
the Study Area and in the vicinity of our property that require remediation. The
EPA and the State of Colorado have not required remediation of any contamination
on or from our property as part of their Superfund investigation and remedial
activities. However, sampling of our property disclosed the existence of
contaminated groundwater. The EPA or the State of Colorado could require
remediation for contaminated groundwater or any remaining contaminated soil on
the property some time in the future, and, as the current owner of the property,
we could be required to pay for or perform such remediation. If we were required
to pay for such remediation, it could have a negative effect on our financial
condition and impair our ability to make payments on the notes.
12
<PAGE>
The loss of key personnel could adversely affect our operations.
Our success will largely depend upon the efforts and skills of
o the officers of our manager, Riviera Gaming Management of Colorado,
Inc., with whom we have a management contract, particularly its
Chairman of the Board of Directors and Chief Executive Officer,
William Westerman, its Chief Operating Officer, Ronald Johnson, its
Chief Financial Officer, Duane Krohn and
o our General Manager, Thomas Guth and our Director of Slot Operations,
James Davey.
The loss of the services of our manager or any of our key officers could have a
material adverse effect on our operations. There can be no assurance that we
would be able to attract and hire suitable replacements in the event of any such
loss of services.
Difficulty in attracting and retaining qualified employees may result in
increased labor costs and adversely affect our operations.
The operation of our business requires skilled employees with gaming
industry experience and qualifications to obtain the requisite licenses.
Currently there is a shortage of skilled labor in the gaming industry. We
believe this shortage will make it increasingly difficult and expensive to
attract and retain qualified employees. Increasing competition in the Black
Hawk/Central City and competing markets may lead to higher costs in order to
retain and attract qualified employees. We may incur higher labor costs to
attract qualified employees from existing gaming facilities which would reduce
the cash flow available to make payments on the notes.
You will have limited recourse against Riviera Holdings if we are not able to
make payments on the notes.
You should not expect Riviera Holdings or any of its affiliates to
participate in servicing the principal, fixed interest, contingent interest or
other payments due on the notes. Neither Riviera Holdings nor any of its
affiliates has any obligation to make any payments of any kind to the holders of
the notes except for its limited obligations under the completion capital
commitment and the keep-well agreement.
Adverse tax treatment could significantly reduce our cash flow and impair our
ability to make payments on the notes.
The notes provide for the payment of both fixed interest and contingent
interest. Contingent interest will be calculated based on a percentage of our
cash flow after we begin operating. The notes and the indenture have terms
typically contained in instruments evidencing indebtedness and are intended to
create a debtor-creditor relationship between us and the holders of the notes.
We intend to treat the notes as indebtedness for federal income tax purposes.
However, this treatment is not binding on the Internal Revenue Service or any
court and there can be no assurance that the Internal Revenue Service will not
successfully argue that the notes should be treated as equity for federal income
tax purposes. If the notes are treated as equity rather than indebtedness, we
would not be able to deduct the interest on that portion of the notes. This
could have a material adverse effect on our after-tax cash flow and prevent us
from fulfilling our obligations under the notes. In addition, the interest
payments made on the portion of the notes that are treated as equity will be
taxable to the recipient as dividends to the extent of our current and
accumulated earnings and profits. This could adversely affect the timing,
character and amounts includible in the income of a holder of notes.
13
<PAGE>
We may not be able to claim a deduction with respect to interest payments on the
notes.
It is possible that the notes may be subject to the provisions of the
Internal Revenue Code dealing with high yield discount obligations in which case
we may not be entitled to claim a deduction with respect to a portion of the
interest payments. This could reduce the amount of cash available to us to meet
our obligations under the notes.
If the collateral securing the note suffers a casualty, we may not be obligated
to repurchase any notes with insurance proceeds.
We have no obligation to make any purchase of notes with the insurance
proceeds following a casualty loss with respect to collateral with a fair market
value between $1.0 million and $20.0 million. This could materially reduce the
value of the collateral securing the notes.
In the event of a bankruptcy case, we may be able to retain collateral over the
claims of the noteholders as long as such noteholders are provided "adequate
protection."
Determinations relating to what constitutes "adequate protection" are
within the discretionary powers of the bankruptcy court. Upon the occurrence of
such a finding by a bankruptcy court, payments on the notes may be delayed and
compensation for such a delay is questionable.
Holders of notes may be required to pay taxes on income prior to receiving such
income in cash.
Holders of notes may be required to include amounts in income prior to
receipt of cash payments attributable to such income. The result of such a
requirement would be that such holders might need to make income tax payments
prior to having receiving payments on the notes which could be used as a source
of funds to make such payments.
There is no active trading market for the notes and one may not develop.
The existing notes are currently eligible for trading in the PORTAL
market. Upon the consummation of the exchange offer, the existing notes will
cease to be eligible for trading in the PORTAL market. The new notes are new
securities for which there is no established market. The initial purchaser may
cease its market making at any time. In addition, the liquidity of the trading
market in these notes, and the market price quoted for these notes, may be
adversely affected by changes in the overall market for high yield securities
and by changes in our financial performance or prospects or in the prospects for
companies in our industry in general. As a result, you cannot be sure that an
active trading market will develop for these notes.
A finding that there was a fraudulent conveyance could impair the rights of
holders to collateral underlying the notes.
In connection with the issuance of the existing notes, we granted
security interests in the collateral to the trustee. Various fraudulent
conveyance and avoidance laws have been enacted for the protection of creditors.
Some of these laws protect parties who were not creditors at the time of the
challenged transfer but who subsequently became creditors. These laws may permit
a court to nullify any transfer of a property interest or any obligation
incurred by any of the parties involved in the transactions described in this
prospectus. Generally, if a court were to find that:
o the debtor made the challenged transfer or obligation with the intent
of hindering, delaying or defrauding its present or future creditors;
or
14
<PAGE>
o the debtor (A) received less than reasonably equivalent value or fair
consideration for incurring the challenged obligation or making the
challenged transfer and (B) was insolvent or was rendered insolvent by
reason of incurring the challenged obligation or making the challenged
transfer, was engaged or about to engage in a business or transaction
for which its assets constituted unreasonably small capital or
intended to incur, or believed that it would incur, debts beyond its
ability to pay as such debts matured, the court could void the
challenged obligation or transfer in whole or in part.
The court could also subordinate any claims with respect to the challenged
obligation or transfer to all other debts of the debtor. The court's
determination as to whether the above is true at any relevant time will vary
depending upon the law applied in any such proceeding.
Generally, a debtor will be considered insolvent if:
o the sum of its debts was greater than the fair saleable value of all
of its assets at a fair valuation; or
o if the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on its
existing debts, as they become fixed in amount and nature.
Also, a debtor generally will be considered to have been left with unreasonably
small capital if its remaining capital, including its reasonably projected cash
flow, was reasonably likely to be insufficient for its foreseeable needs, taking
into account its foreseeable business operations and reasonably foreseeable
economic conditions.
With respect to us and Riviera Holdings, the transfers made by Riviera
Holdings in connection with our capitalization present the most significant
possible fraudulent conveyance issues. In capitalizing us, Riviera Holdings has
contributed $20.0 million of equity capital in cash, comprised of $15.1 million
contributed in August 1997 to purchase the land and additional contributions of
$4.9 million as of September 30, 1999. See the discussion under the section
"Capitalization."
There can be no assurance that Riviera Holdings' past contributions to us
will not be found to have constituted either an actual or a constructive
fraudulent transfer. In addition, future contributions by Riviera Holdings,
including amounts contributed under the completion capital commitment and the
keep-well agreement, might also be found to be an actual or constructive
fraudulent transfer. Any such possible fraudulent transfer challenges, even if
ultimately unsuccessful, could lead to a disruption of our business and alter
the manner in which we manage our business and, ultimately, could have a
material adverse effect on our ability to meet our obligations under the notes.
Our business and our suppliers' businesses are highly dependent on computer
systems and any disruptions due to the Year 2000 problem may adversely affect
our business.
We have conducted a comprehensive review of our computer systems and
other systems for the purpose of assessing our potential Year 2000 problem, and
we are in the process of modifying or replacing those systems which are not Year
2000 compliant. If modifications are not made or not completed timely, the Year
2000 problem could have a significant impact on our operations. In addition, the
failure of a major vendor or supplier to adequately address their Year 2000
problem could have a significant adverse impact on our operations.
As a result of various external risk factors, we could be adversely
impacted and the effect could be material regardless of the readiness of our own
systems. The most reasonable worst case scenario - if one
15
<PAGE>
or more of our utility providers, of electric, natural gas, water or sewer,
experiences Year 2000 problems that impact their ability to provide their
services, our operations could be adversely impacted.
Given the nature of many of the external risk factors, we do not believe
viable alternatives would be available. For example, we cannot develop a
meaningful contingency plan to address a disruption of utilities services.
Consequently, the occurrence of any such disruptions could, depending upon their
severity and duration, have a material adverse impact on our operating results.
See the discussion under the section "Management's Discussion and Analysis of
Financial Conditions and Results of Operations --Year 2000."
Failure to exchange your existing notes for new notes will significantly limit
your ability to sell the existing notes.
If you do not exchange your existing notes for new notes pursuant to the
exchange offer, you will not be able to resell, offer to resell or otherwise
transfer the existing notes unless they are registered under the Securities Act
or unless you resell them, offer to resell or otherwise transfer them under an
exemption from the registration requirements of, or in a transaction not subject
to, the Securities Act. We will no longer be under an obligation to register the
existing notes under the Securities Act except in the limited circumstances
provided under the registration rights agreement. Also, upon consummation of the
exchange offer, the existing notes will cease to be eligible for trading in the
PORTAL market.
To the extent that existing notes are not tendered for exchange and
accepted in the exchange offer, the trading market for the new notes could be
adversely affected because of an insufficient float of new notes available for
trading.
Our construction contract allows for price increases; if such construction cost
increases were to occur, our ability to make payments on the notes could be
impaired.
Our ability to make payments on the notes and our other debt
obligations depends upon the timely completion of our casino. The construction
contract for our casino allows for price increases if:
o there are changes to the plans and specifications;
o work is delayed due to our actions;
o there are labor disputes and work stoppages;
o there are unforeseen environmental or engineering conditions;
o there are natural disasters;
o there are construction scheduling problems; or
o there are weather interferences.
If any of these events were to occur, our construction costs would
increase, and our ability to make payments on the notes would be impaired.
Development of a road has been proposed which would allow potential customers to
reach Central City without driving through Black Hawk; if this road is
developed, it could reduce our customer base, decreasing our revenues and
impairing our ability to make payments on the notes.
16
<PAGE>
Customers now drive through Black Hawk to reach Central City. Central
City has proposed the development of a road directly connecting Central City and
Black Hawk with Interstate 70 which would allow customers to reach Central City
without driving by or through Black Hawk. If this road is developed, our
customer base could be reduced, leading to lower levels of revenues and
impairing our ability to make payments on the notes.
If gaming is legalized in other towns in Colorado, the number of people visiting
our casino may be significantly reduced, impairing our ability to make payments
on the notes.
Currently, limited stakes gaming in Colorado is constitutionally
authorized in Central City, Black Hawk, Cripple Creek and two Native American
reservations in southwest Colorado. However, gaming could be approved in other
Colorado communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
The number of people visiting our casino may be significantly reduced, thus
impairing our ability to make payments on the notes.
Offsite improvements, permit fees, and independent testing are not included in
construction contract costs; these costs, if incurred, could substantially
increase our construction expenses and impair our ability to make payments on
the notes.
Offsite improvements, permit fees, and independent testing are not
included in construction contract costs. These costs, if they are incurred,
could substantially increase our construction costs and reduce our revenues,
thus impairing our ability to make payments on the notes.
We do not have a Year 2000 contingency plan to address all possible risks
associated with the Year 2000 problem; the occurrence of unanticipated events
could, depending upon their severity and duration, have a material adverse
impact on our operating results and impair our ability to make payments on the
notes.
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This situation is generally referred to as the "Year 2000
Problem". If such situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
As a result of various external risks, we could be adversely impacted
and the effect could be material regardless of the readiness of our own systems.
The most reasonable worst case scenario - if one or more of our utility
providers, of electric, natural gas, water or sewer, experiences Year 2000
problems that impact their ability to provide their services, our operations
could be adversely impacted. Furthermore, disruption of services for any of the
markets for our customers could result in an adverse change in customer visits
from the affected market. Automobile traffic to and from the Black Hawk/Central
City market could be disrupted by Year 2000 problems, which would limit the
ability of potential customers to visit our property. The possible long term
disruption of banking services due to Year 2000 problems could ultimately impair
our daily financial transactions, including the deposit of monies and processing
of checks. Furthermore, credit card processing and customers' access to cash via
automated teller machines could also be disrupted. In the event of this type of
disruption, we intend to provide minimal services to our customers and assist
them, if possible, with transportation to the metropolitan Denver area as hotel
facilities are extremely limited in the Black Hawk/Central City area.
17
<PAGE>
We have developed, and continue to update and revise, contingency plans
to address the identified risks. However, given the nature of many of the
external risks, we do not believe viable alternatives would be available. For
example, we cannot develop a meaningful contingency plan to address a disruption
of utilities services. Consequently, the occurrence of any of the aforementioned
disruptions could, depending upon their severity and duration, have a material
adverse impact on our operating results and impair our ability to make payments
on the notes.
18
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
The existing notes were issued on June 3, 1999. The proceeds from the
sale of the existing notes was $45.0 million, which were used as follows:
o approximately $31.9 million was deposited into a construction
disbursement account, of which $10.1 million was used to reimburse
Riviera Holdings for amounts advanced to us to cover construction and
development costs incurred prior to the sale of the existing notes,
and the remaining $21.8 million has been and will continue to be used
to finance the cost to develop, construct, equip and open our casino,
o $5.0 million was deposited into a completion reserve account to be
held as a reserve in case there are insufficient funds in the
construction disbursement account to complete our casino,
o $5.1 million was deposited into an interest reserve account and used
to purchase government securities representing funds sufficient to pay
the first two payments of fixed interest on the notes and
o approximately $3.0 million was used to pay fees and expenses relating
to the foregoing as well as the sale of the existing notes.
19
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at September 30, 1999.
This table should be read in conjunction with the more detailed information and
financial statements, including the notes thereto, included elsewhere in this
prospectus.
At September 30, 1999
Actual
(dollars in
millions)
-----------------
Cash and cash equivalents................... $ 0.4
Cash, restricted (1)........................ 18.3
Short term investments, restricted (1)...... 5.2
-----
$23.9
=====
Debt:
First Mortgage Notes...................... $45.0
Special Improvement District Bonds(2)..... 0.8
-----
Total debt........................ 45.8
Stockholder's equity(3)(4).................. 23.3
-----
Total capitalization.............. $69.1
=====
- - ----------
(1) Includes $13.2 million in the construction disbursement account, after
reimbursement to Riviera Holdings of $10.1 million for amounts advanced to
us to cover construction and development costs incurred as of September 30,
1999, $5.1 million in the completion reserve account and $5.2 million in
the interest reserve account at September 30, 1999.
(2) Our casino and the Isle of Capri Casino, the casino located across the
street from our casino, have entered into development agreements with the
City of Black Hawk to relocate utilities and widen a bridge to access both
properties from the highway. The total estimated cost of these improvements
is approximately $2.9 million which will be shared equally by us and the
Isle of Capri Casino. We will repay our portion of the cost of such
improvements over 10 years beginning in January 2000.
(3) Includes capitalized interest of $3.4 million associated with Riviera
Holdings' investment at September 30, 1999.
(4) Excludes Riviera Holdings' commitment to contribute to us up to $10.0
million of cash if at any time there are insufficient funds available to
enable the Riviera Black Hawk to be operating by May 31, 2000.
20
<PAGE>
SELECTED FINANCIAL INFORMATION
We were organized in August 1997 for the purpose of developing,
constructing, equipping and operating the Riviera Black Hawk. Since that time,
we have been in the development stage and our activities have been limited to
transactions relating to the development of the Riviera Black Hawk.
The selected financial information presented below at December 31, 1997
and 1998, for the period from August 18, 1997 (Date of Inception) to December
31, 1997, and for the year ended December 31, 1998 has been derived from our
audited financial statements included elsewhere in this prospectus. The
financial statement information at and for the nine months ended September 30,
1999 has been derived from our unaudited financial statements included elsewhere
in this prospectus. The unaudited financial statements have been prepared by us
on a basis consistent with the audited financial statements and including all
normal recurring adjustments necessary for a fair presentation of the
information set forth therein. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that will be
achieved for future periods, including the entire year ending December 31, 1999.
This information is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the financial statements, including the notes
thereto, and other financial information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
At At
September 30, December 31,
1999 1998 1997
--------------- -------------- --------------
(dollars in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash................................... $ 415 $ 543 $ 49
Total assets........................... 77,060 28,138 16,632
Long-term debt, including current 45,784 687 0
maturities.............................
Due to Riviera Holdings................ - 6,241 0
Total liabilities...................... 53,803 8,138 7
Stockholder's equity (1)............... 23,257 20,000 16,625
</TABLE>
<TABLE>
<CAPTION>
From
For the August 18,
Nine 1997 (Date
Months For the Year of Inception)
Ended Ended through
September 30, December 31, December 31,
1999 1998 1997
--------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Statement of Operations:
General and administrative expenses..... $ (119) $ 0 $ 0
Interest expense, other................. (574)
Interest income, other.................. 382
----
Loss before taxes....................... (311)
----
Tax benefit............................. 109
----
Net loss................................ (202) 0 0
====
</TABLE>
- - ----------
(1) Includes capitalized interest of $3.4 million associated with Riviera
Holdings' investment.
21
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September December 31,
1999 1998 1998
---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C>
Earnings:
Pre-tax income (loss) (1)................... (202) - -
Fixed charges ............................... 2,093 1,394 1,972
Earnings (loss) available for fixed charges . (202) - -
Ratio of earnings to fixed charges (2)....... Note (3) Note (3) Note (3)
</TABLE>
Fixed charges include interest expense on indebtedness, plus amortization
of deferred financing costs.
(1) We are in the development stage and have not commenced our intended
operations. The net loss is the result of general administrative expenses and
interest expense offset by interest income incurred prior to the opening of the
Casino.
(2) For purposes of determining fixed charges, earnings (losses) are
defined as earnings (loss) before income taxes plus fixed charges.
(3) Since we are in the development stage and have not commenced
operations, our earnings were not sufficient to cover fixed charges by
$2,295,000 and $1,394,000 for the nine months ended September 30, 1999 and 1998,
respectively, and $1,972,000 for the year ended December 31, 1998.
22
<PAGE>
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, our financial statements, including the notes
thereto, and the other financial information included elsewhere in this
prospectus.
Development Activities
We were organized in August 1997 and were initially capitalized with
$15.1 million of cash contributions from Riviera Holdings. Since that time, our
activities have been limited to development activities with respect to the
Riviera Black Hawk. We purchased the land on which the Riviera Black Hawk is
being constructed in August 1997 and commenced construction in July 1998. We
have completed all site improvements, excavation and foundation work. Erection
of the steel structure began in April 1999, and the building is expected to be
enclosed by mid-August 1999. We will have a 300,000 square foot gaming facility
featuring:
o a 31,000 square foot casino with approximately 1,000 slot machines and
12 blackjack tables;
o parking for 520 vehicles, of which 92% will be covered, with
convenient self-park and valet options;
o a 265-seat casual dining restaurant;
o two themed bars; and
o an entertainment center with seating for approximately 500 customers.
Subject to the delays inherent in construction projects of the
magnitude of our casino, and subject to obtaining the necessary gaming
licenses, other permits and financing, we expect to open our casino in
the first quarter of 2000.
Results Of Operations
We are in the development stage and do not have any historical operating
results other than:
o interest income on unused loan proceeds and interest expense, the
majority of which has been capitalized;
o on our outstanding indebtedness to Riviera Holdings;
o the receipt of capital contributions; and
o the capitalization of other costs and pre-opening general and
administrative expenses in the first nine months of 1999 which have
been expensed as required under generally accepted accounting
principles.
The capitalized costs have consisted primarily of license and permit
applications, design costs, construction costs and interest during development
and construction. Future operating results are subject to significant business,
economic, regulatory and competitive uncertainties and contingencies, many of
which are beyond our control. We believe that the Riviera Black Hawk, if
completed and opened, will be able to attract a sufficient number of patrons and
achieve the level of activity and revenues necessary to
23
<PAGE>
permit us to meet our obligations, including with respect to the notes. However,
there can be no assurance that we will be able to achieve these results.
Liquidity And Capital Resources
Our purchase of the site and all development expenses to date were
financed by the proceeds from the sale of the existing notes and by capital
contributions and advances from Riviera Holdings. We expect to fund the
remaining development of the Riviera Black Hawk from a combination of
o $21.8 million of the net proceeds from the sale of the existing notes,
which remained in the construction disbursement account after
reimbursing Riviera Holdings $10.1 million in cash for advances made
to us prior to the sale of the existing notes,
o $10.1 million of the net proceeds from the sale of the existing notes,
which were deposited into the completion reserve account and the
interest reserve account,
o furniture, fixtures and equipment financing in the amount of up to
$11.1 million and
o Special Improvement District Bonds in the amount of $1.5 million. In
addition, Riviera Holdings will be obligated under the completion
capital commitment to contribute to us up to $10.0 million of cash to
us if at any time there are insufficient funds available to enable our
casino to be operating by May 31, 2000. In addition, if our casino is
not operating by May 31, 2000, Riviera Holdings will be obligated to
contribute on that date $10.0 million in cash less any amounts
previously contributed under the completion capital commitment.
Furthermore, if we do not have the necessary funds to make a payment
of fixed interest on the notes during our first three years of
operations or our cash flow is less than $9.0 million in any of our
first three years of operations, Riviera Holdings will be obligated
under the keep-well agreement to contribute cash to us to make up
those amounts, subject to a maximum of $5.0 million for any one
operating year and $10.0 million in the aggregate.
After our casino opens, we expect to fund our operating and capital needs
from operating cash flow. We intend to have sufficient working capital to
provide for reasonably anticipated short-term liquidity needs. In addition,
Riviera Holdings has committed to provide us with additional financing under the
circumstances described above. However, there can be no assurance that any
additional financing, if needed to meet liquidity needs, will be available to us
on favorable terms or at all. There can be no assurance that our estimate of
foreseeable liquidity needs is accurate or that no new business developments or
other unforeseen events will not occur, any of which could result in the need to
raise additional funds. We expect that the adequacy of our operating cash flow
will depend upon:
o customer acceptance of the Riviera Black Hawk;
o the continued development of the Black Hawk/Central City market as a
gaming destination;
o the intensity of our competition;
o the efficiency of operations;
o the depth of customer demand, the effectiveness of our marketing and
promotional efforts; and
o the performance by Riviera Holdings of its agreements to provide
capital to us pursuant to the completion capital commitment and the
keep-well agreement.
24
<PAGE>
Recently Issued Accounting Standards
The American Institute of Certified Public Accountants' Accounting
Standards Executive Committee recently issued Statement of Position No. 98-5,
Reporting on the Costs of Start-Up Activities. This standard provides guidance
on the financial reporting for start-up costs and organization costs. This
standard requires costs of start-up activities and organization costs to be
expensed as incurred, and is effective for fiscal years beginning after December
15, 1998, although earlier application is encouraged. We adopted this standard
effective January 1, 1999. The impact has been to record a general expense of
$119,000 for the nine months ended September 30, 1999, that we would have
otherwise deferred as pre-opening costs.
The Financial Accounting Standards Board recently issued FAS No. 137,
`Deferral of FAS 133 Accounting for Derivatives' which delays the implementation
of that pronouncement to June 15, 2000. We have not determined what effect, if
any, that FAS 133 may have on our results of operations.
Year 2000
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This situation is generally referred to as the "Year 2000
Problem". If such situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
We have conducted a comprehensive review of our computer systems and
other systems for the purpose of assessing our potential Year 2000 Problem, and
we are in the process of modifying or replacing those systems which are not Year
2000 compliant. Based upon this review, our management believes such systems
will be compliant by mid-calendar 1999. However, if modifications are not made
or not completed timely, the Year 2000 Problem could have a significant impact
on our operations.
All costs related to the Year 2000 Problem are expensed as incurred,
while the cost of new hardware and software is capitalized and amortized over
its expected useful life. The costs associated with Year 2000 compliance have
not been and are not anticipated to be material to our financial position or
results of operations. As of September 30, 1999, we have incurred costs of
approximately $2,000, primarily for analysis by internal labor, related to the
system applications and anticipates spending an additional $5,000 to become Year
2000 compliant. The estimated completion date and remaining costs are based upon
our management's best estimates, as well as third party modification plans and
other factors. However, there can be no guarantee that such estimates will occur
and actual results could differ.
In addition, we have communicated with Weitz-Cohen Construction Co., our
general contractor and presently our only major vendor and supplier, to
determine their state of readiness relative to the Year 2000 Problem and our
possible exposure to Year 2000 issues of such party. They have responded in
writing, indicating that they have reached operational sustainability in all
areas. However, there can be no guarantee that the systems of other companies,
which our systems may rely upon, will be timely converted or representations
made to us by these parties are accurate. As a result the failure of a major
vendor or supplier to adequately address their Year 2000 Problem could have a
significant adverse impact on our operations.
As a result of various external risk factors, we could be adversely
impacted and the effect could be material regardless of the readiness of our own
systems. The most reasonable worst case scenario - if one or more of our utility
providers, of electric, natural gas, water or sewer, experiences Year 2000
problems that impact their ability to provide their services, our operations
could be adversely impacted.
25
<PAGE>
Furthermore, disruption of services for any of the markets for our customers
could result in an adverse change in customer visits from the affected market.
Automobile traffic to and from the Black Hawk/Central City market could be
disrupted by Year 2000 problems, which would limit the ability of potential
customers to visit our property. The possible long term disruption of banking
services due to Year 2000 problems could ultimately impair our daily financial
transactions, including the deposit of monies and processing of checks.
Furthermore, credit card processing and customers' access to cash via automated
teller machines could also be disrupted. In the event of this type of
disruption, we intend to provide minimal services to our customers and assist
them, if possible, with transportation to the metropolitan Denver area as hotel
facilities are extremely limited in the Black Hawk/Central City area.
We have developed, and continue to update and revise, contingency plans
to address the identified risks. However, given the nature of many of the
external risk factors, we do not believe viable alternatives would be available.
For example, we cannot develop a meaningful contingency plan to address a
disruption of utilities services. Consequently, the occurrence of any of the
aforementioned disruptions could, depending upon their severity and duration,
have a material adverse impact on our operating results.
26
<PAGE>
Quantitative and Qualitative Disclosure About Market Risk
Market risks relating to our operations result primarily from changes in
interest rates. We invest our cash and cash equivalents in U.S. Treasury Bills
with maturities of 30 days or less. We also have short-term investments, which
consist of U.S. Treasury Bills maturing in 270 days or less at September 30,
1999. The short-term investments are classified as held to maturity investments
and are restricted in use for the interest reserve account required by the bond
indenture.
As of September 30, 1999, we had $45.8 million in borrowings. The
borrowings include $45 million under a private placement that was entered into
in June of 1999. The bonds mature in 2005. Interest under the bonds is based on
a fixed rate of 13% plus contingent interest. The amount of contingent interest
will, subject to limits, be equal to 5% of cash flow for the two fiscal quarters
ending prior to the record date applicable to the relevant interest payment
date. The borrowings also include $.8 million in a special improvement district
bond offering with the City of Black Hawk. Our share of the debt on the SID
bonds of $1,470,000 when the project is complete, is payable over ten years
beginning in January 2000. The special improvement district bonds bear interest
at 5%.
Interest rate Sensitivity
Principal (Notional Amount by Expected Maturity)
Average Interest Rate
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
(Amounts in Fair Value
thousands) 1999 2000 2001 2002 2003 Thereafter Total at 6/30/99
- - ---------------------------------------------------------------------------------------------------------------------
Assets
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short term
investments $2,550 $2,550 $5,100 $5,100
- - ---------------------------------------------------------------------------------------------------------------------
Average interest
rate 4.75% 4.75% 4.75%
- - ---------------------------------------------------------------------------------------------------------------------
Long term debt
including current
portion
- - ---------------------------------------------------------------------------------------------------------------------
Special
Improvement
District Bonds $112 $120 $127 $132 $979 $1,470 $1,470
- - ---------------------------------------------------------------------------------------------------------------------
Average interest
rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
- - ---------------------------------------------------------------------------------------------------------------------
13% First Mortgage
Notes $45,000 $45,000 $45,000
- - ---------------------------------------------------------------------------------------------------------------------
Average interest
rate 13.0% 13.0%
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We issued and sold the existing notes to the Initial Purchaser on June 3,
1999. The Initial Purchaser subsequently sold the existing notes to qualified
institutional buyers in reliance on Rule 144A under the Securities Act. Because
the existing notes are subject to transfer restrictions, we entered into a
registration rights agreement with the Initial Purchaser, dated June 3, 1999,
pursuant to which we agreed:
o within 45 days after June 3, 1999, to prepare and file with the
Securities and Exchange Commission the Registration Statement of which
this prospectus is a part;
o within 150 days after June 3, 1999, to use our best efforts to cause
the Registration Statement to become effective under the Securities
Act;
o upon the effectiveness of the Registration Statement, to offer the new
notes in exchange for surrender of the existing notes; and
o to keep the exchange offer open for not less than 30 days, or longer
if required by applicable law, after the date notice of the exchange
offer is mailed to the holders of the existing notes.
The Registration Statement is intended to satisfy in part our obligations with
respect to the existing notes under the registration rights agreement.
Under existing interpretations of the Securities and Exchange Commission,
the new notes will be freely transferable by holders other than our affiliates
after the exchange offer without further registration under the Securities Act
if the holder of the new notes represents that:
o it is acquiring the new notes in the ordinary course of its business;
o it has no arrangement or understanding with any person to participate
in the distribution of the new notes;
o it is not an affiliate of us, as such terms are interpreted by the
Securities and Exchange Commission; and
o if such holder is not a broker-dealer, then such holder is not engaged
in and does not intend to engage in, a distribution of the new notes.
However, participating broker-dealers receiving new notes in the exchange
offer will have a prospectus delivery requirement with respect to resales of
such new notes. The Securities and Exchange Commission has taken the position
that participating broker-dealers may fulfill their prospectus delivery
requirements with respect to new notes, other than a resale of an unsold
allotment from the original sale of the existing notes, with this prospectus.
Under the registration rights agreement, we are required to allow participating
broker-dealers and other persons, if any, with similar prospectus delivery
requirements to use this prospectus in connection with the resale of such new
notes. Each broker-dealer that receives new notes for its own account in
exchange for existing notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes.
28
<PAGE>
Terms of The Exchange Offer; Period For Tendering Existing Notes
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, which together constitute the
exchange offer, we will accept for exchange existing notes which are properly
tendered on or prior to the expiration date and not withdrawn as permitted
below. The expiration date is 5:00 p.m., New York City time, on January 4, 2000.
However, if we, in our sole discretion, have extended the period of time for
which the exchange offer is open, the expiration date will be the latest time
and date to which the exchange offer is extended.
As of the date of this prospectus, $45.0 million aggregate principal
amount of the existing notes are outstanding. This prospectus, together with the
letter of transmittal, is first being sent on or about December 7, 1999, to
all holders of existing notes known to us.
We expressly reserve the right, at any time or from time to time, to
extend the period of time during which the exchange offer is open, and thereby
delay acceptance for any exchange of any existing notes, by giving notice of
such extension to the holders of existing notes as described below. During any
such extension, all existing notes previously tendered will remain subject to
the exchange offer and may be accepted for exchange by us. Any existing notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder as promptly as practicable after the expiration or termination
of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any existing notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified below. We will give notice of any extension, amendment, non-acceptance
or termination to the holders of the existing notes as promptly as practicable,
such notice in the case of any extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date.
Holders of existing notes do not have any appraisal or dissenters' rights
in connection with the exchange offer.
Procedures for Tendering Existing Notes
The tender to us of existing notes by a holder of existing notes as set
forth below and the acceptance of such tender by us will constitute a binding
agreement between the tendering holder and us upon the terms and subject to the
conditions set forth in this prospectus and in the accompanying letter of
transmittal. Except as set forth below, a holder who wishes to tender existing
notes for exchange pursuant to the exchange offer must transmit a properly
completed and duly executed letter of transmittal to IBJ Whitehall Bank & Trust
Company of New York on or prior to the expiration date. In addition, the
exchange agent must receive:
o certificates for such existing notes along with the letter of
transmittal, or
o prior to the expiration date, a timely confirmation of a book-entry
transfer of such existing notes into the exchange agent's account at
The Depository Trust Company pursuant to the procedure for book-entry
transfer described below, or
o the holder must comply with the guaranteed delivery procedure
described below.
29
<PAGE>
The method of delivery of existing notes, letters of transmittal and all
other required documents is at your election and risk. If such delivery is by
mail, we recommend that you use registered mail, properly insured, with return
receipt requested. In all cases, you should allow sufficient time to assure
timely delivery. You should not send letters of transmittal or existing notes to
us.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the existing notes surrendered for
exchange are tendered:
o by a registered holder of the existing notes who has not completed the
box entitled "Special Issuance Instruction" or "Special Delivery
Instruction" on the letter of transmittal; or
o for the account of an eligible institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible institution. Eligible institutions any firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States. If existing notes are
registered in the name of a person other than a signer of the letter of
transmittal, the existing notes surrendered for exchange must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or exchange.
This must be in satisfactory form as determined by us in our sole discretion,
duly executed by the registered holder with the signature on such existing notes
guaranteed by an eligible institution.
Any beneficial owner whose existing notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, and who wishes
to tender, should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the letter of transmittal and delivering such
owner's existing notes, either make appropriate arrangements to register
ownership of the existing notes in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
All questions as to the validity, form, eligibility, time of receipt and
acceptance of existing notes tendered for exchange will be determined by us in
our sole discretion. This determination shall be final and binding. We reserve
the absolute right to reject any and all tenders of any particular existing
notes not properly tendered or to not accept any particular existing notes which
acceptance might, in our judgment or our counsel's judgment, be unlawful. We
also reserve the absolute right to waive any defects or irregularities or
conditions of the exchange offer as to any particular existing notes either
before or after the expiration date including the right to waive the
ineligibility of any holder who seeks to tender existing notes in the exchange
offer. The interpretation of the terms and conditions of the exchange offer as
to any particular existing notes either before or after the expiration date,
including the letter of transmittal and the instructions to such letter of
transmittal, by us shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of existing notes for
exchange must be cured within such reasonable period of time as we shall
determine. Neither we, the exchange agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of existing notes for exchange, nor shall any of them incur any liability
for failure to give such notification.
If the letter of transmittal or any existing notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a
30
<PAGE>
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by us, proper evidence satisfactory to us of their
authority to so act must be submitted.
By tendering, each holder of existing notes will represent to us in
writing that, among other things:
o the new notes acquired pursuant to the exchange offer are being
obtained in the ordinary course of business of the holder and any
beneficial holder;
o neither the holder nor any such beneficial holder has an arrangement
or understanding with any person to participate in the distribution of
such new notes; and
o neither the holder nor any such other person is our "affiliate," as
defined under Rule 405 of the Securities Act. If the holder is not a
broker-dealer, the holder must represent that it is not engaged in nor
does it intend to engage in it distribution of the new notes.
If any holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act of ours, or is engaged in, or intends to
engage in, or has an arrangement or understanding with any person to participate
in, a distribution of such new notes to be acquired pursuant to the exchange
offer, such holder or any such other person may not rely on the applicable
interpretations of the staff of the Securities and Exchange Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
If the holder is a broker-dealer, the holder must represent that it will
receive new notes for its own account in exchange for existing notes that were
acquired as a result of market-making activities or other trading activities.
Each broker-dealer that receives new notes for its own account in exchange for
existing notes, where such existing notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such new notes.
Acceptance of Existing Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the exchange
offer, we will accept, promptly after the expiration date, all existing notes
property tendered, and will issue the new notes promptly after acceptance of the
existing notes. For purposes of the exchange offer, we shall be deemed to have
accepted properly tendered existing notes for exchange when, as and if we have
given oral and written notice to the exchange agent.
The new notes will bear interest from the most recent date to which
interest has been paid on the existing notes, or if no interest has been paid on
the existing notes, from June 3, 1999. Accordingly, registered holders of new
notes on the relevant record date for the first interest payment date following
the consummation of the exchange offer will receive interest accruing from the
most recent date to which interest has been paid or, if no interest has been
paid, from June 3, 1999. Existing notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the exchange offer.
Holders of existing notes whose existing notes are accepted for exchange will
not receive any payment in respect of accrued interest on such existing notes
otherwise payable on any interest payment date the record date for which occurs
on or after consummation of the exchange offer and will be deemed to have waived
their rights to receive such accrued interest on the existing notes.
In all cases, issuance of new notes for existing notes that are accepted
for exchange pursuant to the exchange offer will be made only after timely
receipt by the exchange agent of:
31
<PAGE>
o certificates for such existing notes or a timely book-entry
confirmation of such existing notes into the exchange agent's account
at The Depository Trust Company;
o a properly completed and duly executed letter of transmittal; and
o all other required documents.
If any tendered existing notes are not accepted for any reason set forth in the
terms and conditions of the exchange offer or if existing notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged existing notes will be returned without expense to
the tendering holder of such existing notes. In the case of existing notes
tendered by book-entry transfer into the exchange agent's account at The
Depository Trust Company pursuant to the book-entry transfer procedures
described below, such non-exchanged existing notes will be credited to an
account maintained with The Depositary Trust Company, as promptly as practicable
after the expiration of the exchange offer.
Book-Entry Transfer
Any financial institution that is a participant in The Depository Trust
Company's systems may make book-entry delivery of existing notes by causing The
Depository Trust Company to transfer such existing notes into the exchange
agent's account at The Depository Trust Company in accordance with The
Depositary Trust Company's procedures for transfer. However, although delivery
of existing notes may be effected through book-entry transfer at The Depository
Trust Company, the letter of transmittal or facsimile thereof with any required
signature guarantees and any other required documents must, in any case, be
transmitted to and received by the exchange agent on or prior to the expiration
date, unless such holder has strictly complied with the guaranteed delivery
procedures described below.
We understand that the exchange agent has confirmed with The Depository
Trust Company that any financial institution that is a participant in The
Depository Trust Company's system may utilize The Depository Trust Company's
Automated Tender Offer Program to tender existing notes. We further understand
that the exchange agent will request, within two business days after the date
the exchange offer commences, that The Depository Trust Company establish an
account with respect to the existing notes for the purpose of facilitating the
exchange offer. Also, any participant may make book-entry delivery of existing
notes by causing The Depository Trust Company to transfer such existing notes
into the exchange agent's account in accordance with The Depository Trust
Company's ATOP procedures for transfer. However, the exchange of the existing
notes so tendered will only be made after timely confirmation of such book-entry
transfer and timely receipt by the exchange agent of an agent's message, an
appropriate letter of transmittal with any required signature guarantee, and any
other documents required. An agent's message is a message, transmitted by The
Depository Trust Company and received by the exchange agent and forming part of
book-entry confirmation, which states that The Depository Trust Company has
received an express acknowledgment from a participant tendering existing notes
which are the subject of such book-entry confirmation and that such participant
has received and agrees to be bound by the terms of the letter of transmittal
and that we may enforce such agreement against such participant.
Guaranteed Delivery Procedures
If a registered holder of the existing notes desires to tender such
existing notes and the existing notes are not immediately available, or time
will not permit such holder's existing notes or other required documents to
reach the exchange agent before the expiration date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may
nonetheless be effected if:
32
<PAGE>
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent received from such
eligible institution a properly completed and duly executed letter of
transmittal and Notice of guaranteed delivery, substantially in the
form provided by us by telegram, telex, facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder of
existing notes and the amount of existing notes tendered, stating that
the tender is being made thereby and guaranteeing that within five New
York Stock Exchange trading days after the date of execution of the
Notice of guaranteed delivery, the certificates for all physically
tendered existing notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other documents required by
the letter of transmittal will be deposited by the eligible
institution with the exchange agent; and
o the certificates for all physically tendered existing notes, in proper
form for transfer, or a book-entry confirmation, as the case may be,
and all other documents required by the letter of transmittal are
received by the exchange agent within five NYSE trading days after the
date of execution of the Notice of guaranteed delivery.
Withdrawal Rights
Tenders of existing notes may be withdrawn at any time prior to the
expiration date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the exchange agent. Any such notice of withdrawal
must:
o specify the name of the person having tendered the existing notes to
be withdrawn;
o identify the existing notes to be withdrawn and the principal amount
of such existing notes; and
o where certificates for existing notes have been transmitted specify
the name in which such existing notes are registered, if different
from that of the withdrawing holder.
If certificates for existing notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution.
If existing notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at The Depository Trust Company to be credited
with the withdrawn existing notes and otherwise comply with the procedures of
such facility. All questions as to the validity, form and eligibility, including
time of receipt, of such notices will be determined by us, whose determination
shall be final and binding on all parties. Any existing notes so withdrawn will
be deemed not to have been validly tendered for exchange for purposes of the
exchange offer. Any existing notes which have been tendered for exchange but
which are not exchanged for any reason will be returned to the holder thereof
without cost to such holder, or in the case of existing notes tendered by
book-entry transfer into the exchange agent's account at The Depository Trust
Company pursuant to the book-entry transfer procedures described above, such
existing notes will be credited to an account maintained with such book-entry
transfer facility for the existing notes, as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn existing notes may be retendered by following one of the procedures
described above at any time on or prior to the expiration date.
33
<PAGE>
Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we shall not
be required to accept for exchange, or to issue new notes in exchange for, any
existing notes. We may terminate or amend the exchange offer if it any time
before the acceptance of such existing notes for exchange or the exchange of new
notes for such existing notes, we determine that:
o the exchange offer does not comply with any applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission;
o we have not received all applicable governmental approvals; or
o any actions or proceedings of any governmental agency or court exist
which could materially impair our ability to consummate the exchange
offer.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in its
reasonable discretion. Our failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any existing notes tendered,
and no new notes will be issued in exchange for any such existing notes, if at
such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended. In any such event we are required to use every reasonable effort to
obtain the withdrawal of any stop order at the earliest possible time.
Exchange Agent
The Bank of New York has been appointed as the exchange agent for the
exchange offer. All executed letters of transmittal should be directed to the
exchange agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this prospectus or of the
letter of transmittal and requests for Notices of Guaranteed Delivery should be
directed to the exchange agent addressed as follows:
<TABLE>
<S> <C> <C>
By Hand, up to 4:30 p.m.: By Registered or Certified Mail: By Overnight Courier & By Hand after
4:30 p.m. on the expiration date only:
The Bank of New York The Bank of New York The Bank of New York
101 Barclay Street, Ground Level 101 Barclay Street 101 Barclay Street
Corporate Trust Services Window New York, NY 10286 New York, NY 10286
New York, NY 10286 Attn: Reorganization Unit-7E Attn: Reorganization Unit-7E
Attn: Reorganization Unit-7E
</TABLE>
34
<PAGE>
By Facsimile:
(212) 815-6339
Confirm by Telephone:
(212) 815-5778
Carolle Montrevil
Delivery other than as set forth above will not constitute a valid
delivery.
Fees and Expenses
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail. However, additional solicitations may be made in person or by telephone by
our officers and employees.
The expenses to be incurred in connection with the exchange offer will be
paid by us. Such expenses include fees and expenses of the exchange agent and
Trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The new notes will be recorded at the same carrying amount as the
existing notes, which is the principal amount as reflected in our accounting
records on the date of the exchange and, accordingly, no gain or loss will be
recognized. The debt issuance costs will be capitalized and amortized to
interest expense over the term of the new notes.
Transfer Taxes
Holders who tender their existing notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that holders
who instruct us to register new notes in the name of, or request that existing
notes not tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
Consequences of Failure to Exchange; Resales of New Notes
Holders of existing notes who do not exchange their existing notes for
new notes in the exchange offer will continue to be subject to the restrictions
on transfer of such existing notes as set forth in the legend thereon as a
consequence of the issuance of the existing notes pursuant to the exemptions
from, or in transactions not subject to, the registration requirements of, the
Securities Act and applicable state securities laws. Existing notes not
exchanged pursuant to the exchange offer will continue to accrue interest at 13%
per annum and will otherwise remain outstanding in accordance with their terms.
Holders of existing notes do not have any appraisal or dissenters' rights under
the Colorado Business Corporation Act in connection with the exchange offer. In
general, the existing notes may not be offered or sold unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. We do
not currently anticipate that we will register the existing notes under the
Securities Act. However, if the Initial Purchaser so requests with respect to
existing notes not eligible to be exchanged for new notes in the exchange offer
and held by it following consummation of the exchange offer or if any holder of
existing notes other than an exchanging dealer is not eligible to participate in
the exchange offer or, in the case of any holder of existing notes other than an
exchanging dealer that participates in the exchange offer, does not receive new
notes in
35
<PAGE>
exchange for existing notes that may be sold without restriction under state and
federal securities laws, other than due solely to the status of such holder as
an affiliate of us within the meaning of the Securities Act, we are obligated to
file a shelf registration statement on the appropriate form under the Securities
Act relating to the existing notes held by such persons.
Based on interpretive letters issued by the staff of the Securities and
Exchange Commission to third parties in unrelated transactions, we are of the
view that new notes issued pursuant to the exchange offer may be offered for
resale, resold or otherwise transferred by holders thereof, other than any such
holder which is our "affiliate" within the meaning of Rule 405 under the
Securities Act or any broker-dealer that purchases notes from us to resell
pursuant to Rule 144A or any other available exemption, without compliance with
the registration and prospectus delivery provisions of the Securities Act. This
is the case provided that such new notes are acquired in the ordinary course of
such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such new notes. If any
holder has any arrangement or understanding with respect to the distribution of
the new notes to be acquired pursuant to the exchange offer, such holder
o could not rely on the applicable interpretations of the staff of the
Securities and Exchange Commission and
o must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale
transaction.
A broker-dealer who holds existing notes that were acquired for its own account
as a result of market-making or other trading activities may be deemed to be all
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of new notes. Each such broker-dealer that receives
new notes for its own account in exchange for existing notes, where such
existing notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the letter of
transmittal that it will deliver a prospectus in connection with any resale of
such new notes. We have not requested the staff of the Securities and Exchange
Commission to consider the exchange offer in the context of a no-action letter,
and there can be no assurance that the staff would take positions similar to
those taken in the interpretive letters referred to above if we were to make
such a no-action request.
In addition, the new notes may not be offered or sold in a jurisdiction
unless they have been registered or qualified for sale in such jurisdictions or
an exemption from registration or qualification is available and is complied
with. We have agreed, pursuant to the registration rights agreement and subject
to the specified limitations therein, to register or qualify the new notes for
offer or sale under the securities or blue sky laws of such jurisdictions in the
United States as any selling holder of the Notes reasonably requests in writing.
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BUSINESS
Riviera Black Hawk
Riviera Black Hawk, is constructing and will own and operate the third
largest integrated casino, entertainment and parking facilities in the state of
Colorado. Located in Black Hawk, Colorado, approximately 40 miles west of
Denver, our casino will be one of the first three encountered when traveling
from Denver to the adjacent gaming cities of Black Hawk and Central City. Our
casino will feature the third largest number of gaming devices in the market
with approximately 1,000 slot machines and 12 blackjack tables. In Colorado,
each slot machine and each table game is considered one gaming device.
We also expect to offer a variety of non-gaming amenities designed to
further differentiate our casino including:
o parking for 520 vehicles, of which 92% will be covered, with
convenient and free self-park and valet options;
o a 265-seat casual dining restaurant;
o two themed bars; and
o an entertainment center with seating for approximately 500 people.
The initial participants in this market were small, privately held gaming
facilities whose inability to offer convenient parking and a full range of
traditional casino amenities limited the growth of this market. Subsequently,
larger casinos offering such amenities have entered the market, have been
gaining market share and have contributed to the consistent growth in the
overall market. As of September 30, 1999, there were 29 casinos in the Black
Hawk/Central City market, with eight casinos each offering more than 400 gaming
devices. Anchor Gaming's Colorado Central Station, located across the street
from our casino with approximately 700 gaming machines and 700 valet parking
spaces, has been the market leader in terms of win per gaming device. We believe
that our casino will be successful due to our:
o premier location;
o convenient, covered self-parking; and
o superior size and amenities.
We expect to open our casino in the first quarter of 2000. The total cost
for our casino, excluding capitalized interest, is expected to be $77.6 million,
which includes:
o $15.1 million for the original purchase of the land on which our
casino is being developed;
o $27.6 million of construction costs;
o $11.1 million for furniture, fixtures and equipment;
o $8.0 million for project development costs, fees and permits;
o $2.7 million for pre-opening costs, opening bankroll and other working
capital requirements;
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o $10.1 million for a completion reserve and an interest reserve; and
o $3.0 million for fees and expenses related to the sale of the existing
notes.
We believe the construction budget and timetable for our casino can be achieved
based on the following:
o construction costs will be incurred pursuant to a construction
contract with a price of $27.6 million, subject only to our changes in
specifications, delays caused by us and natural disasters and other
events beyond the control of the parties;
o the foundation and external structure of the facility has been
substantially completed;
o $22.2 million (80%) of the $27.6 million construction budget had been
expended under the construction contract as of September 30, 1999; and
o the construction contract provides for a completion date of January
15, 2000 with incentives for finishing early and penalties for
finishing late.
Description of the Riviera Black Hawk
General. The Riviera Black Hawk is designed to be an integrated gaming
facility, providing customers with a broad selection of gaming activities, food
and entertainment as well as convenient on-site covered parking. Our casino is
being constructed on a 71,000 square foot (1.63 acres) site zoned entirely for
gaming, providing us with the flexibility to add additional gaming space as
allowable under Colorado gaming regulations. Total square footage for the
facility will be 300,000 square feet, which includes a 175,000 square foot
parking structure. The land is not subject to any material encumbrances.
The exterior design of our casino is based on the historic Western
Victorian influence found in the Black Hawk area in the late 19th century.
Patrons will be able to enter the casino from three entrances:
o a glass-covered pedestrian entrance facing the Colorado Central
Station on the corner of Main and Mill Street, which will serve as the
main entrance for pedestrians coming from the Colorado Central Station
and other casinos across Mill Street as well as the west entrance of
the Isle of Capri Casino;
o a valet and pedestrian entrance facing the Isle of Capri Casino across
Main Street, which will serve as the main entrance for our valet
customers, bus customers and pedestrians leaving the Isle of Capri
Casino through the north entrance; and
o elevator access from our attached self-parking structure.
The interior of the casino will blend the Western Victorian theme with
the atmosphere of a modern casino, with slot machines and blackjack tables on a
single floor. Also adding to the Western Victorian theme will be a large, ornate
bar located in the center of the casino floor. We expect to offer one of the
largest selections of gaming in the market with approximately 1,000
state-of-the-art slot machines and 12 blackjack tables. The slot machines will
be available to customers in numerous denominations, including 5(cent),
25(cent), $1 and $5 and will be grouped together to generate an atmosphere of
excitement consistent with that typically found in Las Vegas-style casinos.
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The Black Hawk/Central City Market
Gaming was first introduced to the Black Hawk/Central City market in
October 1991 following a state-wide referendum where Colorado voters approved
limited stakes gaming for three historic mining towns - Black Hawk, Central City
and Cripple Creek. Limited stakes gaming is defined as a maximum single bet of
$5. Black Hawk and Central City are contiguous cities located approximately 40
miles west of Denver and about ten miles north of Interstate Highway 70, the
main east-west artery from Denver. Historically, these two gold mining
communities were popular tourist towns. However, since the inception of casino
gaming in October 1991, many of the former tourist-related businesses have been
displaced by gaming establishments.
The first casino in the Black Hawk/Central City market was opened in
October 1991 with 14 casinos open by the end of that year. The pace of expansion
increased further in 1992 with the number of casinos in the market peaking at 42
casinos. However, due to a trend of consolidation in the market and the
displacement of small casinos by the entry of larger, better capitalized
operators, the number of casinos has declined to 29 as of September 30, 1999.
The Black Hawk/Central City market primarily caters to "day-trip"
customers from Denver, Boulder, Fort Collins and Golden as well as Cheyenne,
Wyoming. An adult population of approximately 2.3 million people reside within
this 100-mile radius of Black Hawk. In addition, residents within a 100 mile
radius of the City of Black Hawk had an average household income in excess of
$48,000 per annum in 1998. Daily traffic counts passing the Black Hawk/Central
City market on Highway 119, as reported by the Colorado Department of
Transportation, averaged over 14,000 vehicles per day in 1998.
The Black Hawk/Central City market's location has contributed to
consistent growth in the market since the legalization of gaming in 1991. Gaming
revenues have grown from $127.6 million in 1992 to $366.0 million in 1998,
representing a 19% compound annual growth rate. These revenues represented
approximately 76% of total Colorado gaming revenues excluding gaming on Native
American land.
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The following table sets forth gaming statistics for the Black
Hawk/Central City market and well as the individual cities of Black Hawk and
Central City:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Black Hawk
Gaming revenues (in thousands).. $ 173,703 $195,857 $219,911 $234,631 $272,008
Number of casinos(1)............ 19 19 19 19 19
Number of slots(1).............. 4,231 4,877 5,276 5,340 7,181
Number of tables(1)............. 103 113 111 106 125
Win per slot per day(2)......... $ 97.71 $ 104.70 $ 110.68 $ 113.77 $ 122.24
Win per table per day(2)........ $ 375.06 $ 365.57 $ 365.83 $ 370.50 $ 383.69
Central City
Gaming revenues (in thousands).. $ 69,702 $ 94,468 $ 88,870 $ 87,391 $ 93,980
Number of casinos(1)............ 17 13 12 12 12
Number of slots(1).............. 4,311 3,670 3,259 3,196 3,142
Number of tables(1)............. 92 72 60 58 46
Win per slot per day(2)......... $ 54.63 $ 60.51 $ 66.96 $ 67.97 $ 81.15
Win per table per day(2)........ $ 245.32 $ 282.12 $ 244.14 $ 219.63 $ 224.21
Black Hawk/Central City Market
Gaming revenues (in thousands).. $ 243,405 $290,325 $308,781 $322,022 $365,988
Number of casinos(1)............ 36 32 31 31 31
Number of slots(1).............. 8,542 8,547 8,535 8,536 10,323
Number of tables(1)............. 195 185 171 164 171
</TABLE>
- - ----------
(1) As of December 31 for each period shown.
(2) Win per gaming device per day is computed as the amount of gaming revenues
attributable to slot play or table play, as applicable, divided by the
average number of applicable gaming devices during the period presented.
Source: Data for the above table was obtained from Reports of the Colorado
Division of Gaming. Figures for win per slot per day and win per table per day
were obtained from Urban Systems, Inc., USI Project #98-125, January 1999.
Slot machines account for approximately 95% of the market's total gaming
revenues. In contrast, as of December 31, 1998, slot machines in the developed
gaming markets of Nevada and New Jersey generate between 65% and 69% of total
revenues while slot revenues in emerging markets such as Iowa and Indiana
account for approximately 78% of total revenues.
Since 1992, the number of gaming devices in the Black Hawk/Central City
market has grown approximately 44.7% from 7,252 devices in 1992 to 10,494
devices in 1998. The total number of slot machines has increased 45.8% since
1992 to 10,323 in 1998 while the total number of tables in the market has
remained relatively flat with 171 tables in the market at the end of 1998. Win
per gaming device per day has continued to grow despite the increase in the
number of gaming devices.
The City of Black Hawk has experienced more significant growth in gaming
revenues than Central City since 1992. The popularity of Black Hawk in
comparison to Central City is due primarily to Black Hawk's superior access to
major highways, as patrons must first pass through Black Hawk to access Central
City from Denver. Due to this superior location, larger casino operators have
focused on building in the City of Black Hawk. As a result, casinos in Black
Hawk now generally feature a larger average number of gaming devices, a wider
variety of amenities and convenient free parking for patrons. These factors have
contributed to growth in Black Hawk gaming revenues at a compound annual rate of
30.1% since 1992 compared to a more moderate growth for Central City of 4.7%
over the same period. The number of slot machines and tables in the City of
Black Hawk have increased 125.0% and 50.6%, respectively since 1992, while the
number of slot machines and tables in Central City have declined 19.1% and
49.5%, respectively over the same period.
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The information contained in this discussion of the Black Hawk/Central
City market was derived from publicly available data, except where stated
otherwise.
Marketing strategy
We plan to attract customers to our casino by implementing marketing
strategies and promotions designed specifically for this market. In doing so, we
hope to create customer loyalty and benefit from repeat visits by our customers.
Specific marketing programs to support this strategy include the Riviera
Player's Club and "V.I.P." services offered to repeat gaming customers. The
Player's Club is a promotion that rewards casino play and repeat visits to the
casino with various privileges and amenities such as cash bonuses, logo gift
items and invitations to special events, including free slot tournaments and
parties. Riviera Holdings has used the Player's Club promotion in its casino in
Las Vegas and, in its capacity as manager of the Riviera Black Hawk, will tailor
it for the Black Hawk/Central City market and implement it at our casino.
"V.I.P." services will be available to the highest level of players and will
include special valet and self-parking services, complimentary food and
entertainment offerings and special events specifically designed for this group
of customers.
We believe that we will benefit from strong "walk-in" traffic due to the
proximity of our casino to the Colorado Central Station and the Isle of Capri
Casino. We intend to develop specific marketing programs designed to attract
these "walk-in" customers. We further intend to emphasize quality food and
beverage amenities with customer friendly service as a marketing tool. In
addition, we will provide entertainment programs designed to meet the tastes of
the Black Hawk/Central City market, such as live music performances by popular
regional and national groups.
We also intend to utilize proven database marketing techniques previously
implemented by Riviera Holdings at its casino in Las Vegas. Approximately two to
three months prior to opening, we expect to begin to solicit members for our
Players Club using direct mail advertising. Once our casino is opened to the
public, the database will be primarily derived from information supplied by the
Players Club, which will help us to identify our best customers by reference to
levels of play and frequency of visits. We plan to rely on database marketing in
order to best identify target customer segments of the population and to tailor
the casino's promotions and amenities to our core group of customers. We will
use the current database maintained by Riviera Hotel & Casino in Las Vegas to
identify and stratify slot players living in Colorado for appropriate
incentives. Approximately 7,000 slot players have been identified as of
September 30, 1999. We will establish a bus program that will offer bus patrons
incentives directed specifically to them with an accelerated award program based
on levels of play. In addition, we plan to promote our casino by advertising in
newspapers and on billboards in the local areas.
Competition
The Black Hawk/Central City gaming market is characterized by intense
competition. The primary competitive factors in the market are location,
availability and convenience of parking, number of slot machines and gaming
tables, types and pricing of non-gaming amenities, name recognition and overall
atmosphere. Our main competitors will be the larger gaming facilities,
particularly those with considerable on-site or nearby parking and established
reputations in the local market. These facilities have high-profile brand names
in the local market, including the Isle of Capri Casino, Harvey's Wagon Wheel
Casino Hotel, Colorado Central Station, Bullwhackers Black Hawk, Canyon Casino,
Fitzgeralds Casino, the Lodge at Black Hawk and Gilpin Hotel Casino. These
competitors have more gaming experience in the Black Hawk/Central City market
and some have greater financial resources than we do. Construction has also
begun on the "Mardi Gras" casino, which is expected to feature over 600 slot
machines, and on a hotel addition to the casino of one of our principal
competitors. Other projects have also been announced, proposed, discussed or
rumored for the Black Hawk/Central City market.
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We expect that the gaming facilities near the intersection of Main and
Mill Streets will provide significant competition to our casino. Colorado
Central Station, which has been the most successful casino in Colorado, is
located across the street from our casino and has approximately 700 slot
machines, 20 gaming tables and approximately 700 valet parking spaces. The Isle
of Capri Casino, operated by Casino America, which opened in December 1998, is
located directly across the street from our casino and features approximately
1,100 slot machines, 14 table games and 1,100 parking spaces.
Casinos offering hotel accommodations for overnight stay may have a
competitive advantage over our casino. The number of hotel rooms currently in
the Black Hawk/Central City market is approximately 170, with only two gaming
facilities providing hotel accommodations to patrons. These include Harvey's
Wagon Wheel Casino Hotel with approximately 120 rooms and the Lodge at Black
Hawk with approximately 50 rooms. In addition, the Isle of Capri Casino began
construction in 1999 of an approximately 240 room hotel on top of its recently
completed casino.
Customers now drive through Black Hawk to reach Central City. Central
City has proposed the development of a road directly connecting Central City and
Black Hawk with Interstate 70 which would allow customers to reach Central City
without driving by or through Black Hawk.
Currently, limited stakes gaming in Colorado is constitutionally
authorized in Central City, Black Hawk, Cripple Creek and two Native American
reservations in southwest Colorado. However, gaming could be approved in other
Colorado communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
We will also compete with other forms of gaming in Colorado, including lottery
gaming, and horse and dog racing as well as other forms of entertainment.
It is also possible that new forms of gaming could compete with our
casino. Currently, Colorado law does not authorize video lottery terminals.
However, Colorado law permits the legislature, with executive approval, to
authorize new types of lottery gaming, such as video lottery terminals. Video
lottery terminals are games of chance, similar to slot machines, in which the
player pushes a button that causes a random set of numbers or characters to be
displayed on a video screen. The player may be awarded a ticket, which can be
exchanged for cash or credit play. This form of gaming could compete with slot
machine gaming.
Design and construction summary
We have assembled what we believe to be a qualified team to design and
construct the Riviera Black Hawk.
o The Weitz Company, Inc. has been retained as general contractor to
build the Riviera Black Hawk. Based on industry sources, Weitz is
ranked among the top 50 building contractors in the United States
based on total revenues from general building and is the fifth largest
contractor in the State of Colorado. Weitz has extensive experience
building in mountainous terrain, including projects in Vail, Colorado
and Keystone, Colorado.
o Melick Associates, Inc. has been retained as the architects for the
Riviera Black Hawk. Melick Associates has experience with casino
projects in mountainous terrain, including projects in Black Hawk,
Central City and Cripple Creek.
o John Franzoi, Riviera Operating Corporation's Vice President of
Construction, is managing project development and construction for the
Riviera Black Hawk. Mr. Franzoi has a State of
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Nevada general contractors license and has over 30 years of experience
in the construction industry.
o Phillip Harris has been retained as our representative and
construction consultant for the Riviera Black Hawk project. Mr. Harris
is assisting Mr. Franzoi in monitoring the progress of the
construction of the Riviera Black Hawk. Mr. Harris is a construction
consultant with over 30 years construction experience, most recently
as Vice President and Operations Manager for GE Johnson Construction
Company.
We have entered into a construction contract with Weitz. The construction
contract provides that Weitz and various subcontractors will construct the
Riviera Black Hawk, including site development, excavation and construction of
the casino and parking garage.
We have also entered into an architectural contract with Melick
Associates for the architectural design of our casino. The architectural
contract covers architectural and interior design and specifications. Melick
Associates will administer the construction contract and coordinate and
integrate its work with the design build subcontractors.
The scope of permits and approvals required for the construction of our
casino is extensive and includes state and local land use permits, excavation,
building and zoning permits, architectural approvals and approval of street and
traffic signals. To date, we have obtained all City of Black Hawk, State of
Colorado and federal permits required to construct our casino.
Management
Our manager, Riviera Gaming Management of Colorado, Inc., which is our
direct corporate parent and an indirect, wholly-owned subsidiary of Riviera
Holdings, will manage the operations of our casino. We have entered into a
management contract for the provision of these management services.
Intellectual property
We have entered into a license agreement with Riviera Operating
Corporation, a subsidiary of Riviera Holdings, which permits us to use the
trademark "Riviera" and other trademarks and logos in connection with our casino
on a royalty free basis.
Property
Our casino is being constructed on a 71,000 square foot (1.63 acres)
parcel of land in Black Hawk, Colorado, which we own. We have no other
properties.
Employees
We anticipate that when the Riviera Black Hawk opens, it will have an
average of approximately 350 full-time equivalent employees, with the highest
number of employees expected during the summer season.
Legal proceedings
We are not a party to any litigation.
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Riviera Holdings Corporation
Riviera Holdings, through its wholly-owned subsidiaries, owns and
operates the Riviera Hotel & Casino located on the Las Vegas Strip. Opened in
1955, the Riviera Hotel & Casino is situated on a 26-acre site located across
the Strip from Circus Circus and across Paradise Road from the Las Vegas Hilton
and the Las Vegas Convention Center.
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GAMING AND LIQUOR REGULATORY MATTERS
Summary
In general we, Riviera Holdings, our principal executive officers and those
of Riviera Holdings, and any of our employees who will be involved in our gaming
operations, will be required to be licensed or found suitable for licensure by
the Colorado Gaming Commission. Colorado also requires that significant
stockholders of 5% or more of Riviera Holdings be certified as suitable for
licensure. We pay the investigation costs. If any officer, director or employee
were found to be unsuitable for licensure by the Colorado Gaming Commission, we
would have to replace that person. If the Colorado Gaming Commission objected to
our licensure or that of Riviera Holdings or its significant stockholders, we
might be forced to sell our interest in Riviera Black Hawk and pay off the notes
to the extent of the net sale proceeds. If the objection of the Colorado Gaming
Commission related to licensure or suitability for licensure of any of Riviera
Holdings' significant stockholders, Riviera Holdings might attempt to purchase
or arrange for the purchase of the Riviera Holdings shares owned by the
stockholder to which the Colorado Gaming Commission objected, but Riviera
Holdings' ability to make such purchase is limited and it is uncertain whether
Riviera Holdings could arrange for such stock repurchase. At present, we have no
reason to believe that we will have any problem with respect to licensure by
Colorado.
Background
Pursuant to an amendment to the Colorado Constitution, limited stakes
gaming became lawful in the cities of Central City, Black Hawk and Cripple Creek
on October 1, 1991. Limited stakes gaming means a maximum single bet of five
dollars on slot machines and in the card games of blackjack and poker.
Under the Colorado Amendment, no more than 35% of the square footage of
any building and no more than 50% of any one floor of any building may be used
for limited stakes gaming. Persons under the age of 21 cannot participate in
limited stakes gaming. The Colorado Amendment also prohibits limited stakes
gaming between the hours of 2:00 a.m. and 8:00 a.m., and allows limited stakes
gaming to occur in establishments licensed to sell alcoholic beverages.
Further, the Colorado Amendment provides that, in addition to any other
applicable license fees, up to a maximum of 40% of the total amounts wagered
less payouts to players may be payable by a licensee for the privilege of
conducting limited stakes gaming.
Such percentage is to be established by the Colorado Commission on July 1
annually.
Regulatory Structure
The Colorado Act subjects the ownership and operation of limited stakes
gaming facilities in Colorado to extensive licensing and regulation by the
Colorado Commission. The Colorado Commission has full and exclusive authority to
promulgate, and has promulgated, rules and regulations governing the licensing,
conducting and operating of limited stakes gaming. The Colorado Act also created
the Colorado Division of Gaming within the Colorado Revenue Department to
license, regulate and supervise the conduct of limited stakes gaming in
Colorado. The division is supervised and administered by the Director of the
Division of Gaming.
Gaming licenses
The Colorado Commission may issue:
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o slot machine or distributor,
o operator,
o retail gaming,
o support and
o key employee gaming licenses.
The first three licenses require annual renewal by the Colorado Commission.
Support and key employee licenses are issued for two year periods and are
renewable by the Division Director. The Colorado Commission has broad discretion
to condition, suspend for up to six months, revoke, limit or restrict a license
at any time and also has the authority to impose fines.
An applicant for a gaming license must complete comprehensive application
forms, pay required fees and provide all information required by the Colorado
Commission and the Division of Gaming. Prior to licensure, applicants must
satisfy the Colorado Commission that they are suitable for licensing. Applicants
have the burden of proving their qualifications and must pay the full cost of
any background investigations. There is no limit on the cost of such background
investigations.
Gaming employees must hold either a support or key employee license.
Every retail gaming licensee must have a key employee licensee in charge of all
limited stakes gaming activities when limited stakes gaming is being conducted.
The Colorado Commission may determine that a gaming employee is a key employee
and, require that such person apply for a key employee license.
A retail gaming license is required for all persons conducting limited
stakes gaming on their premises. In addition, an operator license is required
for all persons who engage in the business of placing and operating slot
machines on the premises of a retailer. However, a retailer is not required to
hold an operator license. No person may have an ownership interest in more than
three retail licenses.
The Colorado Regulations require that every officer, director, and
stockholder of private corporations or equivalent office or ownership holders
for non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater interest or controlling interest of a publicly traded
corporation or owners of an applicant or licensee shall be a person of good
moral character and submit to a full background investigation conducted by the
Division of Gaming and the Colorado Commission. The Colorado Commission may
require any person having an interest in a license to undergo a full background
investigation and pay the cost of investigation in the same manner as an
applicant.
Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest, association, or agreement with or
relationship to a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant also may jeopardize the licensee's license or the applicant's
application. A license approval may be conditioned upon the termination of any
relationship with unsuitable persons. A person may be found unsuitable because
of prior acts, associations or financial conditions. Acts that would lead to a
finding of unsuitability are those that would violate the Colorado Act or the
Colorado Regulations or that contravene the legislative purpose of the Colorado
Act.
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Duties of licensees
An applicant or licensee must report to the Division of Gaming or
Colorado Commission all leases not later than 30 days after the effective date
of the lease. Also, an applicant or a license, upon the request of the Colorado
Commission or the Division Director, must submit copies of all written gaming
contracts and summaries of all oral gaming contracts to which it is or intends
to become a party. The Division Director or the Colorado Commission may require
changes in the lease or gaming contract before an applicant is approved or
participation in such agreement is allowed or may require termination of the
lease or gaming contract.
The Colorado Amendment and the Colorado Regulations require licensees to
maintain detailed records that account for all business transactions. Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement authorities. The Colorado Regulations also establish
extensive playing procedures and rules of play for poker, blackjack and slot
machines. Retail gaming licenses must adopt comprehensive internal control
procedures. Such procedures must be approved in advance by the Division of
Gaming and include the areas of accounting, surveillance, security, cashier
operations, key control and fill and drop procedures, among others. No gaming
devices may be used in limited stakes gaming without the approval of the
Division Director or the Colorado Commission.
Licensees have a continuing duty to immediately report to the Division of
Gaming the name, date of birth and social security number of all persons who
obtain an ownership, financial or equity interest in the licensee of 5% or
greater, who have the ability to control the licensee, who have the ability to
exercise significant influence over the licensee or who loan any money or other
thing of value to the licensee. Licensees must report to the Division of Gaming
all licenses, and all applications for licenses, in foreign jurisdictions.
With limited exceptions applicable to licensees that are publicly traded
entities, no person may sell, lease, purchase, convey or acquire any interest in
a retail gaming or operator license or business without the prior approval of
the Colorado Commission.
All agreements, contracts, leases, or arrangements in violation of the
Colorado Amendment, the Colorado Act or the Colorado Regulations are void and
unenforceable.
Taxes, fees and fines
The Colorado Amendment requires an annual tax of up to 40% on the total
amount wagered less all payouts to players. With respect to games of poker, the
tax is calculated based on the sums wagered which are retained by the licensee
as compensation. Effective July 1 of each year, the Colorado Commission
establishes the gaming tax for the following 12 months. Currently, the gaming
tax is:
o .25% on the first $2 million of these amounts;
o 2% on amounts from $2 million to $4 million;
o 4% on amounts from $4 million to $5 million;
o 11% on amounts from $5 million to $10 million;
o 16% on amounts from $10 million to $15 million; and
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o 20% on amounts over $15 million.
The municipality of Black Hawk assesses an annual device fee of $750 per
device. There is no statutory limit on state or city device fees, which may be
increased at the discretion of the Colorado Commission or the city. In addition,
a business improvement fee of as much as $102 per device and a transportation
authority device fee of $77 per device also may apply depending upon the
location of the licensed premises in Black Hawk. The current annual business
improvement fee is $89.04.
Black Hawk also imposes taxes and fees on other aspects of the businesses
of gaming licensees, such as parking, alcoholic beverage licenses and other
municipal taxes and fees. Significant increases in these fees and taxes, or the
imposition of new taxes and fees, may occur.
Violation of the Colorado Gaming Act or the Colorado Regulations
constitutes a class 1 misdemeanor which may subject the violator to fines or
incarceration or both. A licensee who violates the Colorado Gaming Act or
Colorado Regulations is subject to suspension of the license for a period of up
to six months, fines or both, or to license revocation.
Requirements for publicly traded corporations
The Colorado Commission has enacted Rule 4.5, which imposes requirements
on publicly traded corporations holding gaming licenses in Colorado and on
gaming licenses owned directly or indirectly by a publicly traded corporation,
whether through a subsidiary or intermediary company. The term "publicly traded
corporation" includes corporations, firms, limited liability companies, trusts,
partnerships and other forms of business organizations. Such requirements
automatically apply to any ownership interest held by a publicly traded
corporation, holding company or intermediary company thereof, where the
ownership interest directly or indirectly is, or will be upon approval of the
Colorado Commission, 5% or more of the entire licensee. In any event, if the
Colorado Commission determines that a publicly traded corporation, or a
subsidiary, intermediary company or holding company has the actual ability to
exercise influence over a licensee, regardless of the percentage of ownership
possessed by said entity, the Colorado Commission may require the entity to
comply with the disclosure regulations contained in Rule 4.5.
Under Rule 4.5, gaming licensees, affiliated companies and controlling
persons commencing a public offering of voting securities must notify the
Colorado Commission within 10 days of the initial filing of a registration
statement with the Securities and Exchange Commission. Licensed publicly traded
corporations are also required to send proxy statements to the Division of
Gaming within 5 days after their distribution. Licensees to whom Rule 4.5
applies must include in their charter documents provisions that: restrict the
rights of the licensees to issue voting interests or securities except in
accordance with the Colorado Gaming Act and the Colorado Regulations; limit the
rights of persons to transfer voting interests or securities of licensees except
in accordance with the Colorado Gaming Act and the Colorado Regulations; and
provide that holders of voting interests or securities of licensees found
unsuitable by the Colorado Commission may, within 60 days of such finding of
unsuitability, be required to sell their interests or securities back to the
issuer at the lesser of the cash equivalent of the holders' investment or the
market price as of the date of the finding of unsuitability. Alternatively, the
holders may, within 60 days after the finding of unsuitability, transfer the
voting interests or securities to a suitable person, as determined by the
Colorado Commission. Until the voting interests or securities are held by
suitable persons, the issuer may not pay dividends or interest, the securities
may not be voted, they may not be included in the voting or securities of the
issuer, and the issuer may not pay any remuneration in any form to the holders
of the securities.
Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial
ownership of
o 5% or more of any class of voting securities of a publicly traded
corporation that is required to include in its articles of
organization the Rule 4.5 charter language provisions or
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o 5% or more of the beneficial interest in a gaming licensee directly or
indirectly through any class of voting securities of any holding
company or intermediary company of a licensee, referred to as
qualifying persons, shall notify the Division of Gaming within 10 days
of such acquisition, are required to submit all requested information
and are subject to a finding of suitability as required by the
Division of Gaming or the Colorado Commission. Licensees also must
notify any qualifying persons of these requirements. A qualifying
person other than an institutional investor whose interest equals 10%
or more must apply to the Colorado Commission for a finding of
suitability within 45 days after acquiring such securities. Licensees
must also notify any qualifying persons of these requirements. Whether
or not notified, qualifying persons are responsible for complying with
these requirements.
A qualifying person who is an institutional investor under Rule 4.5 and
who individually or in association with others, acquires, directly or
indirectly, the beneficial ownership of 15% or more of any class of voting
securities must apply to the Colorado Commission for a finding of suitability
within 45 days after acquiring such interests.
The Colorado Regulations also provide for exemption from the requirements
for a finding of suitability when the Colorado Commission finds such action to
be consistent with the purposes of the Colorado Amendment.
Pursuant to Rule 4.5, persons found unsuitable by the Colorado Commission
must be removed from any position as an officer, director, or employee of a
licensee, or from a holding or intermediary company. Such unsuitable persons
also are prohibited from any beneficial ownership of the voting securities of
any such entities. Licensees, or affiliated entities of licensees, are subject
to sanctions for paying dividends or distributions to persons found unsuitable
by the Colorado Commission, or for recognizing voting rights of, or paying a
salary or any remuneration for services to, unsuitable persons. Licensees or
their affiliated entities also may be sanctioned for failing to pursue efforts
to require unsuitable persons to relinquish their interest. The Colorado
Commission may determine that anyone with a material relationship to, or
material involvement with, a licensee or an affiliated company must apply for a
finding of suitability or must apply for a key employee license.
Alcoholic Beverage Licenses
The sale of alcoholic beverages in gaming establishments is subject to
strict licensing, control and regulation by state and local authorities.
Alcoholic beverage licenses are revocable and nontransferable. State and local
licensing authorities have full power to limit, condition, suspend for as long
as six months or revoke any such licenses. Violation of state alcoholic beverage
laws may constitute a criminal offense resulting in incarceration or fines or
both.
There are various classes of retail liquor licenses which may be issued
under the Colorado Liquor Code. A gaming licensee may sell malt, vinous or
spirituous liquors only by the individual drink for consumption on the premises.
Even though a retail gaming licensee may be issued various classes of retail
liquor licenses, such gaming licensee may only hold liquor licenses of the same
class. An application for an alcoholic beverage license in Colorado requires
notice, posting and a public hearing before the local liquor licensing authority
prior to approval of the same. The Colorado Department of Revenue's Liquor
Enforcement Division must also approve the application.
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Riviera Black Hawk Licenses
Currently, no gaming license in Colorado has been granted in connection
with the Riviera Black Hawk. However, an application for a hotel and restaurant
liquor license has been approved by the local licensing authority and the State
Liquor Enforcement Division. The liquor license will issue upon the granting of
a certificate of occupancy. Applications for key employee gaming licenses have
also been made. Associated Person applications have been submitted for the
officers and directors of Riviera Holdings as well as some of the affiliated
companies as required by the Division Director. Additional Associated Person,
Key Employee and support license applications will have to be made and approved
prior to the opening of the casino.
Before our casino can obtain the final approval of the Colorado
Commission, stockholders of Riviera Holdings who own more than 5% of its common
stock and the person(s) with investment power over the investment must be found
suitable by the Colorado Commission. Five of Riviera Holdings' largest
stockholders have submitted information to the Colorado Commission for the
purpose of establishing suitability for licensing or are seeking to have the
person(s) with investment power over the investment file associated person
applications in Colorado. Based upon our discussions with the staff of the
Division of Gaming, we are optimistic such stockholders will not present a
problem with the Colorado Commission.
National Gambling Impact Study Commission Report
In 1996, Congress created the National Gambling Impact Study Commission
to study the economic and social impact of all forms of gambling in the United
States. It held hearings, and on June 18, 1999, presented its final report. The
report recommended, among other things, that the regulation of gambling continue
to be the responsibility of the states, except for Internet and Indian issues;
that Internet gambling be banned; that there be increased federal regulation of
Indian gambling; and that Congress direct other agencies to conduct studies of
gambling as part of their regular research. The report also called upon state
and local policy makers to consider a moratorium on new or expanded forms of
gambling in their jurisdictions, pending further study of gambling. The
recommendations of the report are not binding on any governmental body, but
portions of the report are likely to be cited, in both Congress and in state
legislatures, by those who are opposed to the presence or expansion of gambling
and who are seeking additional limitation, regulation, or taxation of gambling
facilities or operations that could have an adverse impact on the gaming
industry in general and on our business, in particular.
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MATERIAL AGREEMENTS
Construction Contract
We have entered into a construction contract for the construction of the
Riviera Black Hawk. The construction contract provides for the construction of a
casino, parking garage, associated site work and all floor coverings and food
service equipment at a price of $27.6 million, including a contingency allowance
of $0.5 million. The construction cost is fully supported by a payment and
performance bond obtained by the general contractor, Weitz, who is also required
to provide comprehensive public liability insurance, including contractual
liability coverage, in the amount of $2.0 million plus umbrella coverage in the
amount of $20.0 million. As required by the construction contract, we have
obtained builder's all risk insurance to insure against damage to the work in
place during construction. The price is subject to decrease if cost savings can
be achieved during construction, and is subject to material increase if:
o there are changes to the plans and specifications;
o work is delayed due to actions of the owner;
o there are labor disputes or work stoppages; or
o there are natural disasters.
Offsite improvements, permit fees and the cost of independent testing,
furnishings and finish work, and similar items, are excluded from the
construction contract and will be completed by us under separate contracts.
Work under the construction contract has commenced, and approximately
$22.2 million, or 80% of the total budget, had been expended as of September
30, 1999. The construction contract provides for substantial completion of the
casino project on or before January 15, 2000, subject to extensions due to
adverse weather, acts of God, or other causes outside of the general
contractor's control as provided in the construction contract. To discourage
delays, liquidated damages will be payable by the general contractor for each
day that substantial completion is delayed past the scheduled substantial
completion date, as it may be extended under the construction contract, as
follows:
o no penalties if the casino project is substantially completed on or
before January 31, 2000;
o $10,000 per day for each day from February 1, 2000, through February
15, 2000, that the casino project is not substantially completed after
January 31, 2000; and
o an additional $15,000 for each day from February 15, 2000, through
March 31, 2000, that the casino project is not substantially
completed.
In addition, to encourage early completion of the casino, incentive fees will be
payable to the general contractor. Specifically, the construction contract
provides:
o if Weitz achieves substantial completion of the project on or after
December 29, 1999, but prior to January 4, 2000, Weitz's lump sum fee
shall be increased by $10,000 for each day that the project is
substantially complete prior to January 4, 2000; and
o if Weitz achieves substantial completion of the project any time
before December 29, 1999, Weitz's lump sum fee shall be increased by
$15,000 for each day the project is substantially
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complete prior to December 29, 1999, and $10,000 for each day the
project is substantially complete between December 29, 1999, and
January 4, 2000.
Architectural Contract
We have entered into an architectural contract with Melick Associates for
the provision of architectural and interior design and specifications for the
casino project at a fee of approximately $1.0 million. Pursuant to the
architectural contract, the architect will also provide structural and
engineering, food service design, water proofing consultants, elevator/escalator
consultants and landscape design. However, the architect is not responsible for
the work of independent electrical and mechanical design build subcontractors.
The architect will administer the construction contract and coordinate its work
with the construction subcontractors. The architect has provided professional
liability insurance in the amount of $1.0 million per occurrence, $2.0 million
aggregate with a $10,000 deductible, and damages under the architectural
contract have been limited to the amount of $1.0 million.
Management Agreement
We have entered into a management agreement with our manager, Riviera
Gaming Management of Colorado, Inc., which will end after the tenth full year
audited financial statements are available after the opening of our casino. Our
manager will have the option of extending the term for up to four additional
terms of five years each by giving 180 days written notice.
The manager will manage the Riviera Black Hawk in a manner reasonably
consistent with the standards and procedures exercised by other casino operators
in Black Hawk, Colorado. Our manager will supervise the hiring of all personnel
employed at the casino, who will be the employees of Riviera Black Hawk. Our
manager, at its expense, will supply the level of its own staffing that is
required to carry out the supervision of a full complement of executives
employed and paid by the Riviera Black Hawk.
Our manager may provide goods and services, including centralized
computer systems, service bureau payroll/personnel systems, advertising agency
services, centralized purchasing, licensed promotions, trademarks, service
marks, legal services and other similar services on a competitive price/fee
basis.
The management fees will consist of a revenue fee and a performance fee.
The revenue fee will be based on 1% of net revenues and is payable quarterly in
arrears. For purposes of computing the revenue fee, net revenues is equal to
gross revenues less food and beverage services furnished without charge to
customers, but the retail value of which is included in revenue and is then
deducted as promotional allowances. The performance fee will be based on the
following percentages of EBITDA:
o 10% of EBITDA from $5 million to $10 million;
o 15% of EBITDA from $10 million to $15 million; and
o 20% of EBITDA in excess of $15 million.
The performance fee will be paid based on the preceding quarter's EBITDA in
quarterly installments subject to year-end adjustment. For these purposes,
EBITDA is earnings before interest, taxes, depreciation and amortization, whose
components are based on generally accepted accounting principles.
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If there is any default under the management agreement, our manager will
not be entitled to receive management fees, but our manager will still be
entitled to payment for inter-company goods and services.
Intellectual Property License Agreement
We have entered into a royalty-free license agreement with Riviera
Operating Corporation, a subsidiary of Riviera Holdings, for the licensing of
the "Riviera" and other trademarks and trade names. The licensing agreement
terminates at the same time as the management agreement or earlier upon a change
in control of the Manager and, in either case, may be extended by the trustee up
to six months thereafter upon foreclosure of the notes.
Tax Sharing Agreement
Riviera Holdings is the parent of a group of companies which includes
ourselves and files consolidated federal income returns. Pursuant to the tax
sharing agreement, we pay Riviera Holdings an amount equal to our "separate tax
liability." Our separate tax liability is that amount of federal income tax that
we would owe if we were to file a tax return independent of the group. If the
calculation of our separate tax liability for any year results in a net
operating loss, Riviera Holdings will credit the amount of such loss against any
amount which we might otherwise have to pay to Riviera Holdings in any future
tax year, provided that we remain a part of the group. Our obligation to make
tax payments pursuant to the tax sharing agreement continues regardless of
whether there has been a default in the payment of the notes.
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MANAGEMENT
Executive Officers and Directors of Riviera Black Hawk, Inc.
Set forth below are the names, ages and position of each of our officers
and directors as of the date of this prospectus:
Name Age Position
William L. Westerman......67 Chairman of the Board of Directors and Chief
Executive Officer
Ronald P. Johnson.........50 President and Director
Duane R. Krohn............53 Chief Financial Officer, Secretary, Treasurer
and Director
The following information summarizes the business experience during at
least the past five years of each of our directors and executives:
William L. Westerman is our Chairman of the Board of Directors and Chief
Executive Officer and has held those positions since August 18, 1997. Mr.
Westerman has been the Chairman of the Board and Chief Executive Officer of
Riviera Holdings since February 1993. Mr. Westerman was a consultant to Riviera,
Inc., from July 1, 1991, until he was appointed Chairman of the Board and Chief
Executive Officer of Riviera, Inc., on January 1, 1992. From 1973 to June 30,
1991, Mr. Westerman was President and Chief Executive Officer of Cellu-Craft
Inc., a manufacturer of flexible packaging primarily for food products.
Alusuisse, a multi-national aluminum and chemical company, acquired Cellu-Craft
on June 30, 1989. On January 1, 1990, Mr. Westerman was appointed President of
Alusuisse Flexible Packaging, Alusuisse's wholly-owned U.S. subsidiary engaged
in the manufacture of flexible packaging for food and pharmaceutical products.
Additionally, Mr. Westerman was named a member of the team responsible for all
of Alusuisse's multi-national packaging operations with annual sales volume in
excess of $1 billion. Mr. Westerman resigned from all his positions with
Alusuisse on June 30, 1991. Mr. Westerman has undergraduate and graduate degrees
in engineering from Lehigh University and from the University of Ohio,
respectively.
Ronald P. Johnson is our President and a Director and has held those
positions since February 1999. Mr. Johnson became Vice President of Gaming
Operations of Riviera Operating Corporation in September 1994, and Executive
Vice President of Gaming Operations of Riviera Operating Corporation on July 1,
1998. Mr. Johnson became Director of Slots of Riviera Operating Corporation on
June 30, 1993, and was elected Vice President of Slot Operations and Marketing
on April 26, 1994. Mr. Johnson was Vice President -- Slot Operations and
Marketing of Riviera, Inc., from April 1991 until June 30, 1993. Prior to
joining Riviera, Inc., Mr. Johnson held slot management positions with Sands
Hotel & Casino (1989-1991) and Bally's Grand Las Vegas (1986-1989). In addition
to over 12 years of experience in casino operations, Mr. Johnson has 10 years of
experience, serving from 1976 to 1986, in various financial marketing and
administrative management positions in the slot manufacturing industry with
Bally Distributing, Co., International Game Technology and J&T, Inc.
Duane R. Krohn, CPA, is our Chief Financial Officer, Secretary, Treasurer
and a Director and has held those positions since February 1999. Mr. Krohn
assumed the position of Treasurer of Riviera Holdings and Riviera Operating
Corporation on June 30, 1993, and was elected Vice President of Finance of
Riviera Operating Corporation on April 26, 1994, and Executive Vice President of
Finance of Riviera Operating Corporation on July 1, 1998. Mr. Krohn was
initially employed by Riviera, Inc., in April 1990, as Director of Corporate
Finance and served as Vice President -- Finance from March 1992 to June 30,
1993. Mr. Krohn served as Chief Financial Officer of Imperial Palace, Inc., a
casino/hotel operator in Las Vegas, from February 1987 to March 1990. Prior to
1987, Mr. Krohn was Chief Financial Officer of the Mint and the Dunes in Las
Vegas, Nevada, and Bally's Park Place in Atlantic City, New Jersey.
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Management of the Riviera Black Hawk
We have entered into a management agreement with our manager, Riviera
Gaming Management of Colorado, Inc., under which the manager will manage the
daily operations of Riviera Black Hawk. The manager has hired for Riviera Black
Hawk Thomas Guth and James Davey as the General Manager and Director of Slot
Operations, respectively.
In addition, we have recruited four other key executives for the
positions of Director of Finance, Director of Training and Compliance,
Facilities Director and Director of Security and Surveillance. Current
management represents a blend of seasoned management experience from both the
Black Hawk/Central City and Las Vegas markets. The following is a brief summary
of the business experience of Thomas Guth and James Davey:
Under a letter agreement, dated January 15, 1999, Mr. Guth will be in
charge of coordinating pre-opening functions and will be the senior manager on
site after the casino opens. Mr. Guth has over 20 years of casino marketing and
casino operations experience. Mr. Guth most recently was Director of Corporate
Special Event Marketing for the Boyd Group from September 1998 to March 1999.
From July 1992 to May 1998, Mr. Guth was Vice President, Director of Marketing
for the Aladdin Hotel & Casino. From 1989 to 1992, Mr. Guth was Director of
Special Events/Casino Programs for the Riviera Hotel & Casino. Mr. Guth also has
11 years of experience in casino operations with the Sahara Tahoe, Golden Nugget
and Harrah's casinos.
Under a letter agreement, dated January 9, 1999, Mr. Davey will be in
charge of gaming operations and will report to Mr. Guth. Mr. Davey has over 19
years of experience in slot operations management. From May 1997 to January
1999, Mr. Davey was Assistant Slot Director for the Four Queens Casino and
Hotel. From December 1996 to April 1997, Mr. Davey was the Account Executive for
Casino Data Systems. From August 1995 to May 1996, Mr. Davey was the Account
Executive for Mikohn Gaming. From November 1994 to April 1995, Mr. Davey was the
Assistant Slot Manager for the Imperial Palace Casino.
Neither of such agreements has a fixed term. Both Messrs. Guth and Davey
have been reimbursed for their relocation expenses and will participate in our
life insurance, medical, 401(K) and profit-sharing employee benefit plans at our
cost.
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PRINCIPAL STOCKHOLDERS
We are an indirect wholly-owned subsidiary of Riviera Holdings. The
common stock of Riviera Holdings is traded on the American Stock Exchange. The
table below sets forth information regarding the beneficial ownership of the
common stock of Riviera Holdings as of October 14, 1999, by (1) each person who,
to our knowledge, beneficially owns more than 5% of such common stock, (2) our
directors and executive officers and (3) all directors and executive officers of
Riviera Holdings and its subsidiary, Riviera Operating Corporation. Each person
listed below has sole voting and investment power for the shares set forth
opposite that person's name unless otherwise indicated.
Shares Beneficially Owned+
Name Number Percentage
- - ---- ------------ ------------
William L. Westerman(1)(2)............................ 584,200 12.1%
Ronald P. Johnson(1)(3)............................... 49,500 1.1
Duane R. Krohn(1)(4).................................. 41,800 *
Robert Vannucci(1)(5)................................. 28,668 *
Jerome P. Grippe(1)(6)................................ 26,418 *
Robert R. Barengo(1)(7)............................... 9,380 *
Richard L. Barovick(1)(8)............................. 10,400 *
James N. Land, Jr.(1)................................. 1,500 *
Keyport Life Insurance Co.(9)......................... 857,160 18.9
SunAmerica Life Insurance Company(10)................. 675,920 14.9
Morgens Entities:(11)
Betje Partners...................................... 29,360 0.6
Morgens Waterfall Income Partners................... 43,920 1.0
Phoenix Partners, L.P............................... 79,440 1.8
Restart Partners, L.P............................... 177,997 3.9
Restart Partners II, L.P............................ 374,374 8.3
Restart Partners III, L.P........................... 298,600 6.6
Endowment Restart LLC............................... 261,109 5.8
------- ----
Total Morgens Entities........................... 1,264,800 28.0
James D. Bennett(12).................................. 497,065 11.0
All executive officers and directors as a group
(11 persons)(2)(3)(4)(5)(6)(7)........................ 808,013 16.3
- - ----------
+ Based on the number of outstanding shares of Riviera Holdings' common stock
on October 14, 1999 and the shares beneficially owned by such persons on
October 14, 1999.
* Less than 1%.
(1) The address for each director and officer of Riviera Black Hawk, Inc. or
Riviera Holdings is c/o Riviera Holdings Corporation, 2901 Las Vegas
Boulevard South, Las Vegas, Nevada 89109.
(2) Includes 320,000 shares which may be acquired within 60 days of October 14,
1999, upon the exercise of outstanding options.
(3) Includes 14,500 shares which may be acquired within 60 days of October 14,
1999, upon the exercise of outstanding options.
(4) Includes 14,500 shares which may be acquired within 60 days of October 14,
1999, upon the exercise of outstanding options.
(5) Includes 14,500 shares which may be acquired within 60 days of October 14,
1999, upon the exercise of outstanding options.
(6) Includes 12,250 shares which may be acquired within 60 days of October 14,
1999, upon the exercise of outstanding options.
(7) Includes 2,400 shares which may be acquired within 60 days of October 14,
1999, upon the exercise of outstanding options.
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(8) Includes 400 shares which may be acquired within 60 days of October 14,
1999, upon the exercise of outstanding options.
(9) The address for Keyport Life Insurance Company is 125 High Street, Boston,
Massachusetts 02110. Stein Roe, an affiliate of Keyport, is Keyport's
investment advisor, and, as such, has the power and authority to direct the
disposition of the securities, and accordingly, could be deemed to be a
"beneficial" owner within the meaning of Rule 13d-3 of the Exchange Act.
Stein Roe, however, disclaims actual beneficial ownership of such
securities.
(10) The address for SunAmerica Life Insurance Company is One Sun America
Center, Century City, California 90067. On October 14, 1999, Riviera
Holdings agreed to purchase 81,000 shares of its stock from SunAmerica Life
Insurance Co. After giving effect to this transaction, SunAmerica Life
Insurance Co. will beneficially own 675,920 shares.
(11) The address of Morgens Waterfall is 10 East 50th Street, New York, New York
10022. Morgens Waterfall or its principals are either investment advisors
to, or trustees or general partners of, the eight entities listed in the
above table that are the owners of common stock of Riviera Holdings.
Morgens Waterfall or its principals have the power and authority to direct
this disposition of these securities and, accordingly, could be deemed to
be "beneficial" owners within the meaning of Rule 13d-3 of the Exchange
Act. Each of Morgens Waterfall, its principals and these eight entities,
however, disclaims beneficial ownership with respect to any securities not
actually beneficially owned by it.
(12) Includes (a) 323,003 shares held by Restructuring Capital Associates, L.P.
and Bennett Restructuring Fund, L.P. and (b) 161,262 shares held by Benett
Offshore Restructuring Fund, Inc. The address for Mr. Bennett is c/o
Restructuring Capital Associates, L.P. is 450 Park Avenue, New York, New
York 10022.
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RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the sale of the existing notes, Riviera Holdings had contributed
$30.1 million to us for the purchase of the land on which the Riviera Black Hawk
is being constructed; and for construction costs under the construction
contract. Of the $30.1 million, Riviera Holdings has advanced $20.0 million in
cash equity contributions, excluding capitalized interest, and the remaining
$10.1 million was reimbursed to Riviera Holdings from the proceeds of the sale
of the existing notes.
We have entered into a management agreement with Riviera Gaming
Management of Colorado, Inc. Under this agreement, Riviera Gaming Management of
Colorado, Inc. will manage the operations of our casino.
We have entered into a license agreement with Riviera Operating
Corporation, a subsidiary of Riviera Holdings. Under this agreement, we have the
right to use the "Riviera" name and other trademarks, copyrights and trade names
in connection with our casino.
We have entered into a tax sharing agreement with Riviera Holdings. Under
this agreement, Riviera Holdings will file consolidated federal income tax
returns for us as part of a group of companies and we have agreed to pay Riviera
Holdings for our portion of the group's tax liability.
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DESCRIPTION OF NOTES
We issued $45.0 million 13% First Mortgage Notes due 2005 With Contingent
Interest under an indenture with IBJ Whitehall Bank & Trust Company, as trustee.
IBJ Whitehall Bank & Trust Company has assigned its interest under the indenture
to The Bank of New York. The terms of the indenture apply to the existing notes
and to the new notes. The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. The notes are secured obligations. The collateral
documents referred to under the caption "Security" define the terms of the
collateral that will secure the notes.
The following description is a summary of the selected provisions of the
indenture, the registration rights agreement and the collateral documents which
are deemed to be important to you. It does not restate any of those agreements
in their entirety. We urge you to read such documents because they, and not this
description, define your rights as holders of the notes.
Principal, Maturity and Interest
The notes issued in this offering and any additional notes subsequently
issued under the indenture will be treated as a single class for all purposes
under the indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. We will issue notes in denominations of
$1,000 and integral multiples of $1,000.
The notes will mature on May 1, 2005. Fixed interest on the notes will
accrue at the rate of 13% per annum and will be payable semi-annually in arrears
on May 1 and November 1, commencing on November 1, 1999. We will make each fixed
interest payment to the holders of record on the immediately preceding April 15
and October 15. Fixed interest will accrue from the date of original issuance,
or be computed on the basis of a 360-day year comprised of twelve 30-day months.
The notes will bear contingent interest after we begin operating.
Installments of accrued contingent interest will be payable semi-annually in
arrears on each interest payment date to the holders on the record date
applicable to the relevant interest payment date, unless all or a portion of the
installment is permitted to be deferred. We may defer payment of contingent
interest otherwise due and may continue to defer the payment of any installment
of contingent interest which has already been deferred if, and only to the
extent that:
o the payment of that portion of contingent interest will cause our
adjusted fixed charge coverage ratio for the four consecutive fiscal
quarters ending immediately prior to the applicable record date to be
less than 1.5 to 1.0 on a pro forma basis after giving effect to the
assumed payment of the contingent interest; and
o the principal amount of the notes corresponding to that contingent
interest has not then matured and become due and payable, whether at
stated maturity, upon acceleration, upon redemption, upon maturity of
repurchase obligation or otherwise.
Contingent interest that is deferred will become due and payable upon the
earlier of:
o the next succeeding interest payment date on which all or a portion of
that contingent interest is not permitted to be deferred; and
o the maturity of the corresponding principal amount of the notes,
whether at stated maturity, upon acceleration, upon redemption, upon
maturity of repurchase obligation or otherwise.
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The amount of contingent interest payable for any period will be reduced
pro rata for reductions in the outstanding principal amount of the notes prior
to the immediately preceding record date. No interest will accrue on any
contingent interest that is deferred and which does not become due and payable.
Each installment of contingent interest will be calculated to accrue:
o from, but not including, the most recent semiannual period for which
contingent interest has been paid or through which contingent interest
had been calculated and deferred; or
o if no installment of contingent interest has been paid or deferred,
from and including the date on which we become operating; to, and
including, the earlier of:
o the last day of the semiannual period immediately following the
semiannual period referred to above if the corresponding principal
amount of the notes has not become due and payable; or
o the date of payment if the corresponding principal amount of the notes
has become due and payable, whether at stated maturity, upon
acceleration, upon redemption, upon maturity of repurchase obligation
or otherwise.
Contingent interest will accrue daily on the principal amount of each
note outstanding:
o for any portion of an accrual period which consists of all or part of
a semiannual period that ends during such accrual period, 1/180 of the
contingent interest with respect to such principal amount for such
semiannual period until fully accrued; and
o for any other portion of an accrual period, 1/180 of the contingent
interest with respect to such principal amount for the semiannual
period that began and last ended after the date on which we began
operating.
Methods of Receiving Payments on the Notes
If a holder has given wire transfer instructions to us, we will pay all
principal, interest, premium and liquidated damages, if any, on that holder's
notes in accordance with those instructions. All other payments on notes will be
made at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless we elect to make interest payments by check mailed
to the holders at their addresses set forth in the register of holders.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. We may
change the paying agent or registrar without prior notice to the holders, and we
may act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or new notes in accordance with the indenture. We
are not required to transfer or exchange any note selected for redemption. Also,
we are not required to transfer or exchange any note for a period of 15 days
before a selection of notes to be redeemed.
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Security
The notes are secured by a first priority lien on the collateral which,
subject to permitted liens, includes:
o all funds and securities in the construction disbursement account, the
construction reserve account and the interest reserve account; and
o all of the real property comprising the Riviera Black Hawk; and
o all furniture, fixtures and equipment which are part of the Riviera
Black Hawk, other than furniture, fixtures and equipment acquired,
leased or refinanced through FF&E financing; and
o to the extent permitted by law, the construction contract, the
architect agreement, the completion capital commitment, the keep-well
agreement, the license agreement, the management agreement and other
agreements entered into us in connection with the development,
construction, ownership and operation of the Riviera Black Hawk; and
o all licenses and permits relating to the Riviera Black Hawk, other
than any gaming license or liquor license; and
o all of our accounts receivable, general intangibles, inventory and
other personal property, other than assets of our future unrestricted
subsidiaries.
The indenture contains a requirement that, after we are designated as a
restricted subsidiary of Riviera Holdings, the stock of all our then current and
future subsidiaries and the assets of our current and future restricted
subsidiaries must be pledged to secure the debt evidenced by the Riviera
Holdings indenture.
The security interests may be subordinate to mechanics' liens which may
have priority over the security interest on the real property comprising the
Riviera Black Hawk, including all additions, improvements and components related
to it. We have obtained title insurance on the property in favor of the trustee
which will insure against losses from the enforcement of mechanics' liens.
If an event of default occurs, the trustee may, in addition to any rights
and remedies available to it under the indenture and the collateral documents,
take such action as it deems advisable to protect and enforce its rights in the
collateral, including the institution of sale or foreclosure proceedings. The
proceeds received by the trustee from any sale or foreclosure will be applied
first to pay the expenses of the sale or foreclosure and fees or any other
amounts then payable to the trustee under the indenture, and thereafter to pay
amounts due and payable with respect to the notes.
The proceeds of any sale of collateral pursuant to the indenture and the
collateral documents following an event of default may not be sufficient to
satisfy payments due on the notes. In addition, the ability of the holders to
realize upon the collateral may be limited pursuant to gaming, bankruptcy and
other laws, all as described below.
Gaming Law Limitations on Foreclosure
The trustee's ability to foreclose upon the collateral will be limited by
relevant Colorado gaming laws. The assets which constitute gaming equipment may
only be sold to parties that are licensed or
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approved. Therefore, the practical value of realizing on the collateral may,
without the appropriate Colorado gaming approvals, be limited.
Bankruptcy Limitations on Foreclosure
The right of the trustee to repossess and dispose of collateral upon the
occurrence of an event of default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or
us prior to the trustee having repossessed and disposed of the collateral. Under
the Bankruptcy Code, a secured creditor such as the trustee is prohibited from
repossessing its security from a debtor in a bankruptcy case, or from disposing
of security repossessed from such debtor, without bankruptcy court approval. In
addition, the Bankruptcy Code permits the debtor to continue to retain and to
use collateral and the proceeds, products, offspring, rents or profits of such
collateral even though the debtor is in default under the applicable debt
instruments, provided that the secured creditor is given "adequate protection."
The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the secured
creditor's interest in the collateral and may include, if approved by the
bankruptcy court, cash payments or the granting of additional security for any
diminution in the value of the collateral as a result of the stay of
repossession or the disposition or any use of the collateral by the debtor
during the pendency of the bankruptcy case. The bankruptcy court has broad
discretionary powers in all these matters, including the valuation of the
collateral or any other collateral that may be substituted for it. In addition,
since the enforcement of the lien of the trustee in the collateral consisting of
cash, deposit accounts and cash equivalents may be limited in a bankruptcy
proceeding, the holders may not have any consent rights with respect to the use
of those funds by us during the pendency of the proceeding. In view of these
considerations, it is impossible to predict how long payments under the notes
could be delayed following commencement of a bankruptcy case, whether or when
the trustee could repossess or dispose of the collateral or whether or to what
extent holders would be compensated for any delay in payment or loss of value of
the collateral.
Completion Capital Commitment
Riviera Holdings has entered into a completion capital commitment in
favor of the trustee for the benefit of the holders providing that if:
o there are insufficient available funds to complete the development,
construction, equipping and opening of the Riviera Black Hawk so that
it is operating by May 31, 2000;
o we have provided the trustee and the independent construction
consultant with a written notice that it is unlikely that there will
be sufficient available funds to complete the development,
construction, equipping and opening of the Riviera Black Hawk so that
it is operating by May 31, 2000; or
o the independent construction consultant has provided the trustee and
us with a written notice that it is unlikely that there will be
sufficient available funds, excluding any additional revenues, to
complete the development, construction, equipping and opening of the
Riviera Black Hawk so that it is operating by May 31, 2000; and
o within 10 days of our receiving the notice, we have not provided
evidence satisfactory to the independent construction consultant that
there will be sufficient additional funds including any additional
revenues, to complete the development, construction, equipping and
opening of the Riviera Black Hawk so that it is operating by May 31,
2000;
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then Riviera Holdings will pay into the construction disbursement account cash
in the amounts and at such times as determined by the independent construction
consultant to be necessary to remedy the event; provided that the maximum
aggregate amount of all such payments is $10.0 million. The independent
construction consultant will set forth in a written notice to us its
determination of the amounts required to be contributed and the basis of its
determination. In addition, if the Riviera Black Hawk is not operating by May
31, 2000, Riviera Holdings will pay $10.0 million, less any amounts paid into
the construction disbursement account pursuant to the provisions just mentioned,
in cash into the construction disbursement account. Furthermore, Riviera
Holdings will similarly be required to pay $10.0 million, less any amounts paid
into the construction disbursement account pursuant to the provisions just
mentioned, in cash into the construction disbursement account upon:
o the commencement of a voluntary bankruptcy case by us on or prior to
May 31, 2000;
o the commencement of an involuntary bankruptcy case against us which is
not dismissed, bonded or discharged on or prior to the earlier of 60
days after the commencement and May 31, 2000; or
o the entry of an order for relief against us on or prior to May 31,
2000, under any bankruptcy law in effect at any time. Riviera Holdings
will not assert any defenses or setoffs to the payment of those
amounts.
Deposit Account Agreement
Pursuant to a deposit account agreement, dated as of June 3, 1999, among
Bank of America as deposit bank, Riviera Holdings and First American Title
Insurance Company, Riviera Holdings has deposited $5.0 million to insure First
American against mechanics lien claims against our Black Hawk property. If no
mechanics liens are outstanding 30 days after our casino opens, such $5.0
million deposit will be returned to Riviera Holdings.
Keep-Well Agreement
Riviera Holdings has entered into a keep-well agreement in favor of the
trustee for the benefit of the holders. The keep-well agreement provides that:
o if, at any time prior to the end of the fourth operating period, (a)
there are not sufficient funds in the interest reserve account to make
a payment of fixed interest on the notes and (b) we do not have
sufficient funds to make the payment of fixed interest, Riviera
Holdings will contribute cash to us in an amount necessary to enable
us to make such payment; provided that the amount of any such
contribution will be deducted from the amounts that Riviera Holdings
is required to contribute to us pursuant to the clause below until the
total amount of such contributions are deducted; and
o if our consolidated cash flow for an operating period is less than the
$9.0 million targeted consolidated cash flow for such period, Riviera
Holdings will contribute cash to us in an amount equal to the
difference; provided that the amount contributed with respect to any
operating period pursuant to the clause above will not exceed the
contribution limitation for such period and the amounts contributed
with respect to all operating periods will not exceed $10.0 million in
the aggregate. As used here, contribution limitation means the product
of $1.25 million and the number of fiscal quarters of Riviera Holdings
contained in the relevant operating period.
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Optional Redemption
At any time prior to May 1, 2001, we may redeem up to 35% of the
aggregate principal amount of notes issued under the indenture at a redemption
price of 113% of the principal amount thereof, plus accrued and unpaid interest
and liquidated damages, if any, to the redemption date, with the net cash
proceeds of a qualified public offering; provided that:
o at least 65% of the aggregate principal amount of notes issued under
the indenture remains outstanding immediately after the occurrence of
such redemption, excluding notes held by us; and
o the redemption must occur within 45 days of the date of the closing of
such qualified public offering.
On or after May 1, 2002, we may redeem all or a part of the notes upon
not less than 30 nor more than 60 days' notice, at the following redemption
prices, expressed as percentages of principal amount plus accrued and unpaid
interest and liquidated damages, if any, thereon, to the applicable redemption
date: if redeemed during the twelve-month period beginning on May 1, 2002 -
106.5%, the twelve-month period beginning on May 1, 2003 - 103.25% and at any
time after May 1, 2004 - 100%.
Gaming Redemption
If any gaming authority requires a holder or beneficial owner of notes to
be licensed, qualified or found suitable under any applicable gaming law and
such holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within 30 days after being requested to do so or such
lesser period as required by the gaming authority, or if such holder or
beneficial owner is notified by a gaming authority that it will not be licensed,
qualified or found suitable, we will have the right, at our option, to:
o require the holder or beneficial owner to dispose of such holder's or
beneficial owner's notes within 30 days or such lesser period as
required by the gaming authority of: the termination of the period
described above for the holder or beneficial owner to apply for a
license, qualification or finding of suitability; or receipt of the
notice from the gaming authority that the holder or beneficial owner
will not be licensed, qualified or found suitable by the gaming
authority; or
o redeem the notes of the holder or beneficial owner at a redemption
price equal to the lesser of the principal amount thereof or the price
at which the holder or beneficial owner acquired the notes, together
with, in either case, accrued and unpaid interest and liquidated
damages, if any, thereon to the earlier of the date of redemption or
such earlier date as is required by the gaming authority or the date
of the finding of unsuitability by the gaming authority, which may be
less than 30 days following the notice of redemption, if so ordered by
the gaming authority.
Immediately upon a determination by a gaming authority that a holder or
beneficial owner of notes will not be licensed, qualified or found suitable, the
holder or beneficial owner will not have any further rights with respect to the
notes to:
o exercise, directly or indirectly, through any person, any right
conferred by the notes; and
o receive any interest or any other distribution or payment with respect
to the notes, or any remuneration in any form from us for services
rendered or otherwise, except the redemption price of the notes.
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We are not required to pay or reimburse any holder or beneficial owner of
notes who is required to apply for such license, qualification or finding of
suitability for the costs relating thereto. Those expenses will be the
obligation of the holder or beneficial owner.
Mandatory Redemption
We are not required to make mandatory redemption or sinking fund payments
with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a change of control occurs, each holder will have the right to require
us to repurchase all or any part, equal to $1,000 or an integral multiple
thereof, of that holder's notes pursuant to a change of control offer on the
terms set forth in the indenture. In the change of control offer, we will offer
a change of control payment in cash equal to 101% of the aggregate principal
amount of notes repurchased plus accrued and unpaid interest and liquidated
damages, if any, thereon, to the date of purchase. We must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the notes as a result of a
change of control.
Change of control means the direct or indirect sale, lease, transfer,
conveyance or other disposition of all or substantially all of our properties or
assets. Since there is no precise established definition of substantially all
under applicable law, the ability of a holder of notes to require us to
repurchase such notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of our assets may be uncertain. Change of
control also includes the consummation of any transaction the result of which is
that any person other than one or more of our existing significant stockholders
and any of their affiliates, becomes the beneficial owner, directly or
indirectly, of
o more than 35% of the outstanding voting stock of the Riviera Holdings
and
o a greater percentage of the outstanding voting stock of Riviera
Holdings than is beneficially owned by the existing significant holder
holding the largest such percentage.
Our existing significant stockholders are Morgens Entities named in this
prospectus, Sun America Life Insurance Company and Keyport Life Insurance
Company.
Asset Sales
We will not consummate an asset sale unless:
o the Riviera Black Hawk is operating;
o we receive consideration at the time of such Asset Sale at least equal
to the fair market value of the assets or equity interests issued or
sold or otherwise disposed of;
o such fair market value is determined by our board and evidenced by a
resolution of the board set forth in an officers' certificate
delivered to the trustee; and
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o at least 80% of the consideration therefor received by us in the form
of cash or cash equivalents which will include
o any liabilities, as shown on our most recent balance sheet, other
than contingent liabilities and liabilities that are by their
terms subordinated to the notes, that are assumed by the
transferee of any such assets; and
o any securities, notes or other obligations received by us from
such transferee that, within 30 days of receipt, are converted by
us into cash, to the extent of the cash received in that
conversion.
Within 180 days after the receipt of any net proceeds from an asset sale,
we may apply such net proceeds to make a capital expenditure, improve real
property or acquire long-term assets that are used or useful in a line of
business permitted by the line of business covenant described below; provided
that we grant to the trustee, on behalf of the holders, a first priority
perfected security interest on any such property or assets acquired or
constructed with the net proceeds of any such asset sale.
Any such net proceeds that are not applied or invested as provided in the
preceding paragraph will constitute excess proceeds. When the aggregate amount
of excess proceeds exceeds $5.0 million, we will make an asset sale offer to all
holders the maximum principal amount of notes that may be purchased out of the
excess proceeds. The offer price in any asset sale offer will be equal to 100%
of principal amount plus accrued and unpaid interest and liquidated damages, if
any, to the date of purchase, and will be payable in cash. If any excess
proceeds remain after consummation of an asset sale offer, we may use such
excess proceeds for any purpose not otherwise prohibited by the indenture and
the collateral documents.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with each repurchase of notes
pursuant to an asset sale offer.
Finally, our ability to pay cash to the holders of notes upon a
repurchase may be limited by our existing financial resources.
Events of Loss
Within 360 days after any event of loss with respect to any collateral
with a fair market value, or replacement cost, if greater, in excess of $1.0
million, we may apply the net loss proceeds from such event of loss to the
rebuilding, repair, replacement or construction of improvements to the Riviera
Black Hawk, with no concurrent obligation to make any purchase of any notes;
provided that:
o we deliver to the trustee within 60 days of such event of loss a
written opinion from a reputable architect that the Riviera Black Hawk
with at least the minimum facilities can be rebuilt, repaired,
replaced or constructed and operating within 360 days of the event of
loss;
o an officers' certificate certifying that we have available from net
loss proceeds or other sources sufficient funds to complete the
rebuilding, repair, replacement or construction described above; and
o the net loss proceeds are less than $20.0 million.
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If the net loss proceeds to be used for rebuilding, repair, replacement or
construction exceed $5.0 million, then the net loss proceeds will be deposited
in the construction disbursement account and disbursed in accordance with the
procedures set forth in the cash collateral and disbursement agreement. Any Net
Loss Proceeds that are not reinvested or not permitted to be reinvested as
provided in the first sentence of this paragraph will be deemed excess loss
proceeds.
When the aggregate amount of excess loss proceeds exceeds $5.0 million,
we will make an event of loss offer to holders to purchase the maximum principal
amount of notes that may be purchased out of the excess loss proceeds, at a
purchase price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any,
thereon to the date of purchase. The date of purchase will not be less than 30
or more than 60 days from the date of the event of loss offer. If the aggregate
principal amount of notes tendered pursuant to an event of loss offer exceeds
the excess loss proceeds, the trustee will select the notes to be purchased in
the manner described below. If the aggregate amount of notes tendered pursuant
to any event of loss offer is less than the excess loss proceeds, we may,
subject to the other provisions of the indenture and the collateral documents,
use any remaining excess loss proceeds for general corporate purposes.
Pending any permitted rebuilding, repair, replacement or construction or
the completion of any event of loss offer, we will pledge to the trustee as
additional collateral any net loss proceeds or other cash on hand required for
such permitted rebuilding, repair, replacement or construction pursuant to the
terms of the collateral documents. These pledged funds will be released to us to
pay for or reimburse us for the actual cost of such permitted rebuilding,
repair, replacement or construction, or such event of loss offer, pursuant to
the terms of the collateral documents. Pending the final application of the net
loss proceeds, such proceeds will be invested in cash equivalents which will be
pledged to the trustee as security for the notes. We will grant to the trustee,
on behalf of the holders, a first priority lien, subject to permitted liens, on
any property or asset rebuilt, repaired, replaced or constructed with such net
loss proceeds on the terms set forth in the indenture and the collateral
documents.
The indenture also provides that with respect to any event of loss
pursuant to clause (4) of the definition of event of loss that has a fair market
value, or replacement cost, if greater, in excess of $5.0 million we will be
required to receive consideration at least
o equal to the fair market value, evidenced by a resolution of the board
set forth in an officers' certificate delivered to the trustee, of the
assets subject to the event of loss; and
o at least 90% of which is in the form of cash equivalents.
Excess Cash Purchase Offers
Within 120 days after each operating year, beginning with the first
operating year after the Riviera Black Hawk becomes operating, we will make an
excess cash flow offer to all holders to purchase the maximum principal amount
of notes that is an integral multiple of $1,000 that may be purchased with 50%
of excess cash flow in respect of the operating year then ended, at a purchase
price in cash equal to 101% of the principal amount of the notes to be
purchased, plus accrued and unpaid interest and liquidated damages, if any,
thereon to the date fixed for the closing of the excess cash flow offer, in
accordance with the indenture. If the aggregate principal amount of notes
tendered pursuant to an excess cash flow offer exceeds the excess cash flow
offer amount with respect thereto, the trustee will select the notes to be
repurchased in the manner described below. If the aggregate amount of notes
tendered pursuant to any excess cash flow offer is less than the excess cash
flow offer amount, we may, subject to the other provisions of the indenture and
the collateral documents, use any remaining excess cash flow for general
corporate purposes.
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Excess cash flow means our consolidated cash flow for an operating year,
minus:
o fixed interest, including the portion of any payments associated with
capital lease obligations, of Riviera Black Hawk, Inc. and our
subsidiaries that is paid during such operating year and, without
duplication, contingent interest of Riviera Black Hawk, Inc. and our
subsidiaries that is paid or deferred in accordance with the
provisions of the indenture during such operating year, but only to
the extent that such contingent interest was not deferred in any prior
operating year;
o up to $4.0 million in capital expenditures of Riviera Black Hawk, Inc.
paid to maintain or improve our casino that are actually paid during
such operating year, excluding any capital expenditures made with the
proceeds from the sale of the notes;
o principal payments on indebtedness permitted to be incurred pursuant
to the indenture; and
o amounts paid by us to Riviera Holdings pursuant to the tax sharing
agreement.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
o if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are listed;
or
o if the notes are not so listed, on a pro rata basis, by lot or by such
method as the trustee shall deem fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed at least 30 but not more than 60 days before the
redemption date to each holder of notes to be redeemed at its registered
address. If any note is to be redeemed in part only, the notice of redemption
that relates to that note shall state the portion of the principal amount
thereof to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the holder thereof
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.
Restructure Covenants
Restricted Payments
We will not
o declare or pay any dividend or make any other payment or distribution
on account of our equity interests, including, without limitation, any
payment in connection with any merger or consolidation or to the
direct or indirect holders of our equity interests in any capacity;
o purchase, redeem or otherwise acquire or retire for value, including,
without limitation, in connection with any merger or consolidation
involving us, any equity interests in us or any direct or indirect
parent of us;
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o make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any indebtedness that is
equal in right of payment preference with or subordinated to the
notes, except a payment of interest or principal at the stated
maturity thereof; or
o make any of the aforementioned restricted payments, unless, at the
time of and after giving effect to such restricted payment:
o we are operating;
o no default or event of default shall have occurred and be
continuing or would occur as a consequence thereof;
o we would, at the time of such restricted payment and after giving
pro forma effect thereto as if such restricted payment had been
made at the beginning of the applicable four-quarter period, have
been permitted to incur at least $1.00 of additional indebtedness
pursuant to the fixed charge coverage ratio test set forth in the
first paragraph of the incurrence of indebtedness and issuance of
preferred stock covenant described below; and
o such restricted payment, together with the aggregate amount of
all other restricted payments made by us, excluding restricted
payments permitted by clauses (2) through (7) of the next
succeeding paragraph, is less than the sum, without duplication,
of:
o 50% of our consolidated net income for the period, taken as
one accounting period, from the beginning of the first
fiscal quarter commencing after the date of the indenture to
the end of our most recently ended fiscal quarter for which
internal financial statements are available at the time of
such restricted payment, or, if such consolidated net income
for such period is a deficit, less 100% of such deficit,
plus
o 100% of the aggregate net cash proceeds received by us as a
contribution to its common equity capital, other than
pursuant to the completion capital commitment, the keep-well
and any contribution to us from Riviera Holdings of the net
proceeds of a qualified public offering which are used to
repurchase notes, or from the issue or sale of equity
interests in us other than disqualified stock, or from the
issue or sale of convertible or exchangeable disqualified
stock or convertible or exchangeable debt securities that
have been converted into or exchanged for such equity
interests, other than equity interests or disqualified stock
or debt securities sold to a subsidiary, plus
o to the extent that any restricted investment that was made
after the date of the indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of the
cash return of capital with respect to such restricted
investment, less the cost of disposition, if any, and the
initial amount of such restricted investment.
With respect to any payments made pursuant to clauses (1) through (7)
below, so long as no default has occurred and is continuing or would be caused
thereby and, with respect to any payments made pursuant to clause (8) below, no
event of default or default in the payment when due of any principal,
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interest, premium or liquidated damages on the notes shall have occurred or be
continuing or would occur as a consequence thereof, the preceding provisions
will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated indebtedness or equity
interests of Riviera Black Hawk, Inc. in exchange for, or out of the net
cash proceeds of the substantially concurrent sale, other than to one of
our subsidiaries, of, equity interests of Riviera Black Hawk, Inc., other
than disqualified stock; provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (4)(b) of the
preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of our
Indebtedness that is subordinate or equal in right of payment preference
with the notes with the net cash proceeds from an incurrence of permitted
refinancing indebtedness;
(4) the payment to Riviera Management of amounts owing to it for
reimbursement of goods and services provided and for the payment of
management fees of the management agreement subject to the terms of the
manager subordination agreement relating thereto between Riviera Management
and the trustee and subject to the requirement that all such payments are
made in compliance with the indenture; provided, however, that management
may be made whether or not a default has occurred and is continuing or
would be caused thereby;
(5) any redemption required pursuant to the provisions of the
indenture;
(6) the repayment by us to Riviera Holdings of amounts that Riviera
Holdings had advanced to us prior to the consummation of the offering of
the notes;
(7) the payment by us to Riviera Holdings at any time after the
Riviera Black Hawk has been operating for 180 consecutive days equal to the
amount contained in the completion reserve account at the end of that
period if our fixed charge coverage ratio for our most recently ended four
fiscal quarters after the date on which we became operating for which
internal financial statements are available immediately preceding the date
on which such payment is to be made is at least 1.5 to 1; provided that if
at the time of such payment the Riviera Black Hawk has been operating for
less than four fiscal quarters, such fixed charge coverage ratio will be
calculated with respect to the number of full fiscal quarters, but in no
event less than one full fiscal quarter, for which internal financial
statements are available following the date the we first became operating;
and
(8) the payment by us of amounts owing to Riviera Holdings pursuant to
the tax sharing agreement.
The amount of all restricted payments, other than cash, shall be the fair
market value on the date of the restricted payment of the assets or securities
proposed to be transferred or issued to or by us or such restricted subsidiary,
as the case may be, pursuant to the restricted payment. The fair market value of
any assets or securities that are required to be valued by this covenant shall
be determined by our board. Our board's determination must be based upon an
opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing if the fair market value exceeds $5.0 million. Not
later than the date of making any restricted payment, we shall deliver to the
trustee an officers' certificate stating
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that such restricted payment is permitted and setting forth the basis upon which
the calculations required by this restricted payments covenant were computed,
together with a copy of any fairness opinion or appraisal required by the
indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
We will not, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to incur any Indebtedness, including acquired debt, and
we will not issue any disqualified stock will not permit any of our Subsidiaries
to issue any shares of preferred stock; provided, however, that, so long as no
default or event of default has occurred and is continuing, we may incur
Indebtedness, including acquired debt, or issue disqualified stock, if:
o we are operating;
o our fixed charge coverage ratio for our most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional indebtedness
is incurred or such disqualified stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis, including a pro forma
application of the net proceeds therefrom, as if the additional
indebtedness had been incurred or the preferred stock or disqualified
stock had been issued, as the case may be, at the beginning of such
four-quarter period; and
o the weighted average life to maturity of such indebtedness is greater
than the remaining weighted average life to maturity of the notes.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of permitted debt so long as no default or event of
default has occurred and is continuing:
(1) the incurrence by us and our Subsidiaries of (a) indebtedness
represented by the notes to be issued on the date of the indenture and the
new notes to and (b) their respective obligations arising under the
collateral documents to the extent such obligations would represent
indebtedness;
(2) the incurrence by us of permitted refinancing indebtedness in
exchange for, or the net proceeds of which are used to refund, refinance or
replace Indebtedness, other than intercompany indebtedness, that was
permitted by the indenture to be incurred under the first paragraph of this
covenant or clauses (1), (2), (6), (8) or (10) of this paragraph;
(3) the incurrence by us of intercompany indebtedness between or among
us and any of our wholly owned restricted subsidiaries; provided, however,
that:
o such indebtedness must be expressly subordinated to the prior payment
in full in cash of all obligations with respect to the notes; and
o any subsequent issuance or transfer of equity interests that results
in any such indebtedness being held by a person other than Riviera
Black Hawk, Inc. or a wholly owned restricted subsidiary thereof, any
sale or other transfer of any such indebtedness to a person that is
not either us or a wholly owned restricted subsidiary thereof shall be
deemed, in each case, to constitute an incurrence of such indebtedness
by Riviera Black Hawk, Inc. or such restricted subsidiary, as the case
may be, that was not permitted by this clause (3) and if any
restricted subsidiary is the obligor on such indebtedness, such
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indebtedness is represented by an intercompany note that is pledged to
the trustee as security for the notes;
(4) the incurrence by us of hedging obligations that are incurred for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate indebtedness that is permitted by the terms of;
(5) the incurrence by us of indebtedness solely in respect of
performance or similar bonds or standby letters of credit; provided that
any such bond or standby letter of credit is incurred in the ordinary
course of our business in an aggregate amount not to exceed $2.0 million at
any one time outstanding; and provided, further, that any such bond or
standby letter of credit is incurred on terms customary for operations
similar to ours;
(6) the incurrence by us of FF&E financing; provided, however, that
(a) the principal amount of such Indebtedness does not exceed the cost,
including sales and excise taxes, installation and delivery charges and
other direct costs of, and other direct expenses paid or charged in
connection with, such purchase, of the FF&E purchased or leased with the
proceeds thereof, (b) no Indebtedness incurred under the notes is utilized
for the purchase or lease of such FF&E and (c) the aggregate principal
amount of such indebtedness, including all permitted refinancing
indebtedness incurred to refund, refinance or replace any indebtedness
incurred pursuant to this clause, does not exceed $15.0 million outstanding
at any time;
(7) bond or surety obligations posted by us in order to prevent the
loss or material impairment of or to obtain a gaming license or as
otherwise required by an order of any gaming authority to the extent
required by applicable law and consistent in character and amount with
customary industry practice so long as such Indebtedness does not result
in, and is not secured by, a lien on any of the collateral;
(8) the incurrence by us of indebtedness solely in respect of special
assessment bonds, including all permitted refinancing indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause, and standby letters of credit or surety bonds required to be issued
in connection therewith, in an aggregate amount not to exceed $400,000;
(9) the guarantee by us of indebtedness permitted to be incurred by
another provision of this covenant;
(10) the incurrence by us of additional indebtedness in an aggregate
principal amount, or accreted value, as applicable, at any time
outstanding, including all permitted refinancing indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause, not to exceed $2.0 million; and
(11) the incurrence by our unrestricted subsidiaries of non-recourse
debt; provided, however, that if any such indebtedness ceases to be
non-recourse debt, such event shall be deemed to be an incurrence of
indebtedness by our restricted subsidiary that was not permitted by this
clause (11).
We will not incur any indebtedness, including permitted debt, that is
contractually subordinated in right of payment to any other of our indebtedness
of unless such Indebtedness is also contractually subordinated in right of
payment to the notes on substantially identical terms; provided, however, that
no Indebtedness shall be deemed to be contractually subordinated in right of
payment to any other Indebtedness of such solely by virtue of being unsecured.
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Liens
We will not, directly or indirectly, create, incur, assume or suffer to
exist any lien of any kind on any asset now owned or hereafter acquired, or any
proceeds, income or profits therefrom or assign or convey any right to receive
income therefrom, except permitted liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
We will not, and will not permit any of our restricted subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of such restricted
subsidiary to:
o pay dividends or make any other distributions on its capital stock to
our Subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any indebtedness
owed to us;
o make loans or advances to us; or
o transfer any of its properties or assets to us.
Merger, Consolidation or Sale of Assets
We may not, directly or indirectly
o consolidate or merge with or into another person, whether or not we
are the surviving corporation or
o sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or our assets to another person;
unless:
o either we are the surviving corporation or the person formed by
or surviving any such consolidation or merger, if other than us,
or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof
or the District of Columbia;
o the person formed by or surviving any such consolidation or
merger, if other than us, or the person to which such sale,
assignment, transfer, conveyance or other disposition shall have
been made assumes all our obligations under the notes, the
indenture and the collateral documents;
o immediately after such transaction no default or event of default
exists;
o such transaction would not result in the loss or suspension or
material impairment of any gaming license unless a comparable
replacement gaming license is effective prior to or
simultaneously with such loss, suspension or material impairment;
o we or the person formed by or surviving any such consolidation or
merger, if other than us, or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made:
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o will have consolidated net worth immediately after the
transaction equal to or greater than our consolidated net worth
immediately preceding the transaction; and
o will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the
same had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the fixed charge coverage ratio test set
forth in the first paragraph of the incurrence of indebtedness
and issuance of preferred stock covenant described above; and
o such transaction would not require any holder or beneficial owner
of notes to obtain a gaming license or be qualified or found
suitable under the law of any applicable gaming jurisdiction;
provided that such holder or beneficial owner would not have been
required to obtain a gaming license or be qualified or found
suitable under the laws of any applicable gaming jurisdiction in
the absence of such transaction.
In addition, we may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other person. This covenant will not apply to a sale,
assignment, transfer, conveyance or other disposition of assets between or among
us and any of our wholly owned subsidiaries.
Transactions with Affiliates
We will not make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any affiliate, unless:
o such affiliate transaction is on terms that are no less favorable than
those that would have been obtained in a comparable transaction by
restricted subsidiary with an unrelated person; and
o we deliver to the trustee:
o with respect to any affiliate transaction or series of related
affiliate transactions involving aggregate consideration in
excess of $1.0 million, a resolution of our board set forth in an
officers' certificate certifying that such affiliate transaction
complies with this covenant and that such affiliate transaction
has been approved unanimously by the board; and
o with respect to any affiliate transaction or series of related
affiliate transactions involving aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the
holders of such affiliate transaction from a financial point of
view issued by an accounting, appraisal or investment banking
firm of national standing.
The following items shall not be deemed to be affiliate transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
o payments made pursuant to the completion capital commitment, the
keep-well agreement, the management agreement, the license agreement
and the tax sharing agreement;
o purchases of goods and services in the ordinary course of business;
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o any employment agreement entered into by us in the ordinary course of
business on terms customary in the gaming industry;
o transactions between or among us and/or our restricted subsidiaries;
o restricted payments that are permitted by the provisions of the
indenture; and
o reasonable fees and compensation, including, without limitation,
bonuses, retirement plans and securities, stock options and stock
ownership plans, paid or issued to and indemnities provided on behalf
of our officers, directors, employees or consultants in the ordinary
course of business.
Subject to the preceding clauses, we will not make any loans, advances or other
payments to Riviera Holdings, except as permitted pursuant to the provisions of
the indenture, including the restricted payment covenant.
Limitations on Use of Proceeds
We deposited $5.1 million of the net proceeds from the sale of the
existing notes into the interest reserve account, $31.9 million of the net
proceeds from the sale of the existing notes in the construction disbursement
account and $5.0 million of the net proceeds from the sale of the existing notes
in the completion reserve account. The funds in the interest reserve account,
the construction disbursement account and the completion reserve account will be
invested solely in government securities. All funds in the cash collateral
accounts will be disbursed only in accordance with the cash collateral and
disbursement agreement.
Sale and Leaseback Transactions
We will not enter into any sale and leaseback transaction; provided that
we may enter into a sale and leaseback transaction if:
o we could have
o incurred indebtedness in an amount equal to the attributable debt
relating to such sale and leaseback transaction under the fixed
charge ratio test in the first paragraph of the incurrence of
indebtedness and issuance of preferred stock covenant described
above and
o incurred a lien to secure such Indebtedness pursuant to the liens
covenant described above;
o the gross cash proceeds of such sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by
the board and set forth in an officers' certificate delivered to the
trustee, of the property that is the subject of such sale and
leaseback transaction; and
o the transfer of assets in such sale and leaseback transaction is
permitted by, and we apply the proceeds of such transaction in
compliance with, the indenture.
Additional Subsidiary Guarantees
If we create another subsidiary then any such restricted subsidiary must
become a guarantor and execute a supplemental indenture and deliver an opinion
of counsel to the trustee.
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Designation of Restricted and Unrestricted Subsidiaries
The board may designate any restricted subsidiary to be an unrestricted
subsidiary if that designation would not cause a default. If a restricted
subsidiary is designated as an unrestricted subsidiary, all outstanding
investments owned by the in the subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will reduce the amount
available for restricted payments under the first paragraph of the restricted
payments covenant described above or permitted investments, as applicable. All
such outstanding investments will be valued at their fair market value at the
time of such designation. That designation will only be permitted if such
restricted payment would be permitted at that time and if such restricted
subsidiary otherwise meets the definition of an unrestricted subsidiary. The
board may redesignate any unrestricted subsidiary to be a restricted subsidiary
if the redesignation would not cause a default.
Line of Business
We will not, and will not permit any subsidiary to, engage in any
business or investment activities other than permitted business. We will not,
and will not permit any of our Subsidiaries to, engage in any business,
development or investment activity other than at or in conjunction with the
Riviera Black Hawk until we are operating.
Restriction on Payment of Management Fees
We will not, directly or indirectly, pay to Riviera Management or any of
its affiliates any management fees if at the time of payment:
o a default or an event of default shall have occurred and be continuing
or shall occur as a result thereof; or
o our fixed charge coverage ratio for our most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such management fee is
proposed to be paid would have been less than 1.5 to 1, calculated on
a pro forma basis after deducting management fees to the extent paid
in cash and not deferred and any management fees deferred from a prior
period proposed to be paid in cash during such period, but excluding
any management fees deferred or accrued and not paid in cash during
such period.
Any management fees not permitted to be paid pursuant to this covenant
will be deferred and will accrue and may be paid only at such time that they
would otherwise be permitted to be paid hereunder. The right to receive payment
of the management fee will be subordinate in right of payment to the right of
the holders to receive payments pursuant to the notes. We will not amend the
management agreement to increase amounts to be paid thereunder, or in any other
manner which would be adverse to us or the holders, including without
limitation, to amend the method of computing the management fee.
Reports
Whether or not required by the Commission, so long as any notes are
outstanding, we will furnish to the holders, within the time periods specified
in the Commission's rules and regulations:
o all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K
if we were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of
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Operations" and, with respect to the annual information only, a report
on the annual financial statements by our certified independent
accountants; and
o all current reports that would be required to be filed with the
Commission on Form 8-K if we were required to file such reports.
If we have designated any of its subsidiaries as unrestricted
subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph will include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of our financial condition, our results of operations and our
restricted subsidiaries separate from the financial condition and results of
operations of our unrestricted subsidiaries.
In addition, following the consummation of this exchange offer, whether
or not required by the Commission, we will file a copy of all of the information
and reports referred to the clauses above with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations, unless the Commission will not accept such a filing, and make such
information available to securities analysts and prospective investors upon
request. In addition, we have agreed that, for so long as any notes remain
outstanding, it will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Cash Collateral and Disbursement Agreement
Pursuant to the cash collateral and disbursement agreement, $42.0 million
of the net proceeds from the sale of the existing notes were placed into the
cash collateral accounts and invested in government securities. All funds and
securities in the cash collateral accounts have been pledged as security for the
repayment of the notes. Funds in the cash collateral accounts will be disbursed
pursuant to the cash collateral and disbursement agreement.
Construction Disbursement Account
We deposited $31.9 million of the net proceeds from the sale of the
existing notes in the construction disbursement account, of which $10.1 million
was used to reimburse Riviera Holdings for amounts advanced to us to cover
construction and development costs. The disbursement agent will invest the
remaining funds in government securities which will be held in the construction
reserve account until the funds are needed from time to time to pay for the
development, construction and opening of the Riviera Black Hawk and our other
operating expenses. These funds will be disbursed in accordance with the cash
collateral and disbursement agreement. Subject to exceptions set forth in the
cash collateral and disbursement agreement, the disbursement agent will
authorize the disbursement of funds from the construction disbursement account
only upon the satisfaction of the disbursement conditions set forth in such
agreement.
Completion Reserve Account
We deposited $5.0 million of the net proceeds from the sale of the
existing notes into the completion reserve account. The disbursement agent
invested these funds in government securities which will be held in the
completion reserve account until the funds are needed from time to time to
insure completion of construction of the Riviera Black Hawk. The disbursement
agent will authorize the disbursement of funds from the completion reserve
account to the construction disbursement account only
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upon the satisfaction of the disbursement conditions set forth in the cash
collateral and disbursement agreement.
Interest Reserve Account
We deposited $5.1 million of the net proceeds from the sale of the
existing notes into the interest reserve account. These funds as set forth in an
officer's certificate, will provide for payment in full of the fixed interest on
the notes through May 1, 2000.
Excess Funds
If any funds remain in the construction disbursement account on the date
that the Riviera Black Hawk has been operating for at least 30 consecutive days,
there is no ongoing construction, other than maintenance and repairs in the
ordinary course of business and other than construction associated with the
Riviera Black Hawk in an aggregate amount not to exceed $250,000, in connection
with the Riviera Black Hawk and no default or event of default exists under the
indenture or the collateral documents, the disbursement agent will, upon our
direction, subject to exceptions set forth in the cash collateral and
disbursement agreement, disburse all remaining funds, if any, in the
construction disbursement account to any account or accounts specified by us.
If any funds remain in the completion reserve account on the date that
the Riviera Black Hawk has been operating for at least 180 consecutive days and
there is no ongoing construction, other than maintenance and repairs in the
ordinary course of business, in connection with the Riviera Black Hawk and no
default or event of default exists under the indenture or the collateral
documents, the disbursement agent will, upon our direction, subject to
exceptions set forth in the cash collateral and disbursement agreement, disburse
all remaining funds, if any, in the completion reserve account to any account or
accounts specified by us.
Events of Default - Cash Collateral and Disbursement Agreement
An event of default will exist under the cash collateral and disbursement
agreement if any of the following shall occur:
o a default or event of default occurs and is continuing under the
indenture;
o the disbursement agent, after appropriate consultation with us and the
independent construction consultant, does not approve a request for a
disbursement of over $50,000 or an amendment to the construction
disbursement budget where the aggregate amount that is the subject of
the amendment is over $50,000, and such failure continues for a period
of 30 days;
o the independent construction consultant, in reviewing prior
disbursements, reports an exception in excess of $50,000 and such
exception continues for a period of ten days;
o if at any time the amount of available funds, together with any funds
contributed into the construction disbursement account pursuant to the
completion capital commitment, is less than the amount required in the
construction disbursement budget to cause the Riviera Black Hawk to be
operating on or before the operating deadline and such deficiency
continues for a period of 30 days from notice thereof;
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o we fail to perform or observe any of its obligations regarding, among
other things, application of the proceeds of the notes and such
failure continues for five days after notice thereof or regarding,
among other things, substitution of accounts;
o we fail to deliver documents necessary to perfect the trustee's
security interest in the construction disbursement account, the
completion reserve account, the interest reserve account and the
investments in each and such failure continues for a period of five
days;
o we cease to own the property upon which the Riviera Black Hawk is to
be constructed, or we abandon the Riviera Black Hawk or otherwise
ceases to pursue the operations of the Riviera Black Hawk in
accordance with standard industry practice or sells or otherwise
disposes of our interest in the Riviera Black Hawk, except as
permitted by the merger, consolidation or sale of assets covenant in
the indenture;
o any construction document relating to the Riviera Black Hawk with a
total contract amount of more than $100,000 is terminated, becomes
invalid or illegal, or otherwise ceases to be in full force and
effect, provided that with respect to any such construction document
other than the construction contract and the architect agreement, no
event of default shall be deemed to have occurred under the cash
collateral and disbursement agreement as a result of such termination
if (a) we provide written notice to the independent construction
consultant immediately upon, but in no event more than two business
days after, we become aware of such construction document ceasing to
be in full force or effect that we intend to replace such construction
document or that such replacement is not necessary and (b) in each
case if in the reasonable judgment of the independent construction
consultant a replacement is necessary, (i) we obtain a replacement
obligor or obligors reasonably acceptable to the independent
construction consultant, and (ii) we enter into a replacement
construction document on terms no less beneficial to us and the
trustee than then current market terms within 60 days of such
termination; or
o the independent construction consultant reasonably determines that the
Riviera Black Hawk is likely to become operating no earlier than 60
days after the operating deadline.
If an event of default exists under the cash collateral and disbursement
agreement and the disbursement agent has received written notice thereof, the
disbursement agent will not be permitted to authorize the disbursement of funds
from the construction disbursement account or the completion reserve account,
provided that the disbursement agent may continue to disburse funds from the
construction reserve account or the completion reserve account
o in an amount up to $1.5 million, or such other amount as the trustee
approves by written notice to the disbursement agent, if necessary to
prevent the condition of the Riviera Black Hawk from deteriorating or
to preserve work completed on the Riviera Black Hawk;
o to pay for work already completed or materials already purchased;
o to pay for retainage amounts if an event of default continues for
three consecutive months or more; or
o to make interest payments on the notes.
Events of Default and Remedies
Each of the following is an event of default under the indenture:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes; provided that payments of
contingent interest that are permitted to be deferred as provided in the
indenture will not become due for this purpose until such payment is
required to be made pursuant to the terms of the indenture;
(2) default in payment when due of the principal of, or premium, if
any, on the notes;
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(3) failure by us or any of our subsidiaries to comply with the
provisions for change-of-control or asset sale offers or the covenants
concerning incurrence of indebtedness and issuance of preferred stock,
merger, consolidation or sale of assets and use of proceeds;
(4) failure by us or any of our restricted subsidiaries for 30 days
after notice thereof to comply with the provisions of the restricted
payments covenant and any of the other agreements in the indenture not set
forth in clause (3) above;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our restricted
subsidiaries, or the payment of which is guaranteed by us or any of our
restricted subsidiaries, whether such Indebtedness or guarantee now exists,
or is created after the date of the indenture, if that default:
o is caused by a failure to pay principal of, or interest or premium, if
any, on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default; or
o results in the acceleration of such indebtedness prior to its express
maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a payment default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(6) failure by us or any of our restricted subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and
(7) breach by us or any of our affiliates of any representation or
warranty in any material respect in the collateral documents or any
certificates delivered in connection therewith, failure by us or any of our
affiliates for 30 days, or such other period as specifically provided
therein, after notice thereof to comply with any covenant or agreement set
forth in the collateral documents, the repudiation by us of any of its
obligations under the collateral documents, the unenforceability of the
collateral documents against us or the loss of the perfection or priority
of the liens granted by us thereunder for any reason;
(8) events of bankruptcy or insolvency with respect us or any of our
restricted subsidiaries;
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(9) revocation, termination, suspension or other cessation of
effectiveness for a period of more than 90 consecutive days of any gaming
license which results in the cessation or suspension of gaming operations
at any gaming facility;
(10) default by Riviera Holdings in the performance of its obligations
set forth in, or repudiation of its obligations under, the completion
capital commitment or the keep-well agreement; or
(11) failure of the Riviera Black Hawk to be operating by the
operating deadline or to remain operating thereafter, except (a) as the
hours of operation of the Riviera Black Hawk may be limited by any gaming
authority or gaming law or (b) for a period of time not to exceed 30 days
during any 45-day period and not to exceed 60 days during any one-year
period; provided, however, that, in any event, there shall not be an event
of default under this clause if the failure to remain operating during such
period results from an event of loss pursuant to the terms of the
indenture.
In the case of an event of default arising from events of bankruptcy or
insolvency with respect to us, any restricted subsidiary that is a significant
subsidiary or any group of restricted subsidiaries that, taken together, would
constitute a significant subsidiary, all outstanding notes will become due and
payable immediately without further action or notice. If any other event of
default occurs and is continuing, the trustee or the holders of at least 25% in
principal amount of the then outstanding notes may declare all the notes to be
due and payable immediately.
Holders may not enforce the indenture or the notes except as provided in
the indenture. Subject to limitations, holders of a majority in principal amount
of the then outstanding notes may direct the trustee in its exercise of any
trust or power. The trustee may withhold from holders notice of any continuing
default or event of default, except a default or event of default relating to
the payment of principal or interest or liquidated damages, if it determines
that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing default or event of default and its consequences under
the indenture, except a continuing default or event of default in the payment of
interest or liquidated damages on, or the principal of, the notes.
In the case of any event of default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of us with the intention
of avoiding payment of the premium that we would have had to pay if we then had
elected to redeem the notes pursuant to the optional redemption provisions of
the indenture, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the notes.
If an event of default occurs prior to May 1, 2002, by reason of any willful
action or inaction taken or not taken by or on behalf of us with the intention
of avoiding the prohibition on redemption of the notes prior to May 1, 2002,
then the premium specified in the indenture shall also become immediately due
and payable to the extent permitted by law upon the acceleration of the notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any default or event of
default, we are required to deliver to the trustee a statement specifying such
default or event of default.
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Remedies upon Default Under the Notes
The trustee will be required to initiate a foreclosure against the
collateral in order to enforce its rights under the collateral documents. A
foreclosure against the collateral will be subject to notice and other
procedural limitations.
No Personal Liability of Directors, Officers, Employees and Stockholders
None of our directors, officers, employees, incorporators or
stockholders, as such, shall have any liability for any of our obligations under
the notes, the indenture, the collateral documents or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder by
accepting a note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
Legal defeasance - We may, at our option and at any time, elect to have
all of our obligations discharged with respect to the outstanding notes except
for:
o the rights of holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and liquidated
damages, if any, on such notes when such payments are due from the
trust referred to below;
o our obligations with respect to the notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen
notes and the maintenance of an office or agency for payment and money
for security payments held in trust;
o the rights, powers, trusts, duties and immunities of the trustee, and
our obligations in connection therewith; and
o the legal defeasance provisions of the indenture.
Covenant defeansance - In addition, we may, at our option and at any
time, elect to have our obligations released with respect to covenants that are
described in the indenture and thereafter any omission to comply with those
covenants shall not constitute a default or event of default with respect to the
notes. In the event covenant defeasance occurs, events described under "events
of default," not including non-payment, bankruptcy, receivership, rehabilitation
and insolvency events, will no longer constitute an event of default with
respect to the notes. In addition, the liens securing the collateral will be
released upon covenant defeasance or legal defeasance.
In order to exercise either legal defeasance or covenant defeasance:
o we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders, cash in u.s. dollars, non-callable government
securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, and fixed
interest, the maximum amount payable as contingent interest and
premium and liquidated damages, if any, on the outstanding notes on
the stated maturity or on the applicable redemption date, as the case
may be, and we must specify whether the notes are being defeased to
maturity or to a particular redemption date;
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o in the case of legal defeasance, we must deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee confirming
that
o we have received from, or there has been published by, the
Internal Revenue Service a ruling or
o since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm
that, the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result
of such legal defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times
as would have been the case if such legal defeasance had not
occurred;
o in the case of covenant defeasance we shall have delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred;
o no default or event of default shall have occurred and be continuing
on the date of such deposit other than a default or event of default
resulting from the borrowing of funds to be applied to such deposit;
o such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument other than the indenture to which we or any of
our restricted subsidiaries is a party or by which we or any of our
restricted subsidiaries is bound;
o we must deliver to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the
holders over our other creditors with the intent of defeating,
hindering, delaying or defrauding creditors or others; and
o we must deliver to the trustee an officers' certificate and an opinion
of counsel, each stating that all conditions precedent relating to the
legal defeasance or the covenant defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the holders of
at least a majority in principal amount of the notes then outstanding,
including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes, including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes.
Without the consent of the holders of at least 66 2/3% in aggregate
principal amount of the notes then outstanding, an amendment or waiver may not
affect the liens in favor of the trustee and the holders created under the
collateral documents in a manner adverse to the holders or release all or
substantially all
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of the collateral, in each case, other than pursuant to the release of
collateral in accordance with the provisions of the indenture and of the
applicable collateral documents.
Without the consent of each holder affected, an amendment or waiver may
not, with respect to any notes held by a non-consenting holder:
o reduce the principal amount of notes whose holders must consent to an
amendment, supplement or waiver;
o reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes,
other than as permitted by the indenture;
o reduce the rate of or change the time for payment of interest on any
note;
o waive a default or event of default in the payment of principal of, or
interest or premium, or liquidated damages, if any, on the notes,
except a rescission of acceleration of the notes by the holders of at
least a majority in aggregate principal amount of the notes and a
waiver of the payment default that resulted from such acceleration;
o make any note payable in money other than that stated in the notes;
o make any change in the provisions of the indenture relating to waivers
of past defaults or the rights of holders of notes to receive payments
of principal of, or interest or premium or liquidated damages, if any,
on the notes; or
o waive a redemption payment with respect to any note, other than a
payment required by one of the indenture.
Notwithstanding the preceding, without the consent of any holder of
notes, we and the trustee may amend or supplement the indenture or the notes:
o to cure any ambiguity, defect or inconsistency;
o to provide for uncertificated notes in addition to or in place of
certificated notes;
o to provide for the assumption of the our obligations to holders of
notes in the case of a merger or consolidation or sale of all or
substantially all of our assets;
o to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder; or
o to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust indenture
Act.
Concerning the Trustee
The holders of a majority in principal amount of the then outstanding
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
exceptions. The indenture provides that in case an event of default shall occur
and be continuing, the trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the trustee will be under no obligation to exercise
any of its rights or powers under the indenture at the request of any holder of
notes,
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unless such holder shall have offered to the trustee security and indemnity
satisfactory to it against any loss, liability or expense.
Anyone who receives this prospectus may obtain a copy of the indenture,
each of the collateral documents and registration rights agreement without
charge by writing to Riviera Black Hawk, Inc., Riviera Hotel & Casino, 2901 Las
Vegas Boulevard South, Las Vegas, NV 89109, Attention: Executive Vice President
of Finance.
Registration Rights; Liquidated Damages
The following description is a summary of selected provisions of the
registration rights agreement deemed important to you. It does not restate that
agreement in its entirety. We urge you to read the proposed form of registration
rights agreement in its entirety because it, and not this description, defines
your registration rights as holders.
The registration rights agreement provides:
o we will file an exchange offer Registration Statement with the
Commission on or prior to 45 days after the sale of the existing
notes;
o we will use its best efforts to have the exchange offer Registration
Statement declared effective by the Commission on or prior to 150 days
after the sale of the existing notes;
o unless the exchange offer would not be permitted by applicable law or
Commission policy, we will commence the exchange offer; and use our
best efforts to issue on or prior to 30 business days, or longer, if
required by the federal securities laws, after the date on which the
exchange offer Registration Statement was declared effective by the
Commission, new notes in exchange for all notes tendered prior thereto
in the exchange offer; and
o if obligated to file the shelf registration statement, we will use our
best efforts to file the shelf registration statement with the
Commission on or prior to 45 days after such filing obligation arises
and to cause the shelf registration to be declared effective by the
Commission on or prior to 150 days after such obligation arises.
If:
o we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
o any of such registration statements is not declared effective by the
Commission on or prior to the effectiveness target date;
o we fail to consummate the exchange offer within 45 business days of
the effectiveness target date with respect to the exchange offer
Registration Statement; or
o the exchange offer Registration Statement or the shelf registration
statement is declared effective but thereafter ceases to be effective
or usable in connection with resales of transfer restricted securities
during the periods specified in the registration rights agreement,
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then we will have incurred a registration default and we will pay liquidated
damages to each holder, with respect to the first 90-day period immediately
following the occurrence of the first registration default in an amount equal to
$.05 per week per $1,000 principal amount of notes held by such holder.
The amount of the liquidated damages will increase by an additional $.05
per week per $1,000 principal amount of notes with respect to each subsequent
90-day period until all registration defaults have been cured, up to a maximum
amount of liquidated damages for all registration defaults of $.50 per week per
$1,000 principal amount of notes.
All accrued liquidated damages will be paid by us on each interest
payment date.
Following the cure of all registration defaults, the accrual of
liquidated damages will cease.
Holders of notes will be required to make representations to us as
described in the registration rights agreement in order to participate in the
exchange offer and will be required to deliver information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the shelf
registration statement and benefit from the provisions regarding liquidated
damages set forth above. By acquiring transfer restricted securities, a holder
will be deemed to have agreed to indemnify us against losses arising out of
information furnished by such holder in writing for inclusion in any shelf
registration statement. Holders of notes will also be required to suspend their
use of the prospectus included in the shelf registration statement upon receipt
of written notice to that effect from us.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United States federal
income tax consequences of the exchange offer to a holder of existing notes that
is an individual citizen or resident of the United States or a United States
corporation that purchased the existing notes pursuant to their original issue.
It also summarizes the material United States income tax consequences resulting
from the ownership and disposition of the new notes. This discussion is based on
the Internal Revenue Code of 1986, as amended to the date hereof, existing and
proposed Treasury regulations, and judicial and administrative determinations,
all of which are subject to change at any time, possibly on a retroactive basis.
The following relates only to the existing notes, and the new notes received in
exchange for the existing notes, that are held as "capital assets" within the
meaning of Section 1221 of the Internal Revenue Code by holders. It does not
discuss state, local or foreign tax consequences, nor does it discuss tax
consequences to subsequent purchasers, or to categories of holders that are
subject to special rules, such as foreign persons, tax-exempt organizations,
insurance companies, banks, dealers in stocks and securities and persons holding
the notes as part of a "straddle," "hedge," or "conversion transaction." For
this purpose, subsequent purchasers are persons who did not purchase the
existing notes pursuant to their original issue. Tax consequences may vary
depending on the particular status of an investor.
No rulings will be sought from the IRS with respect to the federal income
tax consequences of the exchange offer and the ownership and disposition of the
exchange noes. There can be no assurance that the IRS will not take positions
contrary to the federal income tax consequences discussed below. In particular,
we intend to treat the notes as indebtedness for federal income tax purposes.
However, this treatment is not binding on the IRS or any court and there can be
no assurance that the IRS will not successfully argue, or that a court will not
hold, that the notes should be treated as equity for federal income tax
purposes. If any portion of the notes is treated as equity rather than
indebtedness, we would not be able to deduct the interest on that portion of the
notes. This could have a material adverse effect on our after-tax cash flow. In
addition, the interest payments made on the portion of the notes that are
treated as equity will be taxable to the recipient as dividends to the extent of
our current and accumulated earnings and profits. This could adversely affect
the timing, character and amounts includible in the income of a holder of notes.
This section does not purport to deal with all aspects of federal income
taxation that may be relevant to an investor's decision to exchange existing
notes for new notes. Each investor should consult with its own tax advisor
concerning the application of the federal income tax laws and other tax laws to
its particular situation before determining whether to exchange existing notes
for new notes.
The Exchange Offer
The exchange of existing notes pursuant to the exchange offer should be
treated as a continuation of the corresponding existing notes because the terms
of the new notes are not materially different from the terms of the existing
notes. Accordingly, such exchange should not constitute a taxable event to
holders, and therefore:
o no gain or loss should be realized by holders upon receipt of an
exchange note;
o the holding period of an exchange note should include the holding
period of the existing note for which the exchange note was exchanged;
and
o the adjusted tax basis of the exchange note should be the same as the
adjusted tax basis of the existing note for which the exchange note
was exchanged immediately before the exchange.
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Recognition of Interest Income
Some Treasury Regulations govern the treatment of debt instruments issued
on or after August 13, 1996 that provide for one or more contingent payments.
Because the notes provide for one or more contingent payments of interest, these
regulations will apply to the notes while owned by a holder. Under these
regulations, we must construct a projected payment schedule for the notes, and
holders generally must recognize all interest income with respect to a note on a
constant yield basis based on this projected payment schedule, subject to
adjustments if actual contingent payments differ from those projected. This
interest is treated as "original issue discount."
In particular, the projected payment schedule will be determined by
including all noncontingent payments and the "expected value" of all contingent
payments on the notes. The projected payment schedule must produce the
"comparable yield," which is the yield at which we would issue a fixed rate debt
instrument with terms and conditions similar to those of the notes. The amount
of interest that accrues each accrual period is the product of the "comparable
yield" and the note's "adjusted issue price" at the beginning of each accrual
period. The "adjusted issue price" of a note is equal to the initial offering
price paid by the holders for a substantial amount of the notes, increased by
interest previously accrued on the note, and decreased by the amount of any
noncontingent payments and the projected amount of any contingent payments
previously made on the note. The amount of interest previously accrued on the
note is determined without adjustments for differences between the projected
payment schedule and the actual payments on the notes. Except for adjustments
made for differences between actual and projected payments, the amount of
interest included in income by a holder of a note is the sum of the "daily
portions" of interest income with respect to the note for each day during the
taxable year, or portion thereof, on which the holder held such note. The "daily
portions" of interest income are determined by allocating to each day in any
accrual period a ratable portion of the interest income allocable to that
accrual period. If actual payments differ from projected payments, then holders
will generally be required in any given taxable year either to include
additional interest in gross income in case the actual payments exceed projected
payments in such taxable year or to reduce the amount of interest income
otherwise accounted in case the actual payments are less than the projected
payments in such taxable year. If the negative adjustment exceeds the interest
for the taxable year that would otherwise have been accounted for on the notes,
the excess will be treated as ordinary loss. However, the amount treated as an
ordinary loss in any taxable year is limited to the amount by which the holder's
total interest inclusions on the notes exceed the total amount of the net
negative adjustments treated as ordinary loss in prior years. Any remaining
excess will be a negative adjustment carryforward and treated as a negative
adjustment in the succeeding year. If a note is sold, exchanged, or retired, any
negative adjustment carryforward from the prior year will reduce the holder's
amount realized on the sale, exchange or retirement.
Thus, under the rules described in the preceding paragraph, depending on
the "comparable yield" and "expected value" used to determine the projected
payment schedule, holders of notes may be required to include amounts in income
prior to the receipt of cash payments attributable to such income. We will
provide to holders the projected payment schedule for the notes. The projected
payment schedule for the notes will consist of all fixed interest payments, all
scheduled principal payments and a projected amount and time for each contingent
interest payment. The yield, timing and amounts set forth on the projected
payment schedule are for federal income tax purposes only and are not assurances
by us with respect to any aspect of the notes. Holders will generally be bound
by the projected payment schedule. However, the IRS will not respect a projected
payment schedule which it determines to be unreasonable. Holders are strongly
urged to consult their tax advisors with respect to the application of the
contingent payment rules described above to the notes.
It is possible that the notes may be subject to the provisions of the
Internal Revenue Code dealing with high yield discount obligations in which case
we may not be entitled to claim a deduction with
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respect to a portion of the interest payments. This could reduce the amount of
cash available to us to meet our obligations under the notes.
Sale, Retirement or Other Taxable Disposition
A holder of a note will generally recognize gain or loss upon the sale,
redemption, retirement, or other taxable disposition of the note in an amount
equal to the difference between the amount of cash and the fair market value of
property received in exchange therefor, except to the extent attributable to the
payment of accrued interest or original issue discount, which generally will be
taxable to the holder as ordinary income, reduced by any negative adjustment
carryforward and the holder's adjusted tax basis in the note. A holder's
adjusted tax basis in a note generally will be equal to the price paid for the
note, increased by the amount of original issue discount previously accrued on
the note, determined without adjustments, and decreased by the amount of any
noncontingent payments and the projected amount of any contingent payments
previously made on the note.
If a note is sold or otherwise disposed of when there are remaining
contingent payments under the projected payment schedule, then any gain
recognized under the sale or other disposition will be ordinary interest income.
Any loss recognized will be ordinary loss to the extent the holders' total
interest inclusions on a note exceed the total amount of ordinary loss the
holder took into account under the rules described above with respect to
differences between actual payments and projected payments, and any additional
loss will generally be a capital loss. If, however, a note is sold or otherwise
disposed of after there are no remaining contingent payments due on the note
under the projected payment schedule, the resulting gain or loss will generally
be capital gain or loss and will be long-term capital gain or loss if the note
has been held for more than one year.
Liquidated Damages
We intend to take the position that the liquidated damages will be
taxable to the holder as ordinary income in accordance with the holder's method
of accounting for federal income tax purposes. The IRS may take a different
position, however, which could affect the timing of both the holder's income and
our deduction with respect to the liquidated damages.
Backup Withholding
A holder of notes may be subject to backup withholding at the rate of 31%
with respect to interest paid on, original issue discount accrued on and gross
proceeds from a sale or other disposition of, the notes unless the holder is a
corporation or comes within other exempt categories and, when required,
demonstrates this fact or provides a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. A holder
of notes who does not provide us with his or her correct taxpayer identification
number may be subject to penalties imposed by the IRS.
We will report to the holders of the notes and the IRS the amount of any
"reportable payments," including any original issue discount accrued on the
notes and any amount withheld with respect to the notes during the calendar
year.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for existing notes
where such existing notes were acquired as a result of market-making activities
or other trading activities. We have agreed that, for a period of 180 days after
the expiration date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until February 6, 2000, all dealers effecting transactions in the new
notes must deliver a prospectus.
We will not receive any proceeds from any sale of new notes by
broker-dealers. Exchange Noes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of new notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the expiration date we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the Holders of the Notes, other than
commissions or concessions of any brokers or dealers and will indemnify the
Holders of the Securities, including any broker-dealers, against liabilities,
including liabilities under the Securities Act.
Each broker-dealer that receives new notes are required to deliver a
prospectus in connection with any resale of such note.
Each broker-dealer that acquired existing notes as a result of market
making or other trading activities may use the exchange offer prospectus, as
supplemented or amended for resales of new notes.
Broker-dealers that acquired the existing notes directly from us in the
initial offering and not as a result of market making or trading activities
cannot use the prospectus for the exchange offer in connection with resales of
the new notes and, absent an exemption, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
secondary resale of the new notes and cannot rely on the position of the staff
in Exxon Capital Holdings Corporation (April 13, 1989).
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LEGAL MATTERS
The validity of the new notes offered hereby will be passed for us by
Dechert Price & Rhoads, New York, New York. Legal matters with respect to
Colorado law will be passed upon by Holme, Roberts & Owen LLP, Denver, Colorado
and Verner, Liipfert, Bernhard, McPherson & Hand, Chartered, Washington, D.C.
EXPERTS
The financial statements of Riviera Black Hawk, Inc., a development stage
company, as of December 31, 1997 and 1998 and for the period from August 18,
1997 (date of inception) through December 31, 1997 and for the year ended
December 31, 1998, included in this prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report included herein,
which report expresses an unqualified opinion and includes an explanatory
paragraph referring to our status as a development stage entity, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of Riviera Holdings Corporation and
Subsidiaries as of December 31, 1997 and 1998 and for each of the three years in
the period ended December 31, 1998 incorporated in this prospectus by reference
from the Amended Annual Report on Form 10-K/A of Riviera Holdings Corporation
and Subsidiaries have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference
and have been so incorporated in reliance upon the report of such firm given
their authority as experts in accounting and auditing.
The Statements as to matters of law and legal conclusions concerning
Colorado gaming law included under the captions "Risk Factors--Gaming licenses,
permits and approvals," "--Legislative issues" and "--State gaming tax issues"
and "Gaming and Liquor Regulatory Matters" have been prepared by Holme, Roberts
& Owen LLP, Denver, Colorado and Edward McGrath, Verner, Liipfert, Bernhard,
McPherson & Hand, Chartered, Washington, D.C., our gaming counsel.
AVAILABLE INFORMATION
We are not currently subject to the periodic reporting and other
informational requirements of the Securities and Exchange Act of 1934, as
amended. We have agreed that, whether or not required to do so by the rules and
regulations of the Securities and Exchange Commission, so long as any notes
remain outstanding, we will furnish to the trustee and deliver or cause to be
delivered to holders of the notes, beginning with respect to our fiscal quarter
ending September 30, 1999:
o all consolidated quarterly and annual financial information that would
be required to be contained in a filing with the Securities and
Exchange Commission on Forms 10-Q and 10-K if we were required to file
such forms and, with respect to the annual information only, a report
thereon by our certified independent accountants and
o all reports that would be required to be filed with the Securities and
Exchange Commission on Form 8-K if we were required to file such
reports.
From and after the time a registration statement with respect to the notes is
declared effective by the Securities and Exchange Commission, we will file such
information with the Securities and Exchange Commission, provided the Securities
and Exchange Commission will accept such filing.
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act of 1933, covering the notes to be issued in the exchange offer.
This prospectus, which is a part of the registration statement, does not contain
all of the information included in the registration statement. Any statement
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made in this prospectus concerning the contents of any contract, agreement or
other document is not necessarily complete. For further information with respect
to us and the notes to be issued in the exchange offer, please reference the
registration statement, including its exhibits. If we have filed any contract,
agreement or other document as an exhibit to the registration statement, you
should read the exhibit for a more complete understanding of the documents or
matter involved.
Copies of the registration statement, including all related exhibits and
schedules, may be inspected without charge at the public reference facilities
maintained by the SEC, or obtained at prescribed rates from the Public Reference
Section of the SEC at the address set forth above. In addition, you may request
a copy of any of these filings, at no cost, by writing or telephoning us at the
following address or phone number:
Riviera Black Hawk, Inc.
444 Main Street
Black Hawk, Colorado 80422
(303) 582-1000
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Page
----
TABLE OF CONTENTS ...........................................................F-1
INDEPENDENT AUDITORS' REPORT.................................................F-2
FINANCIAL STATEMENTS:
Balance Sheets as of September 30, 1999 (Unaudited), December 31,
1998 and 1997.......................................................F-3
Statements of Operations for the Nine Months Ended September 30, 1999
(Unaudited) and cumulative from August 18, 1997 (Inception)
through September 30, 1999 (Unaudited)..............................F-4
Statements of Stockholder's Equity for the Nine Months Ended
September 30, 1999 (Unaudited) and for the Year Ended December 31,
1998 and for the Period from August 18, 1997 (Inception)
through December 31, 1997...........................................F-5
Statements of Cash Flows for the Nine Months Ended September 30, 1999
and 1998 (Unaudited), and for the Year Ended December 31,
1998 and for the Period from August 18, 1997 (Inception)
through December 31, 1997 and cumulative from August 18,
1997 (Inception) through September 30, 1999 (Unaudited).............F-6
Notes to Financial Statements....................................F-7-11
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Riviera Black Hawk, Inc.
(A Development Stage Company):
We have audited the accompanying balance sheets of Riviera Black Hawk,
Inc. (a Development Stage Company) (the "Company") as of December 31, 1998 and
1997, and the related statements of operations, stockholder's equity and of cash
flows for the period from August 18, 1997 (date of inception) through December
31, 1997, and for the year ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1997, and the results of its cash flows for the period from August 18, 1997
(date of inception) through December 31, 1997, and for the year ended December
31, 1998, in conformity with generally accepted accounting principles.
The Company is in the development stage at December 31, 1998. As
discussed in Note 1 to the financial statements, successful completion of the
Company's development program and, ultimately, the attainment of profitable
operations is dependent upon future events, including obtaining certain
regulatory approvals and achieving a level of sales adequate to support the
Company's cost structure.
Deloitte & Touche LLP
Las Vegas, Nevada
February 19, 1999
F-2
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
BALANCE SHEETS
SEPTEMBER 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998 AND 1997
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September December 31,
-------------------
ASSETS 1999 1998 1997
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...................... $ 415 $ 543 $ 49
Cash, restricted............................... 18,255
Short-term investments, restricted............. 5,173
Prepaid expenses............................... 487 73 _
----------- ----------- ---------
Total current assets........................... 24,330 616 49
PROPERTY AND EQUIPMENT.............................. 49,317 27,112 16,583
DEFERRED FINANCING COSTS............................ 3,304
OTHER ASSETS........................................ 109 3
CASH, RESTRICTED.................................... _ 407 _
----------- ----------- ---------
TOTAL.......................................... $ 77,060 $ 28,138 $ 16,632
=========== =========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities....... $ 5,984 $ 1,210 $ 7
Accrued interest expense....................... 1,918
Accrued expenses, other........................ 118 - -
----------- ----------- ---------
Total current liabilities...................... 8,019 1,210 7
----------- ----------- ---------
NONCURRENT LIABILITIES:
Due to Riviera Holdings Corporation............ _ 6,241
13% First Mortgage Notes....................... 45,000
Special improvement district bonds, net of
undisbursed funds of $780.................. 784 687 -
----------- ----------- ---------
Total noncurrent liabilities................... 45,784 6,928 -
----------- ----------- ---------
Total liabilities.............................. 53,803 8,138 7
----------- ----------- ---------
COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 10,000 shares
authorized; 1,000 shares issued and
outstanding....................................
Additional paid-in capital..................... 23,459 20,000 16,625
Accumulated deficit............................ (202) - -
----------- ----------- ---------
Total stockholder's equity..................... 23,257 20,000 16,625
----------- ----------- ---------
TOTAL ......................................... $ 77,060 $ 28,138 $ 16,632
=========== =========== =========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER JUNE 30, 1999 AND PERIOD FROM AUGUST 18, 1997
(DATE OF INCEPTION) THROUGH EPTEMBER 30, 1999 (UNAUDITED)
(In thousands)
Nine Cumulative from
Months August 18, 1997
Ended (Date of
September 30, Inception) through
1999 September 30, 1999
-------- ------------------
Selling, general and administrative.......... $ (119) $ (119)
OTHER INCOME (EXPENSE):
Interest expense............................. (1,918) (1,918)
Amortization of deferred finance cost........ (175) (175)
Interest capitalized......................... 1,519 1,519
Interest income.............................. 382 382
Total other income (expense)............ (191) (191)
Loss before taxes............................ (311) (311)
Tax benefit.................................. 109 109
Net loss.................................... $ (202) $ (202)
See notes to financial statements.
F-4
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
PERIOD FROM AUGUST 18, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997 AND
YEAR ENDED DECEMBER 31, 1998 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock Additional
------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, AUGUST 18, 1997
(Date of Inception)................ - $ - $ - $ -
Common stock issued................ 1,000
Contributed capital................ - - 16,625 16,625
----- ------ -------- --------- --------
BALANCE, DECEMBER 31, 1997.............. 1,000 16,625 16,625
Contributed capital................ - - 3,375 3,375
----- ------ -------- --------- --------
BALANCE, DECEMBER 31, 1998.............. 1,000 20,000 20,000
Contributed capital (unaudited).... 3,459
Net loss (unaudited)............... - - - (202) (202)
----- ------ -------- --------- --------
BALANCE, SEPTEMBER 30, 1999..................
(Unaudited)........................ 1,000 $ - $ 23,459 $ (202) $ 23,257
===== ====== ======== ========= ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
PERIOD FROM AUGUST 18, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997 AND YEAR ENDED DECEMBER 31, 1998 AND
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) AND CUMULATIVE FROM
AUGUST 18, 1997 (INCEPTION) THROUGH SEPTEMBER 30, 1999 (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Cumulative
from
August
August 18, 1997
Nine Nine 18, 1997 (Date of
Months Months (Inception) Inception)
Ended Ended to through
September 30, September 30, December September 30,
1999 1998 1998 31, 1997 1999
-------- -------- ---- ----------- ----------
<S> <C> <C> <C> <C> <C>
NET LOSS.................................... $ (202) $ $ $ $ (202)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....... (14,225) (3,591) (6,667) (15,923) (37,164)
Decrease (increase) in prepaid expenses.. (414) (73) (487)
Increase in cash - restricted............ (18,255) (18,255)
Purchase of short-term investments....... (5,173) (5,173)
Deferred financing costs................. (3,304) (3,304)
(Increase) Decrease in restricted cash... 407 (407) --
Increase in other assets................. (103) (5) (3) (106)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities.... (40,964) (3,596) (7,150) (15,923) (64,383)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (payments to) Riviera
Holding Corporation..................... (6,241) 2,038 6,241 --
Proceeds from long-term borrowings......... 45,000 45,000
Contribution of paid-in capital............ 2,279 2,023 1,403 15,972 20,000
---------- ---------- ---------- ---------- ----------
Net cash provided by financing activities 41,038 4,061 7,644 15,972 65,000
---------- ---------- ---------- ---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS....... (128) 465 494 49 415
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD.................................... 543 49 49
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.... $ 415 $ 515 $ 543 $ 49 $ 415
========== ========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INFORMATION:
Property and equipment purchased using
accounts payable.......................... $ 4,892 $ 1,194 $ 1,203 $ 7 $ 6,102
========== ========== ========== ========== ==========
Property acquired using special improvement
district bonds............................ $ 97 $ 687 $ $ 784
========== ========== ========== ========== ==========
CAPITALIZED INTEREST CONTRIBUTED BY RIVIERA
HOLDINGS CORP............................. $ 1,180 $ 1,394 $ 1,972 $ 653 $ 3,459
========== ========== ========== ========== ==========
CAPITALIZED INTEREST, Other................. $ 1,519 $ $ $ $ 1,519
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM AUGUST 18, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation - On August 18, 1997 (date of
inception), Riviera Black Hawk, Inc. (the "Company") was formed. The
Company is a wholly owned subsidiary of Riviera Holdings Corporation. The
Company is a development stage enterprise that has not commenced operations
and will not commence operations until acceptable financing is obtained,
the casino is constructed, and gaming licenses are obtained. The principal
purpose of the Company is to develop a casino and entertainment complex in
Black Hawk, Colorado, which is anticipated to open in the first quarter of
2000. The Company has begun construction on this casino in Black Hawk,
Colorado, on a site that was purchased for $15.1 million in August 1997.
Financial Statements at September 30, 1999 and for the Nine Months
Ended September 30, 1999 and 1998 - The financial information at September
30, 1999 and for the nine months ended September 30, 1999 and 1998 is
unaudited. However, such information reflects all adjustments (consisting
solely of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the financial position,
results of operations, and cash flows for the interim period. The results
of operations for the nine months ended September 30, 1999 and 1998 are not
necessarily indicative of the results that will be achieved for the entire
year.
Certain Significant Risks and Uncertainties:
Gaming Regulation Licensing - The Company's ability to conduct
gaming operations in the state of Colorado depends on the ability of
the Company and Riviera Holdings Corporation to obtain licensing from
the Colorado gaming authorities. Such licensing and qualifications
will be reviewed periodically by the gaming authorities in Colorado.
Competition - The Black Hawk/Central City, Colorado, market
already has many established casinos. The market is highly
competitive, and other development projects are currently being
planned.
Construction Risks - Any construction project entails significant
construction risks, including, but not limited to, cost overruns,
delays in receipt of governmental approvals, shortages of materials or
skilled labor, labor disputes, unforeseen environmental or engineering
problems, work stoppages, fire and other natural disasters,
construction scheduling problems, and weather interferences, any of
which, if they occurred, could delay construction or result in a
substantial increase in costs to the Company.
Completion Capital Commitment - Riviera Holdings Corporation, will be
obligated to contribute to the Company up to $10.0 million of cash if at
any time there are insufficient funds available to enable the casino in
Black Hawk, Colorado to be operating by May 31, 2000. In addition, if the
casino is not operating by May 31, 2000, Riviera Holdings Corporation will
be obligated to contribute to the Company on that date $10.0 million in
cash less any amounts previously contributed under the Completion Capital
Commitment.
F-7
<PAGE>
Keep-Well Agreement - The Company and Riviera Holdings Corporation
will enter into a Keep-Well Agreement wherein, if (1) the Company does not
have the necessary funds to make a payment of fixed interest on the notes
during our first three years of operations or (2) consolidated cash flow is
less than $9.0 million in any of our first three years of operations,
Riviera Holdings Corporation will be obligated to contribute cash to the
Company to make up those amounts (up to a maximum of $5.0 million for any
one operating year and $10.0 million in the aggregate).
Cash and Cash Equivalents - The Company considers cash and all highly
liquid investments with a maturity at the time of purchase of three months
or less to be cash equivalents. At December 31, 1998 and 1997, there were
no cash equivalents.
Property and Equipment - Property and equipment are stated at cost,
and capitalized lease assets are stated at the present value of future
minimum lease payments at the date of lease inception. Interest incurred
during construction of new facilities or major additions to facilities is
capitalized and amortized over the life of the asset. Depreciation will be
computed, upon the commencement of gaming operations, using the
straight-line method over the shorter of the estimated useful lives or
lease terms, if applicable, of the related assets. The costs of normal
maintenance and repairs will be charged to expense as incurred. Gains or
losses on disposals will be recognized as incurred.
Other Assets - The Company is in the development stage and is
currently incurring organizational costs, which are being capitalized until
operations of the casino commence, at which time such organizational costs
will be amortized over a five-year period. Organizational costs consist
primarily of legal fees associated with establishing the gaming licenses
for business.
Restricted Cash - At December 31, 1998, the Company had a deposit with
a commercial bank in the amount of $407,000, which is restricted as to use.
This amount is required by a construction bond.
Estimates and Assumptions - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results may differ from estimates.
Recently Issued Accounting Standards - The American Institute of
Certified Public Accountants' Accounting Standards Executive Committee
issued Statement of Position No. 98-5, Reporting on the Costs of Start-Up
Activities. This standard provides guidance on the financial reporting for
start-up costs and organization costs. This standard requires costs of
start-up activities and organization costs to be expensed as incurred, and
is effective for fiscal years beginning after December 15, 1998, although
earlier application is encouraged. Management does not expect that the
effect of adopting this standard will have a material impact on the
Company's financial statements.
Federal Income Taxes - Riviera Holdings Corporation allocated income
tax expense or benefit to the Company as if the Company were filing
separate tax returns pursuant to a tax sharing arrangement. The Company
accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The
Company had no results of operation through December 31, 1998 that would
have created taxable events. Accordingly, no provision is shown in these
financial statements through December 31, 1998.
F-8
<PAGE>
2. RELATED-PARTY TRANSACTIONS
As of December 31, 1998, Riviera Holdings Corporation has contributed
$15.1 million to acquire land for the casino in Black Hawk and $4.9 million
in cash for developing the land for the casino, for a total capital
contribution of $20 million.
At December 31, 1998, the Company owed approximately $6.2 million to
Riviera Holdings Corporation, representing advances made by Riviera
Holdings Corporation for costs related to the development of the Riviera
Black Hawk casino. The advances are bearing interest at 10.6 percent and
are due June 30, 2000.
The Company has entered into a management agreement in principle (the
"Management Agreement") with Riviera Gaming Management of Colorado, Inc.,
(the "Manager") a wholly owned subsidiary of Riviera Holdings Corporation,
which, in exchange for a fee, will manage the Company. The management fee
will consist of a revenue fee and a performance fee. The revenue fee will
be based on 1% of net revenues (gross revenues less complimentaries) and is
payable quarterly in arrears. The performance fee will be based on the
following percentages of EBITDA (earnings before interest, taxes,
depreciation and amortization, whose components are based on generally
accepted accounting principles): (1) 10% of EBITDA from $5 million to $10
million, (2) 15% of EBITDA from $10 million to $15 million and (3) 20% of
EBITDA in excess of $15 million. The performance fee will be based on the
preceding quarter's EBITDA, paid in quarterly installments subject to
year-end adjustment. The management fee will go into effect on the date of
the opening of the Riviera Black Hawk casino.
If there is any default under the management agreement, the manager
will not be entitled to receive management fees, but the manager will still
be entitled to inter-company service fees.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31
(amounts in thousands):
1998 1997
---- ----
Land and improvements $15,790 $15,100
Construction in progress 11,322 1,483
------- -------
Total property and equipment $27,112 $16,583
======= =======
In 1998 and 1997, $2.0 million and $.6 million, respectively, in
interest costs were capitalized on the construction project.
4. SPECIAL IMPROVEMENT DISTRICT BONDS
The City of Black Hawk, Colorado, issued Special Improvement District
bonds ("SID bonds") in the amount of $2.9 million in July 1998. The bond
proceeds will be used to finance surface, underground, and utility
improvements, widen and improve a bridge, and improve traffic signals and
other infrastructure projects that benefit the Riviera Black Hawk property
and an adjacent casino. The SID bonds contain a lien provision that
attaches to the property until the bonds are fully paid.
F-9
<PAGE>
The Company is responsible to repay approximately 50% of the bonds. At
December 31, 1998, $1.4 million of the $2.9 million had been expended on
the designated projects. The remaining bond proceeds were in a controlled
disbursement account managed by the City of Black Hawk. The Company is
recording 50% of the costs of improvements to land improvements and a
corresponding amount to SID bonds payable. The bonds accrue interest at 5%
payable semiannually on June 1, and December 1 commencing December 1, 1998.
The Company's share of the debt on the SID bonds, when the project is
complete, is payable over ten years beginning in January 2000, as follows
(amounts in thousands):
1999 $ -
2000 112
2001 120
2002 127
2003 132
Thereafter 979
------
$1,470
======
5. COMMITMENTS AND CONTINGENCIES
The Company has entered into a guaranteed maximum price construction
contract for the construction of the Riviera Black Hawk at a guaranteed
maximum price of $27.6 million, including a contingency allowance of $0.5
million, for the construction of the casino, parking garage, associated
site work and all floor coverings and food service equipment. The
construction cost is fully supported by a payment and performance bond
obtained by the general contractor, Weitz, who is also required to provide
comprehensive public liability insurance, including contractual liability
coverage, in the amount of $2.0 million plus umbrella coverage in the
amount of $20.0 million. The Company has obtained builder's all risk
insurance to insure against damage to the work in place during
construction. The guaranteed maximum price is subject to decrease if there
are changes to the plans and specifications, if the work is delayed due to
actions of the owner or, due to customary contingencies that occur during
construction.
To discourage delays, liquidated damages will be payable by the
general contractor for each day that substantial completion is delayed past
the scheduled substantial completion date (as it may be extended under the
guaranteed maximum price construction contract), as follows: (1) no
penalties if the casino project is substantially completed on or before
January 31, 2000; (2) $10,000 per day each day from February 1, 2000
through February 14, 2000 that the casino project is not substantially
completed after January 31, 2000; and (3) an additional $15,000 for each
day from February 15, 2000 through June 30, 2000. In addition, to encourage
early completion of the casino, incentive fees will be payable to the
general contractor. Specifically, the guaranteed maximum price construction
contract provides: (1) if Weitz achieves substantial completion of the
project on or after December 29, 1999, but prior to January 4, 2000,
Weitz's lump sum fee shall be increased as incentive by $10,000 for each
day that the project is substantially complete prior to January 4, 2000;
and (2) if Weitz achieves substantial completion of the project any time
before December 29, 1999, Weitz's lump sum fee shall be increased as
incentive by $15,000 for each day the project is substantially complete
prior to December 29, 1999, plus the $10,000 for each day the project is
substantially complete between December 29, 1999 and January 4, 2000.
F-10
<PAGE>
The Company has a contract for architect services for approximately
$1.0 million. Substantially all expected services have been rendered and
paid on the contract at December 31, 1998.
6. SUBSEQUENT EVENTS (UNAUDITED)
During the nine months ended September 30, 1999, Riviera Holdings
Corporation contributed another $3.5 million of additional paid in capital.
The Financial Accounting Standards Board recently issued FAS No. 137,
'Deferral of FAS 133 Accounting for Derivatives' which delays the
implementation of that pronouncement to June 15, 2000. The Company has not
determined what effect, if any, that FAS 133 may have on its results of
operations.
The impact of adopting SOP 98-5 has been to record general expenses of
$119,000 for the first nine months of 1999 that the Company would otherwise
have deferred as a pre-opening cost.
On June 3, 1999, the Company closed a $45 million private placement of 13%
First Mortgage Notes. The net proceeds of the placement will be used to
fund the completion of RBH's casino project in Black Hawk, Colorado. The
Riviera Holdings Corporation has not guaranteed the $45 million RBH Notes,
but has agreed to a "Capital Completion Commitment" of up to $10 million
and a "Keep Well Agreement" of $5 million per year (or an aggregate limited
to $10 million) for the first 3 years of RBH operations to cover if (i) the
$5.85 million interest on such Notes is not paid by RBH and (ii) the amount
by which RBH cash flow is less than $7.5 million per year.
The notes were issued at a cost in the amount of $3.5 million. The deferred
financing costs are being amortized over the life of the notes on a
straight-line basis which approximates the effective interest method.
The 13% First Mortgage Note Indenture provides that, in certain
circumstances, the Company must offer to repurchase the 13% Notes upon the
occurrence of a change of control or certain other events. In the event of
such mandatory redemption or repurchase prior to maturity, the Company
would be unable to pay the principal amount of the 10% Notes without a
refinancing.
The 13% First Mortgage Note Indenture contains certain covenants,
which limit the ability of the Company and its restricted subsidiaries,
subject to certain exceptions, to: (i) incur additional indebtedness; (ii)
pay dividends or other distributions, repurchase capital stock or other
equity interests or subordinated indebtedness; (iii) enter into certain
transactions with affiliates; (iv) create certain liens; sell certain
assets; and (v) enter into certain mergers and consolidations. As a result
of these restrictions, the ability of the Company to incur additional
indebtedness to fund operations or to make capital expenditures is limited.
In the event that cash flow from operations is insufficient to cover cash
requirements, the Company would be required to curtail or defer certain of
their capital expenditure programs under these circumstances, which could
have an adverse effect on the Company's operations. At September 30, 1999,
the Company believes that it is in compliance with the covenants.
Amounts related to the Riviera Black Hawk casino project in Black Hawk,
Colorado are restricted in use to that project or for the related 13% First
Mortgage Notes interest payments.
Pursuant to a deposit account agreement, dated as of June 3, 1999, among
Bank of America as deposit bank, Riviera Holdings Corporation and First
American Title Insurance Company, Riviera Holdings Corporation has
deposited $5.0 million to insure First American against mechanics lien
claims against the Black Hawk property. If no mechanics liens are
outstanding 30 days after the casino opens, such $5.0 million deposit will
be returned to Riviera Holdings Corporation.
The Company accounts for investment securities in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 addresses the
accounting and reporting for investments in equity securities that have
readily
F-11
<PAGE>
determinable fair values and for all investments in debt securities, and
requires such securities to be classified as either held to maturity,
trading, or available for sale.
Management determines the appropriate classification of its investment
securities at the time of purchase and re-evaluates such determination at
each balance sheet date. Held-to-maturity securities are carried at
amortized cost. At September 30, 1999, securities classified as held to
maturity comprised debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies, and repurchase agreements, with
an amortized cost of $5,173,000, maturing in three months or more.
In July of 1999 the Company committed to an $11.1 million capital lease
line payable over 60 months at approximately 11.2% annual interest for
gaming equipment, furniture and fixtures at the Black Hawk, Co., casino.
******
F-12
<PAGE>
ANNEX A
RIVIERA HOLDINGS CORPORATION
Riviera Holdings Corporation's consolidated financial statements are
incorporated by reference in this prospectus only to illustrate its ability to
service its obligations under the Completion Capital Commitment and the
Keep-Well Agreement. Neither Riviera Holdings Corporation nor any of its
affiliates will participate in servicing the principal, fixed interest,
contingent interest or other payments due on the notes. Neither Riviera Holdings
Corporation nor any of its affiliates has any obligation to make any payments of
any kind to the holders of the notes.
A-1
<PAGE>
====================================== =======================================
We have not authorized any dealer,
salesperson or other person to give
any information or represent anything
to you other than the information
contained in this prospectus. This $45,000,000
prospectus does not offer to buy or
sell any notes in any jurisdiction
where it is unlawful. You must not
rely on unauthorized information or [LOGO]
representations. The information
contained in this prospectus is
current only as of its date.
-----------------
TABLE OF CONTENTS Riviera Black Hawk,
Inc.
Forward-Looking Statements.........iii
Summary..............................1
Risk Factors.........................9
Use Of Proceeds.....................18
Capitalization......................19
Selected Financial
Information........................20 OFFER TO EXCHANGE
Ratio Of Earnings To
Fixed Charges......................21
Management's Discussion
And Analysis Of Financial 13% First Mortgage Notes
Condition And Results Of due 2005
Operations.........................22 With Contingent Interest
The Exchange Offer..................26
Business ...........................35
Gaming And Liquor
Regulatory Matters.................43 for all outstanding
Material Agreements.................49
Management..........................52
Principal Stockholders..............54 13% First Mortgage Notes
Relationships And Related due 2005
Transactions.......................56 With Contingent Interest
Description of Notes................57
United States Federal
Income Tax Considerations..........85
Plan Of Distribution................88
Legal Matters.......................89
Experts ...........................89
Available Information...............89
Until February 6, 2000, 1999 (90 days --------------
after the effective date of this
Registration Statement), all dealers PROSPECTUS
effecting transactions in the new
notes, whether or not participating --------------
in the original distribution, may be
required to deliver a prospectus.
This is in addition to the
obligation of dealers to deliver a
prospectus when acting as December 7, 1999
underwriters and with respect to
their unsold allotments or
subscriptions.
====================================== =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article 109 of the Colorado Business Corporation Act provides in relevant
part that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful.
In addition, Article 109 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation.
Article 109 also provides that to the extent a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or
defense of any claim issue or matter therein, he shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him in
connection therewith.
The Bylaws of the Company provide for the indemnification of any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") by reason of the fact that such
person is or was a director or officer of the Company or a constituent
corporation absorbed in a consolidation or merger, or is or was serving at the
request of the Company or a constituent corporation absorbed in a consolidation
or merger, as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or is or was a director or officer of the
Company serving at its request as an administrator, trustee or other fiduciary
of one or more of the employee benefit plans of the Company or other enterprise,
against expenses (including attorneys' fees), liability and loss actually and
reasonably incurred or suffered by such person in connection with such
proceeding, whether or not the indemnified liability arises or arose from any
threatened, pending or completed proceeding by or in the right of the Company,
except to the extent that such indemnification is prohibited by applicable law.
The Bylaws of the Company also provide that such indemnification shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
as a matter of law or under any by-law, agreement, vote of stockholders or
otherwise.
II-1
<PAGE>
Section 7-108-402 of the Colorado Business Corporation Act provides that
a corporation may in its articles of incorporation eliminate or limit the
personal liability of a director to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director except for
liability: for any breach of the director's duty of loyalty to the corporation
or its shareholders; for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; for acts specified in
Section 7-108-403 of the Colorado Business Corporation Act (pertaining to
certain prohibited acts including unlawful payments of dividends or unlawful
purchases or redemptions of the corporation's capital stock); or for any
transaction from which the director derived an improper personal benefit. The
Articles of Incorporation of the Company contains a provision so limiting the
personal liability of directors of the Company.
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -------------------------------------------------------------------
3.01 Articles of Amendment to the Articles of Incorporation of the
Company.+
3.02 Articles of Incorporation of the Company.+
3.03 Bylaws of the Company.+
4.01 Indenture, dated as of June 3, 1999, among the Company, Riviera
Holdings and the Initial Purchaser.+
4.02 Form of 13% First Mortgage Note due 2005 with Contingent Interest
(included in Exhibit 4.01).+
4.03 Purchase Agreement, dated as of May 27, 1999, by and among the
Company, Riviera Holdings and the Initial Purchaser.+
4.04 Registration Rights Agreement, dated as of June 3, 1999, by and
between the Company and the Initial Purchaser.+
5.01 Opinion of Dechert Price & Rhoads.+
8.01 Opinion of Dechert Price & Rhoads regarding tax matters.+
10.01 The Completion Capital Commitment, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.+
10.02 The Keep-Well Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Holdings.+
10.03 The Tax-Sharing Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Holdings.+
10.04 The Management Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Gaming Management of Colorado,
Inc.+
10.05 The Trademark License Agreement, dated as of June 3, 1999, by
and between the Company and Riviera Operating Corporation.+
10.06 The Deed of Trust, dated as of June 3, 1999, made by the
Company to the Public Trustee of the County of Gilpin,
Colorado, for the benefit of the Trustee.+
10.07 The Assignment of Rents.+
10.08 The Environmental Indemnity, dated as of June 3, 1999, between the
Company and the Trustee.+
10.09 The Cash Collateral and Disbursement Agreement, dated as of
June 3, 1999, among the Company, the Trustee and Crss
Constructors, Inc.+
10.10 The Account Agreement, dated as of June 3, 1999, among the Company,
the Trustee and IBJ Whitehall Bank and Trust Company.+
10.11 The Security Agreement, dated as of June 3, 1999, made by the
Company in favor of the Trustee.+
10.12 The Manager Subordination Agreement, dated as of June 3, 1999,
by Riviera Gaming Management of Colorado in favor of the
Trustee.+
10.13 The Collateral Assignment of Trademark, dated as of June 3, 1999,
by and between the Company and the Trustee.+
<PAGE>
10.14 The Collateral Assignment, dated as of June 3, 1999, by and between
the Company and the Trustee.+
10.15 The Pledge and Assignment Agreement, dated as of June 3, 1999, by
and between the Company and the Trustee.+
10.16 Deposit Account Agreement, dated as of June 1999, among Bank of
America, Riviera Holdings and First American Title Insurance
Company.+
10.17 Construction Contract, made as of December 29, 1997, among the
Company, Weitz-Cohen Construction Co. and Melick Associates, Inc.+
10.18 Letter Agreement, dated January 6, 1999, between Riviera Gaming
Management and Jim Davey.+
10.19 Letter Agreement, dated January 15, 1999, between Riviera Gaming
Management and Tom Guth.+
12.01 Statement in re Computation of Ratios.+
23.01 Consent of Dechert Price & Rhoads (included in Exhibit 8.01).+
23.02 Consent of Deloitte & Touche LLP for Riviera Black Hawk, Inc.++
23.03 Consent of Deloitte & Touche LLP for Riviera Holdings
Corporation.++
23.04 Consent of Holme Roberts & Owen LLP.+
23.05 Consent of Verner, Liipfert, Bernhard, McPherson & Hand,
Chartered.+
25.01 Statement of Elibigility of Trustee.++
99.01 Form of letter of transmittal.+
99.02 Form of notice of guaranteed delivery.+
- - ----------------
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the contents
of all schedules and the Registrants agree to furnish supplementary copies
of such schedules to the Commission upon request.
+ Previously filed.
++ Filed herewith.
<PAGE>
(b) Financial Statement Schedules:
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
Item 22. Undertakings
(a) Each of the undersigned registrants hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each registrant pursuant to the foregoing provisions, or otherwise, each
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first
<PAGE>
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(d) Each of the undersigned registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the corporation being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on the 7th day of December, 1999.
RIVIERA BLACK HAWK, INC.
By: /s/ William L. Westerman
------------------------------------
William L. Westerman
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on the 7th day of December, 1999.
By: /s/ Ronald P. Johnson
------------------------------------
Ronald P. Johnson
President and Director
By: /s/ Duane R. Krohn
------------------------------------
Duane R. Krohn
Secretary, Treasurer, Chief
Financial Officer and Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -------------------------------------------------------------------
3.01 Articles of Amendment to the Articles of Incorporation of the
Company.+
3.02 Articles of Incorporation of the Company.+
3.03 Bylaws of the Company.+
4.01 Indenture, dated as of June 3, 1999, among the Company, Riviera
Holdings and the Initial Purchaser.+
4.02 Form of 13% First Mortgage Note due 2005 with Contingent Interest
(included in Exhibit 4.01).+
4.03 Purchase Agreement, dated as of May 27, 1999, by and among the
Company, Riviera Holdings and the Initial Purchaser.+
4.04 Registration Rights Agreement, dated as of June 3, 1999, by and
between the Company and the Initial Purchaser.+
5.01 Opinion of Dechert Price & Rhoads.+
8.01 Opinion of Dechert Price & Rhoads regarding tax matters.+
10.01 The Completion Capital Commitment, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.+
10.02 The Keep-Well Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Holdings.+
10.03 The Tax-Sharing Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Holdings.+
10.04 The Management Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Gaming Management of Colorado,
Inc.+
10.05 The Trademark License Agreement, dated as of June 3, 1999, by
and between the Company and Riviera Operating Corporation.+
10.06 The Deed of Trust, dated as of June 3, 1999, made by the
Company to the Public Trustee of the County of Gilpin,
Colorado, for the benefit of the Trustee.+
10.07 The Assignment of Rents.+
10.08 The Environmental Indemnity, dated as of June 3, 1999, between the
Company and the Trustee.+
10.09 The Cash Collateral and Disbursement Agreement, dated as of
June 3, 1999, among the Company, the Trustee and Crss
Constructors, Inc.+
10.10 The Account Agreement, dated as of June 3, 1999, among the Company,
the Trustee and IBJ Whitehall Bank and Trust Company.+
10.11 The Security Agreement, dated as of June 3, 1999, made by the
Company in favor of the Trustee.+
10.12 The Manager Subordination Agreement, dated as of June 3, 1999,
by Riviera Gaming Management of Colorado in favor of the
Trustee.+
10.13 The Collateral Assignment of Trademark, dated as of June 3, 1999,
by and between the Company and the Trustee.+
10.14 The Collateral Assignment, dated as of June 3, 1999, by and between
the Company and the Trustee.+
10.15 The Pledge and Assignment Agreement, dated as of June 3, 1999, by
and between the Company and the Trustee.+
10.16 Deposit Account Agreement, dated as of June 1999, among Bank of
America, Riviera Holdings and First American Title Insurance
Company.+
10.17 Construction Contract, made as of December 29, 1997, among the
Company, Weitz-Cohen Construction Co. and Melick Associates, Inc.+
<PAGE>
10.18 Letter Agreement, dated January 6, 1999, between Riviera Gaming
Management and Jim Davey.+
10.19 Letter Agreement, dated January 15, 1999, between Riviera Gaming
Management and Tom Guth.+
12.01 Statement in re Computation of Ratios.+
23.01 Consent of Dechert Price & Rhoads (included in Exhibit 8.01).+
23.02 Consent of Deloitte & Touche LLP for Riviera Black Hawk, Inc.++
23.03 Consent of Deloitte & Touche LLP for Riviera Holdings
Corporation.++
23.04 Consent of Holme Roberts & Owen LLP.+
23.05 Consent of Verner, Liipfert, Bernhard, McPherson & Hand,
Chartered.+
25.01 Statement of Eligibility of Trustee.++
99.01 Form of letter of transmittal.+
99.02 Form of notice of guaranteed delivery.+
- - ----------------
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the contents
of all schedules and the Registrants agree to furnish supplementary copies
of such schedules to the Commission upon request.
+ Previously filed.
++ Filed herewith.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 333-81613 on Form S-4 of Riviera Black Hawk, Inc. of our report
dated February 19, 1999, (which report expresses an unqualified opinion and
includes an explanatory paragraph referring to Riviera Black Hawk, Inc.'s status
as a development stage company) appearing in the Prospectus, which is part of
this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Las Vegas Nevada
December 7, 1999
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to Registration Statement No. 333-81613 on Form S-4 of Riviera Black Hawk,
Inc. of our report dated February 19, 1999, except for note 18, as to which the
date is October 18, 1999 appearing in the Annual Report on Form 10-K, of Riviera
Holdings Corporation and subsidiaries for the year ended December 31, 1998, and
to the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Las Vegas Nevada
December 7, 1999
========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
Riviera Black Hawk, Inc.
(Exact name of obligor as specified in its charter)
Colorado 86-0886265
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
444 Main Street
Black Hawk, Colorado 80422
(Address of principal executive offices) (Zip code)
-------------
13% First Mortgage Notes due 2005
(Title of the indenture securities)
========================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- - --------------------------------------------------------------------------------
Name Address
- - --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 6th day of December, 1999.
THE BANK OF NEW YORK
By: /s/ MICHAEL CULHANE
---------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
<PAGE>
Exhibit 7 to form T-1
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
<S> <C>
Dollar Amounts
ASSETS In Thousands Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.. $6,394,412
Interest-bearing balances........................... 3,966,749
Securities:
Held-to-maturity securities......................... 805,227
Available-for-sale securities....................... 4,152,260
Federal funds sold and Securities purchased under
agreements to resell................................ 1,449,439
Loans and lease financing receivables:
Loans and leases, net of unearned
income............................................ 37,900,739
LESS: Allowance for loan and
lease losses...................................... 572,761
LESS: Allocated transfer risk
reserve........................................... 11,754
Loans and leases, net of unearned income,
allowance, and reserve............................ 37,316,224
Trading Assets......................................... 1,646,634
Premises and fixed assets (including capitalized
leases)............................................. 678,439
Other real estate owned................................ 11,571
Investments in unconsolidated subsidiaries and
associated companies................................ 183,038
Customers' liability to this bank on acceptances
outstanding......................................... 349,282
Intangible assets...................................... 790,558
Other assets........................................... 2,498,658
Total assets........................................... $60,242,491
<PAGE>
LIABILITIES
Deposits:
In domestic offices................................. $26,030,231
Noninterest-bearing................................. 11,348,986
Interest-bearing.................................... 14,681,245
In foreign offices, Edge and Agreement
subsidiaries, and IBFs............................ 18,530,950
Noninterest-bearing................................. 156,624
Interest-bearing.................................... 18,374,326
Federal funds purchased and Securities sold under
agreements to repurchase............................ 2,094,678
Demand notes issued to the U.S.Treasury................ 232,459
Trading liabilities.................................... 2,081,462
Other borrowed money:
With remaining maturity of one year or less......... 863,201
With remaining maturity of more than one year
through three years............................... 449
With remaining maturity of more than three years.... 31,080
Bank's liability on acceptances executed and
outstanding......................................... 351,286
Subordinated notes and debentures...................... 1,308,000
Other liabilities...................................... 3,055,031
Total liabilities...................................... 54,578,827
EQUITY CAPITAL
Common stock........................................... 1,135,284
Surplus................................................ 815,314
Undivided profits and capital reserves................. 3,759,164
Net unrealized holding gains (losses) on
available-for-sale securities....................... (15,440)
Cumulative foreign currency translation adjustments....
(30,658)
Total equity capital................................... 5,663,664
Total liabilities and equity capital................... $60,242,491
- - ---------------------------------------------------------------
</TABLE>
<PAGE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni
Alan R. Griffith Directors
Gerald L. Hassell
- - -------------------------------------------------------------------------------
