<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 28, 1998)
$275,000,000
[LOGO]
CIRCUS CIRCUS ENTERPRISES, INC.
9 1/4% SENIOR SUBORDINATED NOTES DUE 2005
------------------
We will pay interest on the notes at the rate of 9 1/4% per year. Interest
on the notes is payable on June 1 and December 1 of each year, commencing June
1, 1999. The notes will mature on December 1, 2005. We may redeem the notes
prior to their maturity at the redemption prices described more fully in this
prospectus. This prospectus contains additional information regarding the terms
of the notes, including redemption prices and covenants.
The notes will be subordinated to all of our existing and future senior
indebtedness, as that term is defined in the accompanying prospectus. The notes
will rank equally with all of our existing and future senior subordinated
indebtedness. The notes will effectively rank junior to all liabilities of our
subsidiaries.
INVESTING IN THE NOTES INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT.
---------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
----------- --------------
<S> <C> <C>
Public Offering Price (1)............................................. 100% $ 275,000,000
Underwriting Discount................................................. 2.5% $ 6,875,000
Proceeds, before expenses, to Circus Circus Enterprises, Inc.......... 97.5% $ 268,125,000
</TABLE>
(1) Purchasers will also be required to pay accrued interest from November
20, 1998 if settlement occurs after that date.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NEITHER THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE MISSISSIPPI GAMING COMMISSION, NOR ANY OTHER GAMING REGULATORY AUTHORITY HAS
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS
OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
We expect that the notes will be ready for delivery in New York, New York on
or about November 20, 1998.
------------------------
JOINT BOOK-RUNNING MANAGERS
MERRILL LYNCH & CO. NATIONSBANC MONTGOMERY SECURITIES LLC
----------------
CREDIT LYONNAIS SECURITIES (USA) INC.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
SG COWEN
------------------
The date of this prospectus supplement is November 17, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements................................................ S-3
Summary................................................................... S-4
Risk Factors.............................................................. S-10
Use of Proceeds........................................................... S-16
Capitalization............................................................ S-17
Selected Financial Information............................................ S-18
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. S-20
Description of the Notes.................................................. S-31
Underwriting.............................................................. S-35
Legal Matters............................................................. S-36
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
The Company............................................................... 5
The Trusts................................................................ 6
Gaming Regulation......................................................... 7
Ratio of Earnings To Fixed Charges........................................ 9
Use of Proceeds........................................................... 9
Accounting Treatment Relating to Trust Securities......................... 9
Description of Debt Securities............................................ 9
Description of the Trust Preferred Securities............................. 22
Description of the Trust Preferred Securities Guarantees.................. 23
Description of the Subordinated Deferrable Interest Debentures............ 26
Plan of Distribution...................................................... 33
Legal Matters............................................................. 34
Experts................................................................... 34
</TABLE>
------------------------
This document is in two parts. The first part is the prospectus supplement,
which describes the specific terms of the notes we are offering and certain
other matters relating to us and our business. The second part, the base
prospectus, gives more general information, some of which may not apply to the
notes we are offering. Generally, when we refer only to the prospectus, we are
referring to both parts combined. If the description of your notes varies
between the prospectus supplement and the accompanying prospectus, you should
rely on the information in the prospectus supplement.
------------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the prospectus. We have not, and the
underwriters have not, authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in this
prospectus supplement and the prospectus, as well as information we previously
filed with the Securities and Exchange Commission and incorporated by reference
is accurate as of the date on the front cover of this prospectus supplement
only. Our business, financial condition, results of operations and prospects may
have changed since that date.
S-2
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about Circus Circus Enterprises, Inc., including,
among other things, those relating to:
- Our development and construction activities;
- Our dependence on existing management;
- Leverage and debt service (including sensitivity to fluctuations in
interest rates);
- Domestic and global economic conditions;
- Changes in federal or state tax laws or the administration of such laws;
- Changes in gaming laws or regulations (including the legalization of
gaming in certain jurisdictions); and
- Applications for licenses and approvals under applicable laws and
regulations (including gaming laws and regulations).
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
S-3
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF OUR BUSINESS. IT DOES NOT CONTAIN ALL THE
INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS
AND THE OTHER INFORMATION WE REFER TO CAREFULLY BEFORE YOU DECIDE TO INVEST IN
THE NOTES.
THE COMPANY
We are one of the largest hotel-casino operators (in terms of rooms and
casino square footage) in the United States. Upon completion of our newest
hotel-casino resort, Mandalay Bay, we will own and operate eleven hotel-casino
properties with over 22,000 guest rooms and over 800,000 square feet of gaming
space. We also own a 50% interest in three joint venture casino properties with
approximately 4,700 guest rooms and over 200,000 square feet of gaming space.
For the twelve months ended July 31, 1998, we had revenues of $1.4 billion and
operating income plus depreciation, preopening expense, abandonment losses and
other nonrecurring items of $368.5 million.
In March 1999, we expect to open Mandalay Bay as the centerpiece of our
Masterplan Mile on the south end of the Las Vegas Strip. Masterplan Mile is
approximately 230 acres with approximately one mile of frontage on the Las Vegas
Strip. We believe that Masterplan Mile represents a completely new concept in
hotel-casino development. Mandalay Bay will have a tropical environment and will
be surrounded by multiple resorts, including Luxor and Excalibur. This cluster
of interconnected entertainment destinations will have no similarly scaled
competition in Las Vegas. The array of distinctively themed hotel-casinos within
Masterplan Mile will be complemented by restaurants, shops and entertainment
venues catering to a broad spectrum of Las Vegas visitors.
Our wholly owned and operated properties at July 31, 1998 are summarized
below:
<TABLE>
<CAPTION>
CASINO
HOTEL SQUARE GAMING PARKING
LOCATION/PROPERTY ROOMS FOOTAGE SLOTS(1) TABLES(2) SPACES
- ---------------------------------------------- ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
LAS VEGAS, NEVADA
Circus Circus............................... 3,744 109,000 2,200 74 4,700
Luxor....................................... 4,425 120,000 2,013 105 3,200
Excalibur................................... 4,000 110,000 2,442 75 4,000
Silver City(3).............................. -- 18,200 443 19 350
Slots-A-Fun................................. -- 16,700 537 27 --
RENO, NEVADA
Circus Circus............................... 1,605 60,000 1,779 75 3,000
LAUGHLIN, NEVADA
Colorado Belle.............................. 1,226 64,000 1,234 40 1,700
Edgewater................................... 1,450 44,000 1,331 40 2,300
JEAN, NEVADA
Gold Strike................................. 813 37,000 1,080 22 2,100
Nevada Landing.............................. 303 36,000 1,035 21 1,400
HENDERSON, NEVADA
Railroad Pass............................... 120 21,000 399 9 600
TUNICA COUNTY, MISSISSIPPI
Gold Strike................................. 1,066 48,000 1,322 46 1,400
</TABLE>
- --------------------------
(1) Includes slot machines and other coin-operated devices.
(2) Generally includes blackjack ("21"), craps, pai gow poker, Caribbean stud
poker, wheel of fortune and roulette.
(3) This property is operated by us under a lease which expires in October 1999.
S-4
<PAGE>
JOINT VENTURE PROPERTIES
We are a 50% participant in joint ventures that own and operate properties
in Las Vegas and Reno, Nevada and Elgin, Illinois. Our 50% joint ventures at
July 31, 1998 are summarized below:
<TABLE>
<CAPTION>
CASINO
SQUARE GAMING PARKING
LOCATION/PROPERTY HOTEL ROOMS FOOTAGE SLOTS(1) TABLES(2) SPACES
- ----------------------------------------------- ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
LAS VEGAS, NEVADA
Monte Carlo................................... 3,002 90,000 2,080 95 4,000
ELGIN, ILLINOIS
Grand Victoria................................ -- 36,000 977 58 2,000
RENO, NEVADA
Silver Legacy................................. 1,711 85,000 2,253 83 1,800
</TABLE>
- --------------------------
(1) Includes slot machines and other coin-operated devices.
(2) Generally includes, blackjack ("21"), craps, pai gow poker, Caribbean stud
poker, wheel of fortune and roulette.
NEW CASINO RESORT DEVELOPMENT
LAS VEGAS
In the Spring of 1997, we commenced construction of Mandalay Bay. Mandalay
Bay will be a 43-story, hotel-casino resort with approximately 3,700 rooms and
approximately 135,000 square feet of gaming space. The resort will be situated
on approximately 60 acres of land just south of Luxor. Mandalay Bay's
attractions are planned to include an 11-acre tropical lagoon featuring a
sand-and-surf beach, a three-quarter-mile lazy river ride, a 30,000-square-foot
spa and other entertainment attractions. Inside, Mandalay Bay will offer
internationally renowned restaurants, as well as a House of Blues nightclub and
restaurant, including its signature Foundation Room sited on Mandalay Bay's
rooftop, and 100 "music-themed" hotel rooms in Mandalay Bay's towers.
Within Mandalay Bay and as part of its 3,700 rooms, a Four Seasons Hotel
with approximately 400 rooms will provide Las Vegas visitors with a luxury
"five-star" hospitality experience. We will own the Four Seasons Hotel, but it
will be managed by Four Seasons Hotels Limited. The cost of Mandalay Bay,
including the Four Seasons Hotel but excluding the land, capitalized interest
and pre-opening expenses, is currently estimated at approximately $850 million.
See "Risk Factors--Construction Risks" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources--New Projects."
During the course of construction, Mandalay Bay's hotel tower experienced
settling in excess of the level contemplated in the building's original design
and the amount of settling has been greater in some portions of the structure
than others. We have retained geotechnical, structural engineering and
foundation consultants who have evaluated the situation and have recommended
remedial measures. The recommended remedial measures are substantially
completed, and we do not expect the remaining work to delay the opening of
Mandalay Bay or materially increase the cost of the project. However, until such
remedial measures have been completed and evaluated over a meaningful period of
time, we cannot be certain if further corrective measures will be required or as
to the impact of such measures.
Mandalay Bay is the latest phase of our Masterplan Mile. We are also
constructing a 125,000-square-foot convention facility and a 12,000-seat arena
as core components of Masterplan Mile to be completed and opened concurrently
with Mandalay Bay. The estimated cost of the convention facility and arena,
excluding the land and capitalized interest, is approximately $100 million. We
also intend to construct a monorail system to link our resorts on Masterplan
Mile and we are planning a "Sea of Predators" aquarium exhibit as a core
component of Masterplan Mile. Both the monorail and the Sea of Predators exhibit
are anticipated to be completed after the opening of Mandalay Bay. The cost of
these additional
S-5
<PAGE>
core components, excluding the land and capitalized interest, is estimated at
approximately $75 million. We may add other components to the development plan
for Masterplan Mile in the future.
DETROIT, MICHIGAN
We have formed a joint venture with the Detroit-based Atwater Casino Group
to build, own and operate a hotel-casino in Detroit, Michigan. We will own a 45%
equity interest in the proposed project and receive a management fee. The joint
venture is one of three groups which negotiated development agreements with the
City, which were approved by the City Council on April 9, 1998. The joint
venture's ability to proceed with the proposed project is contingent upon the
receipt of all necessary gaming approvals and satisfaction of other conditions.
The joint venture is planning a $600 million project. We expect to be required
to contribute 20% of such amount in the form of equity and we will seek project-
specific financing for the balance. If we proceed with the project, we will
guarantee completion of the project and enter into a keep-well guarantee with
the City. Under the keep-well guarantee, we could be required to contribute
additional funds, if and as needed, to continue operations of the project for a
period of two years. If permitted by city and state authorities, the joint
venture expects to construct a temporary facility. See "Risk
Factors--Mississippi and Michigan Voter Initiatives to Ban Gaming."
MISSISSIPPI GULF COAST
We also have plans to develop a hotel-casino resort on the Mississippi Gulf
Coast at the north end of the Bay of St. Louis, with approximately 1,500 hotel
rooms. While we have received all necessary approvals to commence development,
these approvals have been challenged in state and federal court. The design and
construction of this project is expected to commence only after satisfactory
resolution of all legal actions. We expect to invest approximately $225 million
in the project. We will own 90% of the resort, with a partner contributing the
land in exchange for the remaining 10% interest. See "Risk Factors--Mississippi
and Michigan Voter Initiatives to Ban Gaming."
BUSINESS STRATEGY
Our objective is to be a leader in resort entertainment, with casino gaming
as our core strength. To achieve this objective, we pursue the following
strategies:
- A LEADER IN EACH OF OUR MARKETS
We seek to be a leading owner and operator of resort destination
properties in major gaming markets within the United States by leveraging
our considerable operating expertise, brand value and reputation in the
gaming industry. We believe that our expansion projects represent
significant growth opportunities with geographic diversity that will
reduce our reliance on any particular U.S. gaming market.
- DEVELOPMENT OF MASTERPLAN MILE
Masterplan Mile is the largest development parcel in Las Vegas. Mandalay
Bay will be the centerpiece of our "Strip within a Strip" concept.
Mandalay Bay, Luxor and Excalibur will represent over 12,000 rooms and
over 350,000 feet of casino space in the aggregate. Our long-term plan
for Masterplan Mile presently includes two additional resorts and
additional entertainment facilities. We believe Masterplan Mile
represents a unique gaming resort complex that will have no comparably
scaled competition in Las Vegas.
- OWN AND OPERATE "MUST SEE" DESTINATIONS
Within each of our existing and target markets, we seek to own and
operate one or more gaming resorts that are viewed by visitors as "must
see" properties. The properties are developed to be distinctively themed
and to provide customers with a vacation experience that includes resort
S-6
<PAGE>
hotel and gaming facilities, premier entertainment events and high
quality dining. We believe that each of our currently planned properties
will, once opened, become one of the destinations of choice in its
respective market.
- TARGET LARGEST SEGMENTS OF VISITORS
We target a broad range of clientele by providing a quality resort
experience at an attractive price. With the construction of Mandalay Bay,
we have increased our commitment to upscale clientele and expanded our
target market to include premium clientele. The interconnected Masterplan
Mile complex should attract the multisegmented range of our target
market.
- MAXIMIZE CUSTOMER SATISFACTION THROUGH STRATEGIC ALLIANCES
We seek strategic alliances with premier partners to create unique
destinations. As an example of this strategy, our agreement with Four
Seasons provides a "five star" hospitality experience. We intend for this
agreement with Four Seasons to be only the first step of a cooperative
relationship with Four Seasons to identify opportunities for development
of hotel and casino properties worldwide. We have also entered into an
agreement with the House of Blues that provides high-quality,
distinctively-themed entertainment as an integral part of the total
experience offered both at Mandalay Bay and within Masterplan Mile.
RECENT DEVELOPMENTS
For the quarter ending October 31, 1998, we reported net income of
$23,716,000, or $.25 per share, compared with net income of $27,223,000, or $.29
per share, in the same quarter last year. In this year's quarter, we absorbed
approximately $5.4 million in political campaign costs associated with
Proposition 5 in California, which are reflected in corporate expense. In the
prior year's quarter, we sold an airplane that resulted in a gain of $.04 per
share. Before these one-time items, earnings in this year's quarter were $.29
per share against $.25 on the equivalent operating basis last year.
Luxor's operating cash flow rose in the quarter to $26.7 million versus
$21.2 million a year ago. Higher room rates and higher casino revenues at the
resort contributed to this growth. At Circus Circus-Las Vegas, operating cash
flow increased to $15.0 million against $11.2 million last year, reflecting both
growth in revenues and improvement in departmental margins, including food.
Excalibur compared about even in operating cash flow with last year's
results ($19.5 million against $19.6 million), while Monte Carlo, a 50%-owned
joint venture, posted operating cash flow of $20.3 million versus $23.8 million.
In Reno, we generated a total of $15.3 million in operating cash flow
(including our 50% ownership of Silver Legacy) against $13.7 million a year ago.
And the positive trend also continued in Laughlin this quarter, with our two
properties (Colorado Belle and Edgewater) contributing $7.4 million in operating
cash flow versus $5.3 million last year.
In Tunica County, Mississippi, our recently expanded and remodeled Gold
Strike Casino Resort turned in $7.6 million in operating cash flow compared with
$2.1 million in the prior year, while in Elgin, Illinois, Grand Victoria (50% of
which we own) posted $20.1 million against $24.4 million last year. This year
Illinois' maximum tax rate on casino revenues has risen to 35% from 20% a year
ago, which caused the downturn in the vessel's profits. Otherwise, casino
revenues at Grand Victoria were up 7% in the quarter.
In total, our properties (before corporate expense but including our share
of depreciation from joint ventures) generated $117.0 million in operating cash
flow compared with $102.5 million in the third quarter last year.
Due primarily to costs associated with the construction of Mandalay Bay, net
current liabilities were $88.2 million as of October 31, 1998, compared to $26.5
million as of July 31, 1998.
S-7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Issuer.......................... Circus Circus Enterprises, Inc.
Notes Offered................... $275,000,000 principal amount of 9 1/4% Senior
Subordinated Notes due 2005.
Maturity........................ December 1, 2005.
Interest Payment Dates.......... June 1 and December 1 of each year, commencing June 1,
1999.
Redemption...................... Prior to December 1, 2002, the notes will be redeemable at
a price equal to their principal amount plus a make-whole
premium. Beginning December 1, 2002, the notes will be
redeemable at the redemption prices more fully explained
in this prospectus. A portion of the notes also will be
redeemable prior to December 1, 2001 with the proceeds of
a public offering of equity securities. The notes may also
be redeemable under certain circumstances as required by
applicable gaming authorities.
Ranking......................... The notes will be subordinated to all of our existing and
future senior indebtedness. The notes will rank equally
with all of our existing and future senior subordinated
indebtedness, including our currently outstanding 7 5/8%
Senior Subordinated Debentures due 2013 and 6 3/4% Senior
Subordinated Notes due 2003. The notes will effectively
rank junior to all liabilities of our subsidiaries.
Because the notes are subordinated, in the event of
bankruptcy, liquidation or dissolution, holders of the
notes will not receive any payment until holders of senior
indebtedness have been paid in full. The term "senior
indebtedness" is defined with respect to the notes in the
"Description of Debt Securities--Certain Definitions"
section of the accompanying prospectus.
Assuming we sold the notes and applied the proceeds on
July 31, 1998, we would have had approximately $1.5
billion of senior indebtedness outstanding and
approximately $327 million of liabilities at our
subsidiaries. We have the ability to incur substantial
amounts of additional debt that will contractually and
effectively rank prior to the notes.
Use of Proceeds................. We estimate that the net proceeds from this offering will
be approximately $267 million. We intend to use these
proceeds to retire indebtedness under our credit facility.
We may subsequently reborrow such funds:
- To finance additional construction costs for Masterplan
Mile;
- To repurchase shares of the Company's Common Stock; and
- For other general corporate purposes.
Risk Factors.................... See "Risk Factors" on page S-10 for a discussion of
factors you should carefully consider before deciding to
invest in the notes.
</TABLE>
S-8
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary was derived from our financial statements. The
information is only a summary and does not provide all of the information
contained in our financial statements. The results of operations for the six
months ended July 31, 1998 may not be indicative of results of operations to be
expected for the full year. The summary should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in our Annual
Report on Form 10-K for the fiscal year ended January 31, 1998 and the Condensed
Consolidated Financial Statements and notes thereto included in our Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1998 and incorporated
by reference in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
------------------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1997 1998
--------- ----------- ----------- ----------- ----------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenues (2).................. $ 963,470 $ 1,170,182 $ 1,299,596 $ 1,334,250 $ 1,354,487 $ 687,390 $ 741,623
Income from operations............ 201,061 256,007 251,373 222,169 236,500 145,385 127,164
Pretax income..................... 182,608 214,490 205,759 163,863 147,922 98,243 75,837
Net income........................ 116,189 136,286 128,898 100,733 89,908 61,977 46,892
OTHER DATA:
EBITDA (3)........................ $ 276,532 $ 341,772 $ 400,133 $ 379,809 $ 376,881 $ 208,218 $ 199,831
Capital expenditures.............. $ 378,785 $ 142,667 $ 221,684 $ 585,835 $ 663,270 $ 302,841 $ 349,981
Rooms (4)......................... 13,665 13,665 17,739 22,407 23,465 22,407 23,465
Casino square footage (4)......... 536,400 650,200 892,900 894,700 894,900 894,700 894,900
Number of slot machines (4)....... 13,376 16,723 23,477 22,254 21,520 21,230 21,125
Number of table games (4)......... 485 594 837 814 785 763 789
Ratio of EBITDA to interest
expense......................... 15.56x 8.00x 7.76x 6.95x 4.24x 4.76x 4.15x
Ratio of long-term debt to
EBITDA.......................... 2.05x 1.85x 1.79x 3.70x 4.75x -- --
Ratio of earnings to fixed
charges (5)..................... 5.40x 5.38x 3.85x 2.68x 1.99x 2.47x 1.82x
</TABLE>
<TABLE>
<CAPTION>
AT JANUARY 31, AT JULY 31,
--------------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................. $ 1,297,924 $ 1,512,548 $ 2,213,503 $ 2,729,111 $ 3,263,548 $ 2,995,770 $ 3,567,674
Long-term debt............... 567,345 632,652 715,214 1,405,897 1,788,818 1,580,953 2,029,311
Stockholders' equity......... 559,950 686,124 1,226,812 971,791 1,123,749 1,092,968 1,170,860
</TABLE>
- --------------------------
(1) Gold Strike, Nevada Landing, Railroad Pass and our 50% interest in Grand
Victoria were acquired on June 1, 1995. The Hacienda was acquired on
September 1, 1995 and closed on December 1, 1996. Gold Strike-Tunica
(formerly Circus Circus-Tunica) opened in August 1994. Luxor opened in
October 1993. Silver Legacy and Monte Carlo, each of which we own a 50%
interest in, opened in July 1995 and June 1996, respectively.
(2) Revenues are net of complimentary allowances.
(3) EBITDA consists of operating income plus depreciation, preopening expense,
abandonment losses and other nonrecurring items. Corporate expense also
contains depreciation which has been added back in the calculation. EBITDA
is a measure commonly used by the financial community but is not prepared in
accordance with United States generally accepted accounting principles and
should not be considered as a measurement of net cash flows from operating
activities.
(4) Items include 100% of our joint venture properties.
(5) The ratio of earnings to fixed charges has been computed by dividing net
income before fixed charges and income taxes, adjusted to exclude
capitalized interest and equity in undistributed earnings of
less-than-50%-owned ventures. Fixed charges consist of interest, whether
expensed or capitalized, amortization of debt discount and issuance costs,
our proportionate share of the interest cost of 50%-owned ventures, and the
estimated interest component of rental expense.
S-9
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION
INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS BEFORE DECIDING TO INVEST IN THE NOTES.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
We are highly leveraged. At October 31, 1998, we had total consolidated
indebtedness of approximately $2.1 billion. The notes will not restrict our
ability to borrow substantial additional debt, including senior indebtedness. In
addition, we are and will become a party to various keep-well agreements with
respect to existing and future joint ventures in which we have or will have an
interest. These agreements may require us to make additional cash contributions.
Our high level of indebtedness could have important consequences to
noteholders such as:
- Limiting our ability to obtain additional financing to fund our growth
strategy, working capital, capital expenditures, acquisitions, debt
service or other obligations;
- Limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a significant portion of these funds to
make principal and interest payments on our indebtedness;
- Limiting our ability to compete with others who are not as highly
leveraged; and
- Limiting our ability to react to changing market conditions, changes in
our industry and economic downturns.
The agreements governing existing debt obligations contain, and any future
financing agreements may contain, financial and restrictive covenants. A breach
of any of these restrictions could cause a default under other debt and the
notes.
If we do not generate sufficient cash from operations to make scheduled
payments on the notes or to meet our other obligations, we will need to
refinance our debt, obtain additional financing or sell assets. We cannot assure
you that our business will generate cash flow, or that we will be able to obtain
funding, sufficient to satisfy our debt service requirements. We may also borrow
funds in the future to finance stock repurchases, which would increase our
leverage.
RESTRICTIONS IN DEBT AGREEMENTS ON OUR OPERATIONS
Our $2 billion revolving credit facility (the "Credit Facility") imposes
certain operating and financial restrictions. These restrictions include, among
other things, limitations on our ability to:
- Incur additional debt;
- Create liens or other encumbrances;
- Pay dividends or to make other restricted payments;
- Make investments, loans or other guarantees;
- Sell or otherwise dispose of a portion of our assets; or
- Merge or consolidate with another entity.
In addition, our Credit Facility also contains financial covenants that will
require us to meet certain financial ratios and tests. Our ability to borrow
funds to meet our financing plans will depend on us meeting these ratios and
tests.
If we fail to comply with the obligations contained in our Credit Facility
or any future financing agreements, an event of default could occur. An event of
default could result in the acceleration of our obligations on all or a
substantial portion of our indebtedness. We would not have, and are not certain
we would be able to obtain, sufficient funds to meet our accelerated or other
obligations, including payments on the notes.
S-10
<PAGE>
SUBORDINATION OF THE NOTES TO SENIOR INDEBTEDNESS
The notes will be subordinated to all senior indebtedness. Assuming we had
issued the notes and applied the proceeds on July 31, 1998, we would have had
outstanding approximately $1.5 billion of senior indebtedness. The notes will
not limit our ability to incur substantial additional senior indebtedness,
including under the Credit Facility. In the event of our bankruptcy, liquidation
or dissolution, our assets would be available to pay obligations on the notes
only after all payments had been made on our senior indebtedness. We cannot
assure you that sufficient assets would remain to make any payments on the
notes. In addition, following the occurrence of certain events of default in
respect of our senior indebtedness, we may be prohibited, under the terms of the
notes, from making any payments on the notes. The term "senior indebtedness," as
it applies to the notes, is defined in the "Description of Debt Securities--
Subordination of Securities" section of the accompanying prospectus.
STRUCTURAL SUBORDINATION OF THE NOTES TO INDEBTEDNESS OF SUBSIDIARIES
The issuer of the notes is a holding company. Our subsidiaries conduct
substantially all of our consolidated operations and own substantially all of
our consolidated assets. Consequently, our cash flow and our ability to meet our
debt service obligations depends upon the cash flow of our subsidiaries and the
payment of funds by the subsidiaries to us in the form of loans, dividends or
otherwise. Our subsidiaries are not obligated to make funds available to us for
payment on the notes or otherwise. In addition, their ability to make any
payments will depend on their earnings, the terms of their indebtedness,
business and tax considerations and legal restrictions.
The notes will effectively rank junior to all liabilities of our
subsidiaries. In the event of a bankruptcy, liquidation or dissolution of a
subsidiary and following payment of its liabilities, the subsidiary may not have
sufficient assets remaining to make any payments to us as a shareholder or
otherwise so that we can meet our obligations at the holding company. Assuming
we had issued the notes and applied the proceeds on July 31, 1998, our
subsidiaries would have had approximately $327 million of outstanding
liabilities, including $1.1 million of indebtedness. The indenture governing the
notes will permit our subsidiaries to incur substantial additional indebtedness.
COMPETITION
The hotel and casino industry is highly competitive. Our hotel-casino
operations in Las Vegas, which are conducted primarily from facilities located
along the Las Vegas Strip, currently compete with approximately 28 other major
hotel-casinos and a number of smaller casinos located on or near the Las Vegas
Strip. Our Las Vegas operations also compete with casinos located in downtown
Las Vegas, approximately 11 of which offer hotel, food and beverage and
entertainment facilities, and several major hotel-casinos located elsewhere in
the Las Vegas area. Our properties in Las Vegas also compete, to a lesser
extent, with casino and hotel facilities in other parts of Nevada, including
Laughlin, Reno and along I-15 (the principal highway between Las Vegas and
southern California) near the California-Nevada state line.
Casino and hotel capacity continues to increase in the Las Vegas market.
During 1997, the number of hotel rooms increased by 11% while the number of
visitors to Las Vegas increased by only 3%. This imbalance of supply and demand
had a negative effect on room and occupancy rates in Las Vegas. Las Vegas hotel
and casino capacity is expected to continue to increase significantly. Mandalay
Bay is just one of four major properties, totaling approximately 12,500 rooms,
that will open within a year's span which began with the opening of a 3,000 room
property in October 1998. At this time, we cannot determine what impact the
opening of these properties will have on us. While our operations in Las Vegas
had previously benefited from growth in hotel and casino capacity in the Las
Vegas market when we were a significant contributor to the new capacity, the
addition of 1,000 rooms at Circus Circus-Las Vegas and an additional 1,950 at
Luxor in 1997 contributed to a growth in hotel capacity in the Las Vegas market
that outpaced market growth in fiscal 1998. Our success at Mandalay Bay and the
entire Masterplan Mile, as well as our
S-11
<PAGE>
other existing operations, will depend on the ability of Mandalay Bay and other
new properties to draw sufficient additional visitors to Las Vegas.
Circus Circus-Reno competes with approximately 13 major casinos (the
majority of which offer hotel rooms), including Silver Legacy, a 1,711-room
hotel-casino complex which is 50% owned by one of our wholly owned subsidiaries.
Circus Circus-Reno and Silver Legacy also compete with numerous other smaller
casinos in the greater Reno area and, to a lesser extent, with casino and hotel
facilities in Lake Tahoe and other parts of Nevada.
In Laughlin, the Colorado Belle and the Edgewater, which together accounted
for approximately 24% of the rooms in Laughlin as of July 31, 1998, compete with
eight other Laughlin casinos. They also compete with the hotel-casinos in Las
Vegas and those on I-15 (the principal highway between Las Vegas and southern
California) near the California-Nevada state line, as well as a growing number
of Native American casinos in Laughlin's regional market. We believe the
significant expansion of hotel and casino capacity in Las Vegas in recent years
and the growth of Native American casinos in central Arizona and southern
California have had a negative impact on Laughlin area properties, including the
Colorado Belle and the Edgewater, by drawing visitors from the Laughlin market.
This has, in turn, resulted in increased competition among Laughlin properties
for a reduced number of visitors thus contributing to generally lower revenues
and profit margins at Laughlin properties, including the Colorado Belle and the
Edgewater.
Our Jean, Nevada properties, Gold Strike and Nevada Landing, are located on
I-15 (the principal highway between Las Vegas and southern California),
approximately 25 miles south of Las Vegas and 12 miles north of the
California-Nevada border. These properties attract their customers almost
entirely from the large number of people traveling between Las Vegas and
southern California. Accordingly, these properties compete with the large
concentration of hotel, casino and other entertainment options available in Las
Vegas as well as three hotel-casinos located at the California-Nevada border.
Gold Strike-Tunica competes with eight other casinos in Tunica County,
Mississippi, including Grand Casinos' hotel-casino which opened in 1996 at Buck
Lake, directly north of Gold Strike-Tunica. Grand Casino's hotel-casino is
closer to Memphis than any of the other facilities currently in operation in
Tunica County.
We own a 50% interest in a joint venture that owns and operates the Grand
Victoria, a riverboat casino and land-based entertainment complex in Elgin,
Illinois, a suburb approximately 40 miles northwest of downtown Chicago. The
Grand Victoria, which holds one of ten riverboat gaming licenses currently
granted in Illinois, is located approximately 20 miles and 40 miles,
respectively, from its nearest competitors in Aurora, Illinois and Joliet,
Illinois.
Gaming has expanded dramatically in the United States in recent years. Forms
of gaming include riverboats, dockside gaming facilities, Native American gaming
ventures, land-based casinos, state-sponsored lotteries, off-track wagering and
card parlors. Since 1990, when there were casinos in only three states
(excluding casinos on Native American lands), gaming has spread to a number of
additional states and still other states are currently considering, or may in
the future consider, the legalization of casino gaming in specific geographic
areas within their jurisdictions. Casino gaming is currently conducted by
numerous Native American tribes throughout the United States and other Native
American tribes are either in the process of establishing or are considering the
establishment of gaming at additional locations, including sites in California
and Arizona. The November 1998 ballot in California included a voter initiative
approved by the voters of California which mandates that the Governor sign
compacts relating to gaming on tribal lands with California tribes upon their
request. The initiative also amended current California law to permit gambling
devices, including slot machines, banked card games and lotteries at tribal
casinos. The competitive impact on Nevada gaming establishments, in general, and
our operations, in particular, from the continued growth of gaming in
jurisdictions outside of Nevada cannot be determined at this time. We believe
that the expansion of casino gaming in areas close to Nevada, such as California
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<PAGE>
and Arizona, could materially adversely affect our operations depending upon the
nature, location and extent of such operations.
CONSTRUCTION RISKS
We are currently involved in a major construction project called Mandalay
Bay, as well as other projects that will be part of our Masterplan Mile. We may
also become involved in other construction projects through our subsidiaries,
joint ventures or future joint ventures. There are many risks involved in any
major construction project, including:
- Potential shortages of materials and labor, work stoppages or labor
disputes;
- Problems with construction, equipment or staffing requirements;
- Weather interference;
- Unforeseen engineering, environmental or geological problems;
- Difficulty in obtaining any of the necessary licenses, permits,
allocations or authorizations from regulatory authorities; and
- Unanticipated cost increases.
Any of these risks could increase the cost or delay the construction or
opening of the facilities or otherwise affect its planned design and features.
It is possible that the existing budget and construction plans for Mandalay Bay
(and/or any budget and construction plans developed for any other project,
including the proposed Detroit joint venture project) may be changed for
competitive or other reasons. In addition, the Detroit joint venture's proposed
project will require it to locate and purchase a satisfactory site.
We cannot be sure that Mandalay Bay will be completed within the time period
or budget currently contemplated. Similarly, we cannot assume the completion of
the other Masterplan Mile core elements or other future projects, including the
one contemplated by the Detroit joint venture. See "Summary--The Company--New
Casino Resort Development" for information concerning remedial measures being
performed at Mandalay Bay in response to settling of the tower which has
occurred.
REGULATION AND LICENSING
The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. We currently conduct licensed gaming
operations in Illinois, Mississippi and Nevada through wholly owned subsidiaries
and/or joint ventures. In Michigan, our wholly owned subsidiary is a participant
in a joint venture which plans to conduct licensed gaming operations in the
future (subject to receipt of the requisite approvals and licenses). We are
required by each of these states as well as the applicable local authorities in
such states, to hold various licenses, meet requirements of suitability,
registrations, permits and approvals (individually, a "Gaming License" and
collectively, "Gaming Licenses") to engage in gaming operations. The gaming or
licensing authority in each state where we conduct business (individually, a
"Gaming Authority" and collectively, the "Gaming Authorities") may deny, limit,
condition, suspend or revoke a Gaming License. These Gaming Authorities also
control approval of ownership interests in gaming operations. We are subject to
denial, limitation or suspension by these Gaming Authorities for any cause they
may deem reasonable.
We may receive substantial fines or forfeiture of assets for violations of
gaming laws or regulations. Our denial, suspension or revocation of any Gaming
License or any of our subsidiaries or joint ventures could have a material
adverse effect on our business.
To date, we have obtained all Gaming Licenses necessary for the operation of
our existing gaming activities. However, Gaming Licenses and related approvals
are privileges under Illinois, Mississippi, Nevada and Michigan law, and we
cannot be sure that any new Gaming License that may be required in the future
will be granted or that existing Gaming Licenses will not be revoked or
suspended.
S-13
<PAGE>
The Nevada Gaming Commission (the "Nevada Commission") may, in its
discretion, require the holder of any securities issued by us to file
applications, be investigated and be found suitable to own such securities if it
has reason to believe that such ownership would be inconsistent with the
declared policies of the State of Nevada. If the Nevada Commission determines
that a person is unsuitable to own such securities, then pursuant to the Nevada
Gaming Control Act and the regulations promulgated thereunder, we can be
sanctioned, including the loss of our approvals, if without the prior approval
of the Nevada Commission, we:
- Pay to the unsuitable person any dividend, interest or any distribution
whatsoever;
- Recognize any voting right by such unsuitable person in connection with
such securities;
- Pay the unsuitable person remuneration in any form; or
- Make any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation or similar transaction.
Similar to Nevada, the Illinois Gaming Board and the Mississippi Gaming
Commission have jurisdiction over the holders and beneficial owners of
securities issued by us and may also require their investigation and approval.
The Michigan Gaming Control Board will have similar jurisdiction and authority
if a joint venture which includes our wholly owned subsidiary is subsequently
licensed to conduct gaming operations in Detroit, Michigan. An applicant must
pay all costs of investigation incurred by a Gaming Authority in conducting an
investigation relating to the applicant.
In Mississippi and Nevada, we may not make a public offering of our
securities without prior approval of the applicable Gaming Authorities if the
securities or proceeds therefrom are intended to be used
- to construct, acquire or finance gaming facilities in such jurisdictions
or
- to retire or extend obligations incurred for such purposes or for similar
transactions.
On May 22, 1997, the Nevada Commission granted prior approval to make public
offerings of our securities for a period of two years, subject to certain
conditions (the "Nevada Shelf Approval"). The Nevada Shelf Approval also applies
to any affiliated company that we wholly own (a "Gaming Affiliate") which is a
publicly traded corporation or would become a publicly traded corporation after
a public offering. The Nevada Shelf Approval also includes approval for our
registered and licensed subsidiaries to guarantee any security, and to pledge
their assets to secure the payment or performance of any obligation, issued by
us or a Gaming Affiliate in a public offering under the Nevada Shelf Approval.
However, the Nevada Shelf Approval may be rescinded for good cause without prior
notice upon the issuance of an interlocutory stop order by the Chairman of the
Nevada State Gaming Control Board (the "Nevada Board") and must be renewed
biennially. The Nevada Shelf Approval does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of this prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful. We received
a similar one-year waiver of approval requirements from the Mississippi Gaming
Commission on January 22, 1998 (the "Mississippi Shelf Approval"). This public
offering of notes will be made pursuant to the Nevada Shelf Approval and the
Mississippi Shelf Approval, each as currently in effect or as may be renewed in
the discretion of the applicable Gaming Authority.
This is only a summary of the regulatory requirements applicable to Circus
Circus Enterprises, Inc. and the holders of its securities. For additional
information regarding the gaming laws and regulations applicable to our gaming
operations and the holders of our securities, see the discussion under the
caption "Regulation and Licensing" in Item 1 of our Annual Report on Form 10-K
for the fiscal year ended January 31, 1998.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
Under certain circumstances, we have the right, at our option, to cause a
holder to dispose of its notes or to redeem its notes as set forth in the
accompanying prospectus. See "Description of Debt Securities-- Mandatory
Disposition Pursuant to Gaming Laws" in the accompanying prospectus.
S-14
<PAGE>
MISSISSIPPI AND MICHIGAN VOTER INITIATIVES TO BAN GAMING
In Mississippi, where we currently own and operate one hotel-casino and plan
to build another, two requests were filed with the Secretary of State to place
on the November 1999 state-wide ballot a voter initiative to ban gaming in the
state. The local circuit court found the wording of both initiatives invalid.
The sponsor appealed the local circuit court's decision on one of the
initiatives to the Mississippi Supreme Court, which affirmed the ruling that the
initiative's wording was invalid. Therefore, legal process for neither
initiative was completed in time for the inclusion of such initiative on the
November 1999 ballot. Since Mississippi is a voter initiative state, it is
possible that the gaming ban initiative could be re-worded and meet the
requirements for placement on the ballot of a later election. Passage of any
Mississippi initiative requires an affirmative vote representing both a majority
of the votes cast with respect to such initiative and at least 40% of the voters
casting votes on any matter in the election.
In Michigan, where a joint venture in which we will own a 45% equity
interest plans to build, own and operate a Detroit hotel-casino, opponents of
casino gaming circulated a petition to compel inclusion on the November 1998 or
November 2000 state-wide ballot of a proposal to repeal the legislation
authorizing casino gaming in Detroit. On September 18, 1998, the Michigan Board
of State Canvassers declared that the ballot proposal did not contain sufficient
valid signatures to be placed on the state-wide ballot. Based upon this
decision, the ballot proposal did not appear on the November 1998 state-wide
ballot and will not appear on the November 2000 state-wide ballot. The decision
of the Michigan Board of State Canvassers has been appealed to the Michigan
Court of Appeals, where the matter is currently pending. If the decision of the
Michigan Board of State Canvassers is reversed by the Michigan courts, the
ballot initiative would be placed on the next state-wide ballot. Passage of the
ballot initiative would then require the affirmative vote of a majority of the
votes cast with respect thereto. Reference is made to the more detailed
discussion of this initiative under "Regulation and Licensing--Michigan" in Item
1 of our Annual Report on Form 10-K for the year ended January 31, 1998,
incorporated by reference in the accompanying prospectus.
Approval by the requisite number of voters of a Mississippi initiative
similar to those proposed in 1998 or the Michigan initiative would repeal the
legislation authorizing gaming in the state where such approval was obtained
subject to the final results of any legal challenges which might be raised
regarding the initiative and its impact on any current casino operations and/or
pending applications for gaming licenses in such state. We are unable to
determine at this time whether any such initiative will be submitted to voters.
If any such initiative is submitted to the voters of Mississippi or Michigan for
their consideration no assurance can be given regarding the outcome of the vote
or the impact of the vote on our current or proposed gaming operations in such
state.
UNCERTAIN EFFECT OF NATIONAL GAMBLING IMPACT STUDY COMMISSION
A National Gambling Impact Study Commission has been established by the
United States Congress to conduct a comprehensive study of the social and
economic impact of gaming in the United States. The National Commission is
required to issue a report containing its findings and conclusions, together
with recommendations for legislation and administrative actions, within two
years after its first meeting, which occurred on June 20, 1997. Any
recommendations which may be made by the National Commission could result in the
enactment of new laws and/or the adoption of new regulations which could
adversely impact the gaming industry in general. We are unable at this time to
determine what recommendations, if any, the National Commission will make, or
the ultimate disposition of any recommendations the National Commission may
make.
S-15
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the notes offered hereby (the "Notes"),
estimated to be approximately $267 million, will be used by Circus Circus
Enterprises, Inc. (the "Company") to repay a portion of the indebtedness
outstanding under the Credit Facility ($1.3 billion as of the date hereof). The
Company may subsequently reborrow such funds to finance additional construction
costs for Masterplan Mile, to repurchase shares of the Company's Common Stock or
for working capital and other general corporate purposes.
The Credit Facility, which matures on July 31, 2002, provides the Company
with a $2 billion revolving credit line. The Company's ability to borrow under
the Credit Facility is subject to compliance with the covenants therein. The
Company also has a corporate debt program pursuant to which it may issue
commercial paper or other forms of short-term debt. To the extent the Company
issues debt under this program, it is required to maintain an equivalent amount
of credit available under the Credit Facility to retire such debt. At July 31,
1998, the weighted average rate under the Credit Facility was approximately 6.5%
per annum. The portion of such indebtedness incurred during the past 12 months
was incurred in connection with the funding of costs associated with the
construction of Masterplan Mile and the Tunica property and the refinancing of
previously incurred indebtedness. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Credit Facility."
On October 30, 1998, the Company entered into a lease intended as security
with a group of financial institutions (the "Lease Facility") pursuant to which
it may finance the acquisition of up to $200 million of equipment. Pursuant to
the terms of the Lease Facility, at the time of each acquisition of equipment
using such facility, the Company must permanently reduce the $2 billion
commitment under the Credit Facility by the cost of the equipment so acquired.
As of the date hereof, the Company has not utilized the Lease Facility.
S-16
<PAGE>
CAPITALIZATION
The following table sets forth the Company's cash and capitalization at July
31, 1998 and as adjusted as of that date to give effect to the sale of the Notes
offered hereby and the application of the net proceeds therefrom. This table
should be read in conjunction with the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 31, 1998 which is incorporated by reference in
the accompanying Prospectus.
<TABLE>
<CAPTION>
JULY 31, 1998
----------------------------
ACTUAL AS ADJUSTED
------------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents...................................................................... $ 78,977 $ 78,977
------------- -------------
------------- -------------
Current portion of long-term debt.............................................................. $ 3,469 $ 3,469
------------- -------------
Long-term debt:
Commercial paper............................................................................. 58,672 58,672
Credit Facility (1).......................................................................... 1,165,000 898,000
6.45% Senior Notes due 2006.................................................................. 199,670 199,670
Notes offered hereby......................................................................... -- 275,000
7 5/8% Senior Subordinated Debentures due 2013............................................... 150,000 150,000
6 3/4% Senior Subordinated Notes due 2003.................................................... 149,921 149,921
7.0% Debentures due 2036..................................................................... 149,860 149,860
6.70% Debentures due 2096.................................................................... 149,745 149,745
Other notes.................................................................................. 6,443 6,443
------------- -------------
Total long-term debt....................................................................... 2,029,311 2,037,311
------------- -------------
Stockholders' equity:
Common stock, $.01 2/3 par value............................................................. 1,894 1,894
Preferred stock, $.01 par value.............................................................. -- --
Additional paid-in capital................................................................... 558,839 558,839
Retained earnings............................................................................ 1,121,164 1,121,164
Treasury stock, at cost...................................................................... (511,037) (511,037)
------------- -------------
Total stockholders' equity................................................................. 1,170,860 1,170,860
------------- -------------
Total capitalization..................................................................... $ 3,203,640 $ 3,211,640
------------- -------------
------------- -------------
</TABLE>
- ------------------------
(1) The Credit Facility provides the Company with a $2 billion revolving credit
line. The Company's ability to borrow under the Credit Facility is subject
to the Company's compliance with the covenants therein. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Credit Facility."
S-17
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected consolidated financial information of the Company presented in
the table below for each of the five fiscal years ended January 31, and the
balance sheet data as of the end of such year, has been derived from audited
consolidated financial statements included in the documents incorporated by
reference in the accompanying Prospectus. The selected consolidated financial
information of the Company presented in the table below as of and for the six
months ended July 31, 1997 and 1998 is unaudited; however, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for such periods have been
included. The results of operations for the six months ended July 31, 1998 may
not be indicative of results of operations to be expected for the full year. The
table should be read in conjunction with the Consolidated Financial Statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1998 and the Condensed Consolidated Financial
Statements and notes thereto included in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended July 31, 1998 incorporated by reference in the
accompanying Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1997 1998
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Revenues
Casino........................................ $ 538,813 $ 612,115 $ 664,772 $ 655,902 $ 632,122 $ 319,237 $ 349,518
Rooms......................................... 176,001 232,346 278,807 294,241 330,644 165,931 176,629
Food and beverage............................. 152,469 189,664 201,385 210,384 215,584 108,854 124,562
Other......................................... 126,048 166,295 158,534 146,554 142,407 72,257 89,346
Earnings of unconsolidated affiliates......... -- 5,459 45,485 86,646 98,977 51,874 42,237
--------- --------- --------- --------- --------- --------- ---------
993,331 1,205,879 1,348,983 1,393,727 1,419,734 718,153 782,292
Less--complimentary allowances.................. (29,861) (35,697) (49,387) (59,477) (65,247) (30,763) (40,669)
--------- --------- --------- --------- --------- --------- ---------
Net revenues.................................. 963,470 1,170,182 1,299,596 1,334,250 1,354,487 687,390 741,623
--------- --------- --------- --------- --------- --------- ---------
Costs and expenses
Casino........................................ 209,402 246,416 275,680 302,096 316,902 148,382 176,988
Rooms......................................... 78,932 94,257 110,362 116,508 122,934 61,511 64,465
Food and beverage............................. 149,267 177,136 188,712 200,722 199,955 99,931 105,620
Other operating expenses...................... 82,958 107,297 92,631 90,601 90,187 43,528 51,753
General and administrative.................... 150,495 183,175 215,083 227,348 232,536 115,498 133,070
Depreciation and amortization................. 58,105 81,109 93,938 95,414 117,474 57,183 68,371
Preopening expense............................ 16,506 3,012 -- -- 3,447 -- --
Abandonment losses............................ -- -- 45,148 48,309 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total cost and expenses before corporate
expenses.................................. 745,665 892,402 1,021,554 1,080,998 1,083,435 526,033 600,267
--------- --------- --------- --------- --------- --------- ---------
Operating profit before corporate expense....... 217,805 277,780 278,042 253,252 271,052 161,357 141,356
Corporate expense............................... 16,744 21,773 26,669 31,083 34,552 15,972 14,192
--------- --------- --------- --------- --------- --------- ---------
Income from operations.......................... 201,061 256,007 251,373 222,169 236,500 145,385 127,164
Interest expense................................ (17,770) (42,734) (51,537) (54,681) (88,847) (43,716) (48,120)
Interest expense from unconsolidated
affiliates.................................... -- -- (5,616) (15,567) (15,551) (8,261) (6,331)
Other income (expense).......................... (683) 1,217 11,539 11,942 15,820 4,835 3,124
--------- --------- --------- --------- --------- --------- ---------
Income before provision for income tax.......... 182,608 214,490 205,759 163,863 147,922 98,243 75,837
Provision for income tax........................ 66,419 78,204 76,861 63,130 58,014 36,266 28,945
--------- --------- --------- --------- --------- --------- ---------
Net income...................................... $ 116,189 $ 136,286 $ 128,898 $ 100,733 $ 89,908 $ 61,977 $ 46,892
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER DATA:
EBITDA (2).................................... $ 276,532 $ 341,772 $ 400,133 $ 379,809 $ 376,881 $ 208,218 $ 199,831
Capital expenditures.......................... $ 378,785 $ 142,667 $ 221,684 $ 585,835 $ 663,270 $ 302,841 $ 349,981
Rooms (3)..................................... 13,665 13,665 17,739 22,407 23,465 22,407 23,465
Casino square footage (3)..................... 536,400 650,200 892,900 894,700 894,900 894,700 894,900
Number of slot machines (3)................... 13,376 16,723 23,477 22,254 21,520 21,230 21,125
Number of table games (3)..................... 485 594 837 814 785 763 789
Ratio of EBITDA to interest expense........... 15.56x 8.00x 7.76x 6.95x 4.24x 4.76x 4.15x
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1997 1998
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of long-term debt to EBITDA............. 2.05x 1.85x 1.79x 3.70x 4.75x -- --
Ratio of earnings to fixed charges (4)........ 5.40x 5.38x 3.85x 2.68x 1.99x 2.47x 1.82x
</TABLE>
<TABLE>
<CAPTION>
AT JANUARY 31, AT JULY 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property, equipment and leasehold interests... $1,179,961 $1,239,062 $1,474,684 $1,920,032 $2,466,848 $2,166,765 $2,748,809
Total assets.................................. 1,297,924 1,512,548 2,213,503 2,729,111 3,263,548 2,995,770 3,567,674
Long-term debt................................ 567,345 632,652 715,214 1,405,897 1,788,818 1,580,953 2,029,311
Total stockholders' equity.................... 559,950 686,124 1,226,812 971,791 1,123,749 1,092,968 1,170,860
</TABLE>
- ------------------------------
(1) Gold Strike, Nevada Landing, Railroad Pass and our 50% interest in Grand
Victoria were acquired on June 1, 1995. The Hacienda was acquired on
September 1, 1995 and closed on December 1, 1996. Gold Strike-Tunica
(formerly Circus Circus-Tunica) opened in August 1994. Luxor opened in
October 1993. Silver Legacy and Monte Carlo, each of which the Company owns
a 50% interest in, opened in July 1995 and June 1996, respectively.
(2) EBITDA consists of operating income plus depreciation, preopening expense,
abandonment losses and other nonrecurring items. Corporate expense also
contains depreciation which has been added back in the calculation. EBITDA
is a measure commonly used by the financial community but is not prepared in
accordance with United States generally accepted accounting principles and
should not be considered as a measurement of net cash flows from operating
activities.
(3) Items include 100% of the Company's joint venture properties.
(4) The ratio of earnings to fixed charges has been computed by dividing net
income before fixed charges and income taxes, adjusted to exclude
capitalized interest and equity in undistributed earnings of
less-than-50%-owned ventures. Fixed charges consist of interest, whether
expensed or capitalized, amortization of debt discount and issuance costs,
the Company's proportionate share of the interest cost of 50%-owned
ventures, and the estimated interest component of rental expense.
S-19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
AND THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED
IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED JULY
31, 1998 INCORPORATED BY REFERENCE IN THE ACCOMPANYING PROSPECTUS.
THREE AND SIX MONTHS ENDED JULY 31, 1998 COMPARED WITH THE THREE AND SIX MONTHS
ENDED JULY 31, 1997
RESULTS OF OPERATIONS
REVENUES
Revenues for the Company increased $41.4 million, or 12%, for the three
months ended July 31, 1998 and $54.2 million, or 8%, for the six months, versus
the corresponding prior year periods. The increase in revenue for both the three
and six months was attributable primarily to two properties, though all of the
Company's wholly owned properties reported increased revenues during the second
quarter. First, the completion of an 1,100-room hotel tower at Gold
Strike-Tunica in the first quarter contributed to an increase in revenues at
that property of $18.3 million, or 184%, in the second quarter and $32.4
million, or 160%, in the six months. Second, Luxor benefitted from a new
national advertising campaign, an increase in the amount of high-budget play in
the casino and the opening of a new 1,200-seat showroom in the third quarter of
the prior year which contributed to increases in revenue at this property of
$15.0 million, or 20%, for the quarter and $27.1 million, or 19%, for the six
months ended July 31, 1998.
OPERATING INCOME
For the quarter ended July 31, 1998, income from operations rose $3.4
million, or 5%, while the six months experienced a decline in income from
operations of $18.2 million, or 13%, compared to the same periods a year ago.
The Company's composite operating margin was 17.2% and 17.1% for the three and
six months ended July 31, 1998 versus 18.3% and 21.2% for the comparable periods
in the prior year. A discussion of operating results by market follows.
LAS VEGAS
The Company's Las Vegas properties posted an overall increase in operating
income of $2.5 million, or 6%, during the second quarter, while there was an
overall decrease for the six month period of $12.3 million, or 12%. The increase
in operating income for the quarter was due primarily to improved results at
Luxor, which was up $3.1 million, or 29%, and Circus Circus-Las Vegas, which was
up $1.2 million, or 15%. These increases were partially offset by a lower
contribution from Monte Carlo (a 50%-owned joint venture) which fell $1.9
million, or 24%.
As mentioned above, Luxor benefitted from a new national advertising
campaign which began in February and an increase in the amount of high-budget
play in the casino. The increase at Circus Circus-Las Vegas was driven by
increased contributions from the hotel department (rooms were being remodeled in
the prior year) and the food and beverage department (due to selective price
increases). The decrease at Monte Carlo was due to a low hold percentage on
table games during the quarter, as well as increased promotional expenses.
For the six months ended July 31, 1998, the positive results for the second
quarter were more than offset by general softness in market conditions in Las
Vegas throughout the first three months of the year, particularly during
mid-week periods. Luxor was also negatively impacted by the additional costs of
the national advertising campaign and other casino promotional expenses. The
individual property results for the six months are as follows: Luxor down $2.5
million, or 9%, Excalibur down $5.2 million, or 14%, Circus Circus-Las Vegas
down $2.5 million, or 14%, and Monte Carlo down $2.3 million, or 13%.
S-20
<PAGE>
RENO
In Reno, the Company's combined operating income declined $1.0 million, or
9%, in the second quarter and $2.8 million, or 15%, in the six months versus the
same periods last year. Strong results at Circus Circus-Reno in the second
quarter (operating income up 18%) were offset by a decrease in results at Silver
Legacy (50%-owned by the Company). Circus Circus-Reno benefitted from a
comparison to the prior year in which the casino was undergoing remodeling. The
increased results at Circus Circus-Reno contributed to the decrease in results
at Silver Legacy, as guests staying at Circus spent more of their time in the
new casino rather than visiting the neighboring Silver Legacy. For the six
months, both these properties were negatively impacted by adverse weather
conditions in February, which made travel in and out of the area difficult.
LAUGHLIN
The Company's two properties in Laughlin, the Colorado Belle and the
Edgewater, posted a combined increase in operating income of $1.3 million, or
35%, in the second quarter and a combined decrease of $.3 million, or 2%, for
the six months ended July 31, 1998 versus the previous year. While the region
continues to suffer from difficult competitive challenges, foremost of which are
the unregulated Native American casinos in Laughlin's prime central Arizona and
southern California feeder markets, these two properties posted their first
quarterly increase in operating income in several years. The increases stemmed
from a combination of casino marketing efforts and cost controls.
RIVERBOAT MARKETS
In Tunica County, Mississippi, operating income at the Gold Strike rose more
than four-fold to $4.1 million in the quarter, while for the six months
operating income rose 160% to $5.5 million. The increases are the result of the
addition of an 1,100-room hotel tower that was completed during the first
quarter of this year.
Results at Grand Victoria (a 50%-owned riverboat casino in Elgin, Illinois)
reflected a $2.6 million decrease in the Company's share of operating income for
the second quarter and a $5.8 million decrease for the six months. An increase
in the maximum tax rate on casino revenues in Illinois from 20% to 35% was
responsible for the decreased contribution from Grand Victoria.
INTEREST EXPENSE
For the three and six months ended July 31, 1998, interest expense
(excluding joint venture interest expense) increased $2.2 million and $4.4
million versus the prior year. The increase was due principally to higher
average borrowings related to the construction of the new hotel tower at Gold
Strike-Tunica and the ongoing construction of Mandalay Bay. Average borrowings
were approximately $2.0 billion and $1.9 billion for the current quarter and six
months, compared against $1.5 billion and $1.4 billion for the same periods last
year. Capitalized interest was $9.9 million and $17.0 million for the quarter
and six months ended July 31, 1998 versus $4.9 million and $8.5 million in the
year-ago periods. Long-term debt at July 31, 1998 stood at $2.0 billion compared
to $1.6 billion at July 31, 1997.
The Company also recorded interest expense related to joint venture projects
of $3.2 million and $6.3 million in the quarter and six months ended July 31,
1998 compared to $4.0 million and $8.3 million in the previous year. This
reflects the Company's 50% share of the interest expense of Silver Legacy and
Monte Carlo, with the decrease in expense attributable to lower debt outstanding
at Monte Carlo.
INCOME TAX
For the three and six months ended July 31, 1998, the Company's effective
tax rate was approximately 37% and 38%, compared with 37% for both periods in
the prior year. These rates reflect the corporate statutory rate of 35% plus the
effect of various nondeductible expenses, including the amortization of goodwill
associated with the acquisition of Gold Strike Resorts.
S-21
<PAGE>
FISCAL 1998 COMPARED WITH FISCAL 1997
RESULTS OF OPERATIONS
For the year ended January 31, 1998, the Company reported net income of
$89.9 million, or $.95 per share, compared to $100.7 million, or $.99 per share,
in the prior year. Average shares outstanding totaled 94.9 million as against
101.9 million, reflecting the repurchase of 10.1 million shares of the Company's
stock in fiscal 1997.
During fiscal 1998, the Company recognized approximately $8.0 million in
costs associated with the resignation of its chairman and $3.4 million in
preopening expenses related to the opening of an 1,100-room hotel at its
remodeled Gold Strike Casino Resort in Tunica County, Mississippi. Also during
the year, the Company recognized a $6.0 million gain on the sale of a company
airplane. In the prior year, the Company took one-time asset write-offs totaling
$48.3 million, related primarily to construction and remodeling at Luxor and
Circus Circus-Las Vegas. The Company also recognized $5.6 million in preopening
expenses (reflected in Earnings of Unconsolidated Affiliates) related to the
June 21, 1996, opening of Monte Carlo, a 50%-owned joint venture hotel/casino on
the Las Vegas Strip. Excluding the effect of these nonrecurring items, earnings
per share for fiscal 1998 were $1.01 versus $1.33 in the prior year.
The decline in earnings was due primarily to two factors. The first was
lower operating income at Excalibur, which faced significant new competition
from New York-New York, Monte Carlo and the expanded Luxor. The second factor
was higher interest expense arising from borrowings in the prior year for the
expansion projects at Luxor and Circus Circus-Las Vegas. Also negatively
affecting results for fiscal 1998 was the closure of the Hacienda Hotel and
Casino in December 1996. This property was demolished to make way for the
construction of Mandalay Bay, the Company's destination resort currently under
construction on the Las Vegas Strip. (See Liquidity and Capital Resources for
additional details regarding Mandalay Bay.) Additionally, the Company sold its
interest in Windsor Casino Limited in January 1997.
REVENUES
Revenues for fiscal 1998 increased $20.2 million, or 2%, from the prior
year. This increase was attributable primarily to Luxor, whose revenues grew
$78.2 million, or 34%, on the strength of 1,950 new rooms (however, this
comparison is against a prior year when the property's operations were
significantly disrupted by construction). Circus Circus-Las Vegas posted an
increase in revenues of $11.1 million, or 5%, due to 1,000 new rooms which
opened late last year (though this comparison, too, is with a construction-
disrupted year).
The Company also benefitted from a full year's contribution from Monte
Carlo. This property contributed $34.2 million to the Company's revenues in
fiscal 1998 as against $16.6 million in the prior year, when the property was
open only seven months. (The Company's share of the operating income of joint
ventures is recorded as revenue under Earnings of Unconsolidated Affiliates.)
Meanwhile, the Company's 50% interest in Silver Legacy contributed $20.7 million
to the Company's revenues in fiscal 1998 versus $12.0 million in fiscal 1997.
Effective May 1, 1997, the Company began receiving a priority return on its
investment in Silver Legacy representing approximately two-thirds of the joint
venture's operating income. Based on current projections, the Company
anticipates receiving this priority return for a period of approximately two
years.
The above increases were offset by the closure of the Hacienda in December
1996, which had produced $41.6 million in revenues in fiscal 1997, and by lower
results at Excalibur, whose revenues decreased $23.4 million, or 8%, from their
record level of the prior year.
Casino revenues declined $23.8 million, or 4%, during fiscal 1998. While
Luxor's casino revenues grew 22% due to its expansion, this was offset by the
closure of the Hacienda and a 10% decrease in casino revenues at Excalibur.
Meanwhile, hotel revenues rose $36.4 million, or 12%, due to the additional
rooms at Luxor and Circus Circus-Las Vegas versus the prior year. The Company's
combined hotel occupancy fell from 94% to 88%, compared with a decline in the
overall occupancy in the Las Vegas market from 90% to
S-22
<PAGE>
86%. Revenues in the Company's other principal revenue centers (food, beverage,
amusements and retail) were essentially flat against the prior year.
INCOME FROM OPERATIONS (EXCLUDING NONRECURRING ITEMS)
Income from operations for fiscal 1998 decreased $28.9 million, or 10%, from
the prior year. The Company's composite operating margin was 18.2%, compared
with 20.6% in fiscal 1997. The principal factor behind this decline was
depreciation expense, which was $26.0 million higher in fiscal 1998 due to the
expansion projects at Luxor and Circus Circus-Las Vegas that were completed in
the prior year. Operating income was also negatively affected by lower results
at Excalibur, closure of the Hacienda and sale of the Company's interest in
Windsor Casino Limited, which in fiscal 1997 had contributed $9.5 million of
operating income to the Company's results. A discussion of operating results by
market follows.
LAS VEGAS
Overall, results at our Las Vegas properties fell below those for the prior
year. In particular, Excalibur's operating income declined $23.6 million, or
26%, from its record level in fiscal 1997. The decline was due to increased
competition and overall weakness in the Las Vegas market. Despite an approximate
11% increase in Las Vegas hotel rooms, the number of visitors to the city grew
by only 3%. The closure of the Hacienda in late 1996 also adversely affected our
results, given that this property had produced $6.4 million in operating income
in fiscal 1997.
At Luxor, operating income increased $12.3 million, or 33%, mainly because
of the 1,950 new rooms placed in service late last year. This property underwent
significant remodeling in fiscal 1997, and certain elements of the remodeling
extended into fiscal 1998. Work continued on the showroom until its opening in
September 1997, and on RA, THE NIGHTCLUB, until its opening in December 1997.
The Company believes this remodeling had a disruptive effect on operations in
fiscal 1998, though not to the same extent as in the prior year.
Operating income at Circus Circus-Las Vegas was slightly below that for the
prior year despite the addition of 1,000 new rooms. While these new rooms ran at
nearly 100% occupancy, additional depreciation expense on the rooms offset much
of the benefit. Moreover, the Company believes that many of the guests staying
at Circus Circus-Las Vegas are spending a portion of their time visiting the
newer megaresorts on the south end of the Las Vegas Strip, and that a number of
the guests staying in the new hotel rooms represent former "walk-in" customers
who were already established as gaming customers.
Monte Carlo--a joint venture with Mirage Resorts--contributed $17.6 million
more in operating income (as the Company's 50% share) than in fiscal 1997, when
the property was open for seven months.
RENO
In Reno, operating income at the 50%-owned Silver Legacy rose 34% over the
prior year. The presence of the Women's National Bowling Tournament contributed
to the improved results. Furthermore, effective May 1, 1997, Circus began
receiving a priority return on its investment representing approximately
two-thirds of Silver Legacy's operating income. As a result, Circus' share of
Silver Legacy's operating income rose by $8.7 million from the prior year. At
Circus Circus-Reno, however, operating income was down approximately $1.0
million, or 9%. The casino at that property underwent significant remodeling for
a portion of the summer, which contributed to this decrease.
LAUGHLIN
The Company's two properties in Laughlin (Colorado Belle and Edgewater)
produced operating income of $18.1 million as against $25.4 million in the
previous year, a decrease of 29%. The Laughlin market continues to suffer the
brunt of several competitive challenges, most notably the growth of unregulated
Native American casinos. There currently are 37 such casinos in Laughlin's
central Arizona and southern California feeder markets. Competition from Las
Vegas, in the form of major new themed resorts has also eroded Laughlin's
customer base, as have expanded facilities at Primm, Nevada.
S-23
<PAGE>
OTHER MARKETS
In Tunica County, Mississippi, operating income at the recently rechristened
Gold Strike Casino Resort declined by $5.6 million, or 67%, during fiscal 1998.
The property experienced significant disruption due to a $140 million expansion
project which added an 1,100-room hotel and included remodeling and retheming of
the casino. The hotel tower and remodeling were completed in early 1998.
Results at Grand Victoria--a cruising gaming vessel in Elgin, Illinois, in
which the Company has a 50% interest--were below those for the previous year.
The decrease reflected the impact of a full year of additional mandatory
contributions to public entities in the city and county that began in June 1996.
Furthermore, effective January 1998, the Illinois gaming tax was increased.
Based upon last year's gaming revenue, this tax increase is anticipated to
reduce the Company's share of operating income by $9-$10 million in the coming
year.
Results for fiscal 1998 at the Company's other smaller properties were below
those for the prior year.
DEPRECIATION AND AMORTIZATION EXPENSE
In fiscal 1998, depreciation and amortization expense rose $26.0 million, to
$129.7 million. This increase stemmed primarily from a full year's depreciation
on the expansion and remodeling projects at Luxor and Circus Circus-Las Vegas.
For fiscal 1999, Circus estimates that its depreciation expense will be
approximately $137 million.
DEPRECIATION EXPENSE BY PROPERTY (IN MILLIONS):
<TABLE>
<CAPTION>
YEAR ENDED JANUARY
31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Luxor...................................................................... $ 39.5 $ 26.8
Circus Circus-Las Vegas.................................................... 22.7 17.9
Excalibur.................................................................. 14.1 12.2
Circus Circus-Reno......................................................... 8.5 6.6
Colorado Belle............................................................. 4.4 3.8
Edgewater.................................................................. 4.3 4.3
Gold Strike-Tunica......................................................... 6.2 5.1
Other...................................................................... 30.0 27.0
--------- ---------
$ 129.7 $ 103.7
--------- ---------
--------- ---------
</TABLE>
INTEREST EXPENSE
In fiscal 1998, interest expense (excluding joint venture interest expense
and before capitalized interest) rose $40.2 million to $110.9 million. This
increase was due primarily to higher average debt outstanding ($1.6 billion
versus $865 million in fiscal 1997) related to the completed expansion projects
at Luxor and Circus Circus-Las Vegas; the prior-year share repurchase; the
recently completed expansion at Gold Strike-Tunica and the ongoing construction
of Mandalay Bay on the Las Vegas Strip. The increase in interest was partially
offset by higher capitalized interest ($22.0 million versus $16.0 million in
fiscal 1997) related primarily to the Gold Strike-Tunica and Mandalay Bay
projects.
The Company also recorded interest expense related to joint venture projects
of approximately $15.6 million in both fiscal 1998 and fiscal 1997. This
represents the Company's 50% share of Silver Legacy's and Monte Carlo's interest
expense.
TAXES
The Company's effective tax rates for the years ended January 31, 1998 and
1997 were 39.2% and 38.5%. These reflect the federal statutory rate of 35% plus
the effect of various nondeductible expenses, primarily the amortization of
goodwill associated with the June 1995 Gold Strike acquisition, and
S-24
<PAGE>
compensation associated with the resignation of the Company's chairman. For
fiscal 1999, the Company estimates that its tax rate will be approximately 39%.
FISCAL 1997 COMPARED WITH FISCAL 1996
RESULTS OF OPERATIONS
Excluding one-time asset write-offs and preopening expenses, earnings per
share for fiscal 1997 were $1.33 compared to $1.66 in the previous year. During
fiscal 1997, the Company took one-time asset write-offs totaling $48.3 million
and recognized $5.6 million in preopening expenses related to the opening of
Monte Carlo. In fiscal 1996, the Company took one-time asset write-offs totaling
$45.1 million and recognized $5.2 million of preopening expenses related to the
opening of Silver Legacy.
The asset write-offs in fiscal 1997 were necessitated by construction and
remodeling at Luxor and Circus Circus-Las Vegas, as well as construction and
remodeling at the Company's other properties. Write-offs in fiscal 1996 related
primarily to a discontinued riverboat project in Chalmette, Louisiana.
The decline in results for fiscal 1997 was due primarily to significant
construction disruption at Luxor and Circus Circus-Las Vegas. Luxor added 1,950
new rooms and remodeled extensive portions of the interior. Meanwhile, Circus
Circus-Las Vegas added a new 1,000-room hotel tower.
REVENUES
Revenues for fiscal 1997 increased $34.7 million, or 3%, from fiscal 1996.
This increase was due primarily to the inclusion of a full 12 months of
operations for the properties acquired in the Gold Strike acquisition, compared
to eight months of operations in fiscal 1996. The Company acquired the
properties (Gold Strike, Nevada Landing, Railroad Pass and Grand Victoria) on
June 1, 1995. The Company's 50% ownership in Grand Victoria accounted for the
most significant portion of the revenue increase.
INCOME FROM OPERATIONS (EXCLUDING NONRECURRING ITEMS)
Income from operations for fiscal 1997 decreased $25.7 million, or 9%, from
the prior year. The decrease in operating income was due principally to
construction disruptions at Luxor and Circus Circus-Las Vegas.
The Company benefitted from a record year at Excalibur and from the June
1996 opening of Monte Carlo (50% owned by Circus), whose results exceeded
expectations. The Company also benefitted from a full year's operations at
Silver Legacy, a 50/50 joint venture, versus only six months of operations in
fiscal 1996 (the property opened on July 28, 1995). However, the above benefits
were offset by lower results at Circus Circus-Reno whose operating income
declined $13.6 million due to competition from the adjacent Silver Legacy, as
well as winter storms and flooding which struck the market in the fourth
quarter. In addition, the Company continued to experience lower results at its
Laughlin properties and at Circus Circus in Tunica County, Mississippi
(subsequently renamed Gold Strike Casino Resort).
DEPRECIATION AND AMORTIZATION EXPENSE
For fiscal 1997, depreciation and amortization expense rose $5.3 million to
$103.7 million. This increase came primarily from a full year's amortization of
goodwill and additional depreciation expense related to the Gold Strike
acquisition in June 1995.
INTEREST EXPENSE
Interest expense for fiscal 1997 (excluding joint venture interest expense
and before capitalized interest) rose $10.6 million to $70.7 million. This
increase was due primarily to higher average debt outstanding ($865 million
versus $715 million in fiscal 1996) related to various construction projects
(primarily the new rooms and other improvements at Luxor and Circus Circus-Las
Vegas). The Company also repurchased 10.1 million shares of its common stock.
The increase in fiscal 1997 interest expense was largely offset by higher
capitalized interest ($16.0 million as against $8.6 million in fiscal 1996)
related to those same construction projects.
S-25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $79.0 million at July 31, 1998,
reflecting normal daily operating requirements. The Company's pretax cash flow
from operations was $102.8 million and $199.8 million for the three and six
months ended July 31, 1998 versus $94.3 million and $208.2 million for the same
periods last year. In this context, pretax cash flow from operations is defined
as the Company's income from operations plus noncash operating expenses
(primarily depreciation and amortization). The Company used its cash flow
primarily to fund the construction of Mandalay Bay, the completion of a new
hotel tower at Gold Strike-Tunica and miscellaneous other construction projects.
CAPITAL SPENDING
Capital expenditures for the quarter and six months ended July 31, 1998 were
$165.6 million and $350.0 million. Of these amounts, $133.6 million and $278.6
million related to the construction of Mandalay Bay, $13.4 million and $20.2
million related to the construction of other core components of Masterplan Mile
(primarily the convention center, arena, monorail and aquarium exhibit--see "New
Projects") and $4.6 million and $18.8 million related to the completion of
construction and remodeling at Gold Strike-Tunica.
CREDIT FACILITY
In May 1997, the Company amended its unsecured Credit Facility with its bank
group, increasing the size of the facility from $1.5 billion to $2 billion at
more favorable terms and pricing (see Note 2 of Notes to Condensed Consolidated
Financial Statements in the Form 10-Q for the quarter ended July 31, 1998). The
Company also has a $1.0 billion commercial paper program which is backed by the
Credit Facility. In order to provide increased borrowing capacity during the
construction of Mandalay Bay, the Credit Facility was further amended in May
1998 to provide a more liberal leverage test on total debt during such period
and a new leverage test on senior debt. As of July 31, 1998, the Company had
aggregate borrowings of $1.2 billion outstanding under the Credit Facility and
commercial paper program and under the Company's most restrictive loan
covenants, it could issue additional debt of approximately $181 million.
In August 1998, the Company filed a shelf registration statement registering
$550 million of securities that may be issued from time to time in the form of
additional debt securities of the Company and/or preferred securities of
Delaware business trusts formed for the purpose of issuing their trust
securities and investing the proceeds in debt securities of the Company.
JOINT VENTURES
In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado
Hotel/Casino, opened in downtown Reno, Nevada. As a condition of the joint
venture's $230 million bank credit agreement, the Company is obligated under a
make-well agreement to make additional contributions to the joint venture as may
be necessary to maintain a minimum coverage ratio (as defined).
NEW PROJECTS
In the Spring of 1997, the Company commenced construction of Mandalay Bay, a
43-story, hotel-casino resort which will have approximately 3,700 rooms and
approximately 135,000 square feet of gaming space. The resort, which is expected
to be completed in March 1999, will be situated on approximately 60 acres of
land just south of Luxor. Mandalay Bay's attractions are planned to include an
11-acre tropical lagoon featuring a sand-and-surf beach, a three-quarter-mile
lazy river ride, a 30,000-square-foot spa and other entertainment attractions.
Inside, Mandalay Bay will offer internationally renowned restaurants, as well as
a House of Blues nightclub and restaurant, including its signature Foundation
Room sited on Mandalay Bay's rooftop, and 100 "music-themed" hotel rooms in
Mandalay Bay's towers.
Within Mandalay Bay and as part of its 3,700 rooms, a Four Seasons Hotel
with approximately 400 rooms will provide Las Vegas visitors with a luxury
"five-star" hospitality experience. The Four Seasons Hotel, which will be owned
by the Company and managed by Four Seasons, represents the first step
S-26
<PAGE>
pursuant to the Company's cooperative effort with Four Seasons to identify
strategic opportunities for development of hotel and casino properties
worldwide. The cost of Mandalay Bay, including the Four Seasons Hotel but
excluding land and capitalized interest, is currently estimated at approximately
$850 million and as of July 31, 1998, $516.8 million in costs had been incurred
for this project. In addition, the Company expects to incur pre-opening expenses
of approximately $50 million.
During the course of construction, Mandalay Bay's hotel tower experienced
settling in excess of the level contemplated in the building's original design
and the amount of settling has been greater in some portions of the structure
than others. We have retained geotechnical, structural engineering and
foundation consultants who have evaluated the situation and have recommended
remedial measures. The recommended remedial measures are substantially
completed, and we do not expect the remaining work to delay the opening of
Mandalay Bay or materially increase the cost of the project. However, until such
remedial measures have been completed and evaluated over a meaningful period of
time, we cannot be certain if further corrective measures will be required or as
to the impact of such measures.
Mandalay Bay is the latest phase of the Company's development of over 230
acres of land it owns at the south end of the Las Vegas Strip which runs from
Tropicana Avenue south approximately one mile to Russell Road ("Masterplan
Mile"). As part of its development plan for Masterplan Mile, the Company is
constructing a 125,000-square-foot convention facility and a 12,000-seat arena.
These facilities are expected to be completed and opened concurrently with
Mandalay Bay, and will represent core components of Masterplan Mile which will
be cross-marketed to guests at the Company's existing and future hotel-casinos
within Masterplan Mile. The estimated cost of the convention facility and arena,
excluding land and capitalized interest, is approximately $100 million and as of
July 31, 1998, $16.5 million in costs had been incurred for these facilities.
The Company also plans to construct a monorail system which will link the
Company's resorts on Masterplan Mile. Furthermore, the Company is planning a
"Sea of Predators" aquarium exhibit which will likewise represent a core
component of Masterplan Mile. Both the monorail and the Sea of Predators exhibit
are anticipated to be completed after the opening of Mandalay Bay. The cost of
these additional Masterplan Mile core components, excluding land and capitalized
interest, is estimated at approximately $75 million, of which $5.1 million had
been incurred as of July 31, 1998. The Company may add other core components to
its development plan for Masterplan Mile in the future.
The Company has formed a joint venture with the Detroit-based Atwater Casino
Group, comprised of numerous Detroit-area business, education, civic and
community leaders. The Company will own a 45% equity interest in the proposed
project and receive a management fee. On November 21, 1997, the joint venture
was selected to be one of three groups permitted to negotiate a development
agreement with the City, and its development agreement was approved by the City
Council on April 9, 1998. The joint venture's ability to proceed with the
proposed project is contingent upon the receipt of all necessary gaming
approvals and satisfaction of other conditions. The joint venture is currently
planning a $600 million project, of which the Company would be required to
contribute 20% of such amount in the form of equity, with the balance expected
to be provided through project-specific financing. If the Company proceeds with
the project, the development agreement provides that the Company will guarantee
completion of the project and will be required to give a keep-well guarantee,
pursuant to which the Company would contribute additional funds, if and as
needed, to continue operations of the project for a period of two years. If
permitted by city and state authorities, the Company would consider construction
of a temporary facility.
The Company has announced that it plans to develop a hotel/casino resort on
the Mississippi Gulf Coast at the north end of the Bay of St. Louis, near the
DeLisle exit on Interstate 10. It is currently anticipated that the resort will
include approximately 1,500 rooms and will involve an investment of
approximately $225 million. The Company has received all necessary approvals to
commence development. However, these approvals have been challenged in state and
federal court, and the Company anticipates that the design and construction of
this project will begin only after satisfactory resolution of all
S-27
<PAGE>
legal actions. As presently contemplated, Circus will own 90% of the resort,
with a partner contributing land (up to 500 acres) in exchange for the remaining
10% interest.
Although the Company had previously entered into an agreement with Mirage
Resorts to participate in the development of a site located in the Marina
District of Atlantic City, New Jersey, the agreement was subject to litigation
which was settled. The Company has no current plans for development in Atlantic
City.
OTHER MATTERS
The Company believes that, through a combination of borrowings under the
Credit Facility, operating cash flows and ability to raise additional funds
through debt or equity markets, it has sufficient capital resources to meet all
of its existing cash obligations and fund its commitments on the projects
underway.
YEAR 2000 READINESS DISCLOSURE
BACKGROUND
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
computer software may recognize a date using "00" as the year 1900 rather than
the year 2000. This is generally referred to as the Year 2000 issue. If this
situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
RISK FACTORS
The Company utilizes computer systems in virtually all aspects of its
business. In particular, Year 2000 problems in the hotel or casino systems at
the Company's wholly owned properties or at any of its joint venture properties
could disrupt operations at the affected properties and have a material adverse
impact upon the Company's operating results. The Company is also exposed to the
risk that one or more of its suppliers or its joint ventures' suppliers could
experience Year 2000 problems that impact the ability of such suppliers to
provide goods and services. Though this is not considered as significant a risk
with respect to the suppliers of goods, due to the availability of alternative
suppliers, the disruption of certain services, such as utilities, could,
depending upon the extent of the disruption, have a material adverse impact on
the Company's operations.
APPROACH
The Company has established a task force to coordinate the Company's
response to the Year 2000. This task force, which reports to the Audit Committee
of the Board of Directors, includes the Company's Chief Accounting Officer, the
Chief Internal Auditor, the Director of Information Services, as well as support
staff. The Company also engaged an outside consultant which assisted it in
establishing an approach to dealing with the Year 2000 issue, and the Company is
in the process of implementing a Year 2000 compliance program at the Company's
wholly owned properties and at its joint venture properties. The program
consists of the following phases:
PHASE 1 Compilation of an inventory of information technology (IT) and
non-IT systems that may be sensitive to the Year 2000 problem.
PHASE 2 Identification and prioritization of the CRITICAL systems from
the systems inventory compiled in Phase 1 and inquiries of third
parties with whom the Company does significant business (i.e.,
vendors and suppliers) as to the state of their Year 2000
readiness.
PHASE 3 Analysis of critical systems to determine which systems are not
Year 2000 compliant and evaluation of the costs to repair or
replace those systems.
PHASE 4 Repair or replace noncompliant systems and testing of those
systems for which representation as to Year 2000 compliance has
not been received or for which representation was received but
has not been confirmed.
S-28
<PAGE>
STATUS
Phases 1 and 2 are substantially complete but for the process of making
inquiries of significant third parties as to their Year 2000 readiness, which is
currently ongoing. Phases 3 and 4 are ongoing and will continue through the
first half of calendar 1999. It is the Company's goal to have this project
completed by mid-1999. Based upon the analysis conducted to date, the Company
believes all of the major critical systems at the Company's wholly owned
properties and at its joint venture properties are currently compliant or will
be compliant by mid-1999. The only significant aspect of Year 2000 compliance of
the Company and its joint ventures which has been identified to date is the need
to replace older personal computers whose systems are not Year 2000 compatible.
COSTS
The total cost to the Company of making its systems and those of its joint
venture properties Year 2000 compliant is currently estimated to be in the range
of $5 to $10 million. The majority of this cost relates to the acquisition of
new computer hardware to replace the personal computers noted above and the
purchase of new software to replace noncompliant software. These costs will be
capitalized and depreciated over their expected useful life. To the extent
existing hardware or software is replaced, the Company will recognize a loss
currently for the undepreciated balance. This loss is included in the above cost
estimate. Furthermore, all costs related to software modification, as well as
all costs associated with the Company's administration of its Year 2000 project,
are being expensed as incurred and are likewise included in the cost estimate
above.
MARKET RISK AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to market risk in the form of fluctuations in
interest rates and their potential impact upon the Company's variable-rate debt.
The Company manages this market risk by utilizing derivative financial
instruments in accordance with established policies and procedures. The Company
evaluates its exposure to market risk by monitoring interest rates in the
marketplace. The Company does not utilize derivative financial instruments for
trading purposes.
With respect to derivative financial instruments, the Company manages its
exposure to counterparty credit risk by entering into agreements with highly
rated institutions that can be expected to fully perform under the terms of such
agreements. Frequently, these institutions are also members of the bank group
providing the Company's credit facility, which management believes further
minimizes the risk of nonperformance.
The Company's derivative financial instruments consist exclusively of
interest rate swap agreements. Interest differentials resulting from interest
rate swap agreements are recorded on an accrual basis as an adjustment to
interest expense. Interest rate swaps related to debt are matched either with
specific fixed-rate debt obligations or with levels of variable-rate borrowings.
The following table provides information about the Company's derivative and
other financial instruments that are sensitive to changes in interest rates,
including interest rate swaps and debt obligations. For debt obligations, the
table presents principal cash flows and related weighted-average interest rates
by expected maturity dates. For interest rate swaps, the table presents notional
amounts and weighted-average interest rates by contractual maturity dates.
Notional amounts are used to calculate the contractual cash flows to be
exchanged under the contract. Weighted average variable rates are based on
implied
S-29
<PAGE>
forward rates in the yield curve. Implied forward rates should not be considered
a predictor of actual future interest rates.
<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31,
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ----------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt (including current portion)
Fixed rate................................... $ 3.1 $ 3.5 $ 0.5 $ 0.3 $ 0.2 $ 803.0 $ 810.6
Average interest rate...................... 4.9% 5.3% 5.6% 6.7% 6.7% 6.9% 6.9%
Variable rate................................ -- -- -- -- $ 981.3 -- $ 981.3
Average interest rate...................... -- -- -- -- 5.9% -- 5.9%
Interest rate swaps
Pay fixed.................................... $ 52.0 $ 25.0 -- -- -- $ 150.0 $ 227.0
Average payable rate....................... 8.8% 8.1% -- -- -- 5.9% 6.8%
Average receivable rate.................... 5.8% 5.8% -- -- -- 6.3% 6.1%
Pay floating................................. -- -- -- $ 30.0 -- -- $ 30.0
Average payable rate....................... -- -- -- 6.0% -- -- 6.0%
Average receivable rate.................... -- -- -- 8.2% -- -- 8.2%
</TABLE>
FORWARD-LOOKING STATEMENTS
Certain information included in this report and other materials filed or to
be filed by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or written statements made or to be made
by the Company) contains statements that are forward-looking within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include information
relating to current expansion projects, plans for future expansion projects and
other business development activities as well as other capital spending,
financing sources, Year 2000 compliance and the effects of regulation (including
gaming and tax regulation) and competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results may differ from
those expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to, those
relating to development and construction activities, dependence on existing
management, leverage and debt service (including sensitivity to fluctuations in
interest rates), domestic or global economic conditions, changes in federal or
state tax laws or the administration of such laws, changes in gaming laws or
regulations (including the legalization of gaming in certain jurisdictions) and
applications for licenses and approvals under applicable laws and regulations
(including gaming laws and regulations).
S-30
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes (referred to
in the accompanying Prospectus as the "Senior Subordinated Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Senior Subordinated Debt Securities
set forth in the Prospectus, to which description reference is hereby made. The
following summary of the Notes is qualified in its entirety by reference to the
Senior Subordinated Debt Indenture between the Company and The Bank of New York,
as trustee (the "Trustee"), referred to in the accompanying Prospectus.
GENERAL
The Notes will be limited to $275,000,000 in aggregate principal amount. The
Notes will constitute part of the senior subordinated debt of the Company and
will be subordinated to all current and future Senior Indebtedness of the
Company. The Notes will rank PARI PASSU with the Company's other senior
subordinated debt, including its 7 5/8% Senior Subordinated Debentures due 2013
and 6 3/4% Senior Subordinated Notes due 2003 ($300 million outstanding at July
31, 1998). The Notes will bear interest from November 20, 1998, or from the most
recent date to which interest has been paid or provided for, at the annual rate
set forth on the cover page of this Prospectus Supplement, and will mature on
December 1, 2005. Interest will be payable semiannually on June 1 and December
1, commencing June 1, 1999, to the persons in whose names the Notes are
registered at the close of business on the preceeding May 15 or November 15. All
payments of interest and principal will be payable in U.S. Dollars.
The Notes will be issued in fully registered form only, in denominations of
$1,000 and multiples of $1,000. Principal and interest will be payable at the
agency maintained by the Company in the City of New York, which on the date
hereof is at the office of The Bank of New York, 101 Barclay Street, New York,
New York.
The Notes will be subject to defeasance and covenant defeasance upon the
satisfaction of the conditions described under "Description of Debt
Securities--Satisfaction and Discharge of Indentures" and "--Covenant
Defeasance" in the accompanying Prospectus.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable, at the option of the
Company, (i) in whole but not in part, at any time prior to December 1, 2002 at
a redemption price equal to 100% of the principal amount thereof plus the
Make-Whole Premium, together with accrued and unpaid interest thereon to the
applicable redemption date, and (ii) in whole or in part at any time on or after
December 1, 2002 at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on December 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------------------- -----------
<S> <C>
2002................................................................... 104.625%
2003................................................................... 102.313%
2004 and thereafter.................................................... 100.000%
</TABLE>
"Make-Whole-Premium" means, with respect to any Note at any redemption date,
the excess, if any, of (a) the aggregate present value of the sum of the
principal amount and premium that would be payable on December 1, 2002 of such
Note and all remaining interest payments to and including December 1, 2002,
discounted on a semi-annual bond equivalent basis from December 1, 2002 to the
redemption date at a per annum interest rate equal to the sum of the Treasury
Yield (determined on the Business Day immediately preceding the date of such
redemption), plus 50 basis points, over (b) the aggregate principal amount of
the Note being redeemed.
S-31
<PAGE>
"Treasury Yield" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the date
fixed for redemption (or, if such Statistical Release is no longer published,
any publicly available source of similar data)) most nearly equal to the then
remaining average life of the Notes, provided that if the average life of the
Notes is not equal to the constant maturity of a United States Treasury security
for which a weekly average yield is given, the Treasury yield shall be obtained
by linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given, except that if the average life of the Notes is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. On or prior to December 1,
2001, the Company may, at its option, use the net proceeds of a Public Equity
Offering to redeem up to 35% of the originally issued aggregate principal amount
of the Notes, at a redemption price in cash equal to 109.25% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; PROVIDED that not less than $178.8 million in aggregate principal
amount of Notes is outstanding following such redemption. Notice of any such
redemption must be given not later than 60 days after the consummation of the
Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means an
underwritten public offering of Capital Stock (other than Redeemable Capital
Stock) of the Company made on a primary basis by the Company pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission in accordance with the Securities Act of 1933, as amended,
resulting in net cash proceeds to the Company (after deducting any underwriting
discounts and commissions) of at least $50 million. "Capital Stock" means with
respect to any person, any and all shares, interests, participations, rights in
or other equivalents (however designated) of such person's capital stock, and
any rights (other than debt securities convertible into capital stock), warrants
or options exchangeable for or convertible into such capital stock. "Redeemable
Capital Stock" means any class or series of Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to the stated maturity of the Notes
or is redeemable at the option of the holder thereof at any time prior to the
stated maturity of the Notes, or is convertible into or exchangeable for debt
securities at any time prior to the stated maturity of the Notes.
MANDATORY REDEMPTION. The Company will not be required to make any
mandatory sinking fund payments in respect of the Notes.
SELECTION; EFFECT OF REDEMPTION NOTICE. In the case of a partial
redemption, selection of the Notes for redemption will be made pro rata, by lot
or such other method as the Trustee in its sole discretion deems appropriate and
just; PROVIDED that any redemption pursuant to the provisions relating to a
Public Equity Offering shall be made on a pro rata basis or on as nearly a pro
rata basis as practicable (subject to DTC procedures). No Notes of a principal
amount of $1,000 or less shall be redeemed in part. Notice of redemption shall
be mailed by first-class mail 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 such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon surrender
for cancellation of the original Note. Upon giving of a redemption notice,
interest on Notes called for redemption will cease to accrue from and after the
date fixed for redemption (unless the Company defaults in providing the funds
for such redemption) and such Notes will cease to be outstanding.
S-32
<PAGE>
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
Under certain circumstances, the Company has the right, at its option, to
cause a holder to dispose of its Notes or to redeem its Notes as set forth in
the accompanying Prospectus. See "Description of Debt Securities--Mandatory
Disposition Pursuant to Gaming Laws" in the accompanying Prospectus.
SUBORDINATION
The payment of the principal, of premium, if any, and interest on the Notes
will be subordinated in right of payment, to the prior payment in full of all
Senior Indebtedness to the extent and in the manner set forth in the
accompanying Prospectus. If the Company fails to make any payment on the Notes
when due or within any applicable grace period, whether or not on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the holders of the Notes
to accelerate the maturity thereof. See "Description of Debt Securities--Events
of Default and Notice Thereof" in the accompanying Prospectus.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the Holders of the Notes and funds that would be otherwise
payable to the holders of the Notes will be paid to the holders of Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full, and
the Company may be unable to meet its obligations fully with respect to the
Notes. See "Risk Factors--Substantial Leverage and Debt Service."
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Notes. The Notes will be issued only as fully registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more fully
registered global Notes certificates will be issued, representing in the
aggregate the aggregate principal amount of Notes, and will be deposited with
DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a global Note.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Notes within the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of Notes ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
S-33
<PAGE>
purchased Notes. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Notes, except in the event that use of the
book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all the Notes deposited by Participants
with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of
Notes with DTC and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Notes. DTC's records reflect only the identity of the Direct Participants to
whose accounts such Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Notes
are being redeemed, DTC will reduce by lot the amount of the interest of each
Direct Participant in the Notes to be redeemed.
Although voting with respect to the Notes is limited, in those cases where a
vote is required neither DTC nor Cede & Co. will itself consent or vote with
respect to Notes. Under its usual procedures, DTC would mail an Omnibus Proxy to
the Trust as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Distribution payments on the Notes will be made to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
participants to Beneficial Owners will be governed by standing instructions and
customary practices, as in the case with securities held for the account of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trust or any trustee or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the responsibility
of the Trust, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Note will not be
entitled to receive physical delivery of Notes. Accordingly, each Beneficial
Owner must rely on the procedures of DTC to exercise any rights under the Notes.
DTC may discontinue providing its services as securities depositary with
respect to the Notes at any time by giving reasonable notice to the Company.
Under such circumstances, in the event that a successor securities depositary is
not obtained, Note certificates are required to be printed and delivered.
Additionally, the Company may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary) with respect to the
Notes. In that event, certificates for the Notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
S-34
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement dated
November 17, 1998 (the "Purchase Agreement"), the Company has agreed to sell to
Merrill Lynch Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), NationsBanc
Montgomery Securities LLC ("NationsBanc"), Credit Lyonnais Securities (USA)
Inc., Friedman, Billings, Ramsey & Co., Inc. and SG Cowen Securities Corporation
(collectively, the "Underwriters"), and each of the Underwriters has severally
agreed to purchase, the principal amount of Notes set forth opposite its name
below. In the Purchase Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any of the Notes are purchased. In the event of default by an
Underwriter, the Purchase Agreement provides that, in certain circumstances, the
purchase commitments of the nondefaulting Underwriter may be increased or the
Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------------------------------- --------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................................ $ 130,000,000
NationsBanc Montgomery Securities LLC............................................................. 130,000,000
Credit Lyonnais Securities (USA) Inc.............................................................. 5,000,000
Friedman, Billings, Ramsey & Co., Inc............................................................. 5,000,000
SG Cowen Securities Corporation................................................................... 5,000,000
--------------
Total.................................................................................. $ 275,000,000
--------------
--------------
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this prospectus supplement and to certain dealers at such price
less a concession not in excess of .25% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of .125% of the principal amount of the Notes to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes but are not obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
The Company has agreed to indemnify the Underwriters against, or to
contribute to payments that the Underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
The Company has agreed that for a period of 180 days from the date hereof,
it will not, without the prior written consent of Merrill Lynch and NationsBanc,
directly or indirectly, issue, sell, offer or contract to sell, grant any option
for the sale of, or otherwise transfer or dispose of, any debt securities of the
Company.
Until the distribution of the Notes is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters to bid for and
purchase the Notes. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
this offering, I.E., if they sell more Notes than are contemplated on the cover
page of this prospectus supplement, the Underwriters may reduce that short
position by purchasing Notes in the open market.
S-35
<PAGE>
The Underwriters may also impose a penalty bid on certain Underwriters. This
means that if the Underwriters purchase Notes in the open market to reduce the
Underwriters' short position or to stabilize the price of the Notes, they may
reclaim the amount of the selling concession from the Underwriters who sold
those Notes as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Bank of America National Trust and Savings Association ("Bank of America"),
an affiliate of NationsBanc, is an agent and lender under the Credit Facility.
Pursuant to the repayment of the Credit Facility, Bank of America will receive
an amount greater than 10% of the net proceeds of this Offering. Bank of America
is an affiliate of NationsBanc, which is a member of the National Association of
Securities Dealers, Inc. (the "NASD"). Therefore, the underwriting arrangements
for this offering will be made in compliance with Rule 2710(c)(8) and Rule 2720
of the Conduct Rules of the NASD, which provides that, among other things, when
an NASD member is to receive an amount greater than 10% of the net proceeds of
an offering, the initial public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
Merrill Lynch has agreed to act as qualified independent underwriter and the
yield on the Notes being offered hereby will be no lower than that recommended
by Merrill Lynch. In connection with this offering, Merrill Lynch, in its role
as a qualified independent underwriter, has performed due diligence
investigations and reviewed and participated in the preparation of the
prospectus and the Registration Statement of which the prospectus forms a part.
In addition, affiliates of each of the other Underwriters are lenders and agents
under the Credit Facility.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Wolf, Block,
Schorr and Solis-Cohen LLP, Philadelphia, Pennsylvania and, as to matters of
Nevada law, by Schreck Morris, Las Vegas, Nevada. Certain legal matters will be
passed upon on behalf of the Underwriters, by Cahill Gordon & Reindel (a
partnership including a professional corporation) New York, New York.
S-36
<PAGE>
PROSPECTUS
$550,000,000
[LOGO]
CIRCUS CIRCUS ENTERPRISES, INC.
DEBT SECURITIES
SUBORDINATED DEFERRABLE INTEREST DEBENTURES
------------------
CIRCUS FINANCE I
CIRCUS FINANCE II
TRUST PREFERRED SECURITIES
GUARANTEED BY
CIRCUS CIRCUS ENTERPRISES, INC.
------------------
Circus Circus Enterprises, Inc., a Nevada corporation (the "Company"), may
offer from time to time in one or more series its debt securities consisting of
debentures, notes or other evidence of indebtedness (the "Debt Securities") on
terms to be determined at the time of the offering. At the option of the
Company, the Debt Securities may be issued as senior secured Debt Securities, as
senior unsecured Debt Securities, as senior subordinated Debt Securities or as
subordinated Debt Securities and in any combination thereof. The general terms
and conditions of the Debt Securities are described under "Description of Debt
Securities" in this Prospectus. The Company may also from time to time issue its
unsecured subordinated deferrable interest debentures (the "Subordinated
Deferrable Interest Debentures") and Trust Preferred Securities Guarantees (as
defined), as described herein and in the applicable Prospectus Supplement.
Circus Finance I and Circus Finance II (each a "Trust"), each a statutory
business trust formed under the laws of Delaware, may from time to time offer
preferred securities evidencing preferred beneficial interests in the assets of
the respective Trust ("Trust Preferred Securities"). The payment of periodic
cash distributions ("distributions") with respect to Trust Preferred Securities
of each of the Trusts, out of moneys held by each of the Trusts, and payments on
liquidation, redemption or otherwise with respect to such Trust Preferred
Securities will be guaranteed by the Company as described herein (each, a "Trust
Preferred Securities Guarantee"). The Company's obligations under the Trust
Preferred Securities Guarantees will be subordinate and junior in right of
payment to all other liabilities of the Company and PARI PASSU (equally and
ratably) with the most senior preferred stock issued by the Company and with any
guarantee that may be entered into by the Company in respect of any preferred
stock of any subsidiary or affiliate of the Company. Subordinated Deferrable
Interest Debentures may be issued and sold from time to time in one or more
series by the Company to a Trust in connection with the investment of the
proceeds from the offering of Trust Preferred Securities and Trust Common
Securities (as defined herein) of such Trust. The Subordinated Deferrable
Interest Debentures subsequently may be distributed pro rata to holders of Trust
Preferred Securities and Trust Common Securities in connection with the
termination of such Trust upon the occurrence of certain events as may be
described in the Prospectus Supplement. The Debt Securities, the Trust Preferred
Securities, the Trust Preferred Securities Guarantees and the Subordinated
Deferrable Interest Debentures are collectively referred to as the "Securities."
(CONTINUED ON NEXT PAGE)
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
NEITHER THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE MISSISSIPPI GAMING COMMISSION, NOR ANY OTHER GAMING REGULATORY
AUTHORITY HAS PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED
HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
THE DATE OF THIS PROSPECTUS IS AUGUST 28, 1998.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The Trust Preferred Securities (which will be issued with a Trust Preferred
Securities Guarantee, and the proceeds of which will be used exclusively to
purchase Subordinated Deferrable Interest Debentures) and the Debt Securities
offered pursuant to this Prospectus may be offered separately or together in one
or more series up to an aggregate public offering price of $550,000,000 (or the
equivalent thereof in foreign currency or currency units), in each case at
individual prices and on terms to be determined at the time of the offering and
set forth in one or more supplements to this Prospectus (each, a "Prospectus
Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and,
among other things, will include, where applicable, (i) in the case of Debt
Securities or Subordinated Deferrable Interest Debentures, the specific
designation, aggregate principal amount offered, ranking, rate or rates of
interest or the provisions for determining such rate or rates (which may be
fixed or variable) or the manner of calculation thereof, if any, the time of
payment of interest, if any, maturity (which may be fixed or extendible), form
(which may be certificated or global), authorized denominations, currency of
payment, any terms relating to redemption (whether mandatory, at the option of
the Company or the holder), terms for sinking fund payments, additional
covenants, the initial public offering price, the purchase price and other terms
with respect to such Securities and (ii) in the case of shares of Trust
Preferred Securities, the number of shares, specific title and stated value, any
dividend, liquidation, redemption, voting and other rights and restrictions and
the initial public offering price.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain U.S. Federal income taxes, accounting and other
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Supplement.
The Securities may be sold directly by the Company or the applicable Trust
through agents designated by the Company or the applicable Trust from time to
time or through underwriters or dealers designated by the Company or the
applicable Trust from time to time. If any agents of the Company or the
applicable Trust or any dealers or underwriters are involved in the sale of the
Securities in respect of which this Prospectus is being delivered, the name of
such agents, dealers or underwriters and any applicable agent's commission,
dealer's purchase price or underwriter's discount will be as set forth in or may
be calculated from the applicable Prospectus Supplement. The net proceeds to the
Company or the applicable Trust, as the case may be, from such sale will be the
purchase price of such Securities less such commission in the case of an agent,
the purchase price of such Securities in the case of a dealer or the public
offering price of such Securities less such discount in the case of an
underwriter and less, in each case, other attributable issuance expenses. See
"Plan of Distribution" for indemnification arrangements for agents, dealers and
underwriters.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "PLAN OF DISTRIBUTION."
2
<PAGE>
AVAILABLE INFORMATION
The Company and the Trusts have filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), a combined registration statement on Form S-3 (herein,
together with all amendments thereto and exhibits filed therewith, referred to
as the "Registration Statement") relating to the Debt Securities, the
Subordinated Deferrable Interest Debentures, the Trust Preferred Securities and
the Trust Preferred Securities Guarantees.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, information statements and other
information with the Commission. Such reports, proxy statements, information
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington D.C. 20549, and at the Commission's
Regional Offices at Seven World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, upon the payment of fees prescribed by the Commission.
The Commission maintains a site on the World Wide Web that contains reports,
proxy and information statements and other information regarding registrants
(including the Company) that file electronically with the Commission. The
address of the Commission's Web site is http://www.sec.gov. Reports, proxy
statements, information statements and other information concerning the Company
can also be inspected at the offices of the New York Stock Exchange, Inc.
located at 20 Broad Street, New York, New York 10005 and at the Pacific
Exchange, 301 Pine Street, San Francisco, California 94104.
This Prospectus does not contain all the information set forth in the
Registration Statement of which this Prospectus is a part filed by the Company
and the Trusts with the Commission under the Securities Act. Statements
contained herein concerning the provisions of any contract or other document are
necessarily summaries of such contracts or documents, and each statement is
qualified in its entirety by reference to the copy of the applicable contract or
document filed with the Commission. A copy of the Registration Statement is on
file at the offices of the Commission and may be obtained upon payment of fees
prescribed by the Commission, or may be examined without charge at the public
reference facilities of the Commission described above or at the Commission's
Web site, the address of which is set forth above.
No separate financial statements of the Trusts have been included herein.
The Company does not believe that such financial statements would be material to
holders of the Trust Preferred Securities because (i) all of the voting
securities of the Trusts will be owned, directly or indirectly, by the Company,
a reporting company under the Exchange Act, (ii) the Trusts have no independent
operations and exist for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the applicable Trust and
investing the proceeds thereof in the Subordinated Deferrable Interest
Debentures issued by the Company and (iii) the obligations of each Trust under
the Trust Securities are fully and unconditionally guaranteed by the Company to
the extent that such Trust has funds available to meet such obligations. See
"The Trusts," "Description of the Trust Preferred Securities," "Description of
the Trust Preferred Securities Guarantees" and "Description of the Subordinated
Deferrable Interest Debentures." The Trusts do not expect to file separate
reports under the Exchange Act but must apply for and be granted relief by the
Commission to avoid the requirement to file such reports.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended January
31, 1998, the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 30, 1998 and the Company's Current Report on Form 8-K dated August
3, 1998, previously filed by the Company (File No. 1-8570) with the Commission
under the Exchange Act, are incorporated by reference in this Prospectus as of
their respective dates.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities made
hereby shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the respective dates of filing of such reports and
documents, except as to any portion of any future annual or quarterly report to
the Company's stockholders or proxy statement which is not deemed to be filed
under those provisions. Any such statement contained in this Prospectus, or in a
document, all or a portion of which is incorporated by reference herein, shall
be deemed to be modified or superseded for purposes of this
3
<PAGE>
Prospectus to the extent that a statement contained herein or in any
subsequently dated document, as the case may be, which also is or is deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as modified
or superseded, to constitute a part of this Prospectus.
The Company undertakes to provide, without charge, to each person to whom
this Prospectus is delivered, upon the written or oral request of such person, a
copy of the Indentures (as hereinafter defined) or any document incorporated
herein by reference in this Prospectus, other than exhibits to such documents,
unless such exhibits are also specifically incorporated by reference herein.
Requests should be directed to the Company at 2880 Las Vegas Boulevard South,
Las Vegas, Nevada 89109, Attention: General Counsel; telephone number (702)
734-0410.
------------------------
The Company will furnish each holder of the Securities annual reports
containing audited financial statements, quarterly reports containing unaudited
financial information and such other reports as may be required by applicable
law.
4
<PAGE>
THE COMPANY
Circus Circus Enterprises, Inc., which was incorporated in 1974, currently
owns and operates, through wholly owned subsidiaries, nine hotel-casino
properties in Nevada with a total of approximately 17,700 guest rooms. These
properties include (i) three hotel/casinos in Las Vegas (Circus Circus-Las
Vegas, Luxor and Excalibur), (ii) Circus Circus Hotel and Casino in Reno, (iii)
Colorado Belle Hotel and Casino and Edgewater Hotel and Casino which are located
on the Colorado River in Laughlin, (iv) Gold Strike Hotel and Gambling Hall and
Nevada Landing Hotel & Casino in Jean, and (v) Railroad Pass Hotel and Casino in
Henderson. The Company also owns and operates a dockside casino situated on a
24-acre site in Tunica County, Mississippi, which includes a 1,066-room hotel
tower placed in service during late 1997 and early 1998. It also operates two
smaller casinos on the Las Vegas Strip, Slots-A-Fun (which the Company also
owns) and Silver City Casino (which the Company operates under a lease which
expires in October 1999).
In the Spring of 1997, the Company commenced construction of Mandalay Bay
(formerly referred to as Project Paradise), a 43-story, hotel-casino resort
which will have approximately 3,700 rooms and approximately 135,000 square feet
of gaming space. The resort, which is expected to be completed in the first
quarter of 1999, will be situated on approximately 60 acres of land just south
of Luxor. Mandalay Bay's attractions are planned to include an 11-acre tropical
lagoon featuring a sand-and-surf beach, a three-quarter-mile lazy river ride, a
30,000-square-foot spa and other entertainment attractions. Inside, Mandalay Bay
will offer internationally renowned restaurants, as well as a House of Blues
nightclub and restaurant, including its signature Foundation Room sited on
Mandalay Bay's rooftop, and 100 "music-themed" hotel rooms in Mandalay Bay's
towers.
Within Mandalay Bay and as part of its 3,700 rooms, a Four Seasons Hotel
with approximately 400 rooms will provide Las Vegas visitors with a luxury
"five-star" hospitality experience. The Four Seasons Hotel, which will be owned
by the Company and managed by Four Seasons Hotels Limited ("Four Seasons"),
represents the first step pursuant to the Company's cooperative effort with Four
Seasons to identify strategic opportunities for development of hotel and casino
properties worldwide. The cost of Mandalay Bay, including the Four Seasons Hotel
but excluding the land, is currently estimated at approximately $850 million.
During the course of construction, Mandalay Bay's hotel tower has
experienced settling which has exceeded the level contemplated in the building's
original design and the amount of settling has been greater in some portions of
the structure than others. The Company has retained geotechnical, structural
engineering and foundation consultants who are evaluating the situation and have
recommended remedial measures which are in the initial stages of implementation.
Completion of the recommended remedial measures is not expected to delay the
opening of Mandalay Bay or materially increase the cost of the project. However,
until such remedial measures are completed and evaluated and the ongoing
evaluation of the site is concluded there can be no assurances that further
corrective measures will not be required or, if additional measures are
required, as to the cost of such measures or their impact, if any, on the
scheduled completion and opening of Mandalay Bay.
Mandalay Bay is the latest phase of the Company's development of over 230
acres of land it owns at the south end of the Las Vegas Strip which runs from
Tropicana Avenue south approximately one mile to Russell Road ("Masterplan
Mile"). As part of its development plan for Masterplan Mile, the Company is
constructing a 125,000-square-foot convention facility and a 12,000-seat arena.
These facilities are expected to be completed and opened concurrently with
Mandalay Bay, and will represent core components of Masterplan Mile which will
be cross-marketed to guests at the Company's existing and future hotel-casinos
within Masterplan Mile. The estimated cost of the convention facility and arena
is approximately $100 million.
The Company also plans to construct a monorail system which will link the
Company's resorts on Masterplan Mile. Furthermore, the Company is planning a
"Sea of Predators" aquarium exhibit which will likewise represent a core
component of Masterplan Mile. Both the monorail and the Sea of Predators
5
<PAGE>
exhibit are anticipated to be completed after the opening of Mandalay Bay. The
cost of these additional Masterplan Mile core components is estimated at
approximately $75 million. The Company may add other core components to its
development plan for Masterplan Mile in the future.
The Company, through wholly owned subsidiaries, is a 50% participant in
three joint ventures which own and operate gaming properties. They include (i) a
joint venture which owns and operates Monte Carlo, a 3,002-room hotel/casino on
the Las Vegas Strip that opened in June 1996, (ii) a joint venture which owns
and operates the Grand Victoria, a riverboat casino and related land-based
entertainment complex located in Elgin, Illinois, and (iii) a joint venture
which owns and operates Silver Legacy, a 1,711-room hotel/casino located in
downtown Reno that opened in July 1995 and is situated between (and connected by
enclosed climate-controlled skyways to) Circus Circus-Reno and another
hotel/casino owned and operated by an affiliate of the other joint venture
participant.
The Company is also a participant in another joint venture which has been
selected to develop one of three casinos permitted to be developed in Detroit,
Michigan. The Company will own a 45% equity interest in the proposed project and
receive a management fee. A development agreement between this joint venture and
the City of Detroit was approved by the Detroit City Council on April 9, 1998.
The joint venture's ability to proceed with the proposed project is contingent
upon the receipt of all necessary gaming approvals and satisfaction of other
conditions. The joint venture is planning a $600 million project, of which the
Company would be required to contribute 20% of such amount in the form of
equity, with the balance being provided through project-specific financing.
The Company's executive offices are located at 2880 Las Vegas Boulevard
South, Las Vegas, Nevada 89109, and its telephone number is (702) 734-0410.
Unless the context otherwise indicates, all references herein to the Company are
to Circus Circus Enterprises, Inc. and its subsidiaries.
THE TRUSTS
Each of Circus Finance I and Circus Finance II is a statutory business trust
formed under the Delaware Business Trust Act, as amended (the "Trust Act")
pursuant to (i) a separate declaration of trust, executed by the Company, as
sponsor for such trust (the "Sponsor"), and the Trustees (as defined herein) of
such trust as of that date and (ii) the filing of a separate certificate of
trust with the Delaware Secretary of State. The declaration of trust of each
Trust will be amended and restated in its entirety (as so amended and restated,
the "Declaration") substantially in the form filed as an exhibit to the
Registration Statement filed by the Company and the Trusts of which this
Prospectus forms a part. Each Trust exists for the exclusive purposes of (i)
issuing and selling the Trust Preferred Securities representing preferred
undivided beneficial interests in the assets of such Trust and Trust Common
Securities representing common undivided beneficial interests in the assets of
such Trust (the "Trust Common Securities" and, together with the Trust Preferred
Securities, the "Trust Securities"), (ii) investing the gross proceeds of the
Trust Securities in a series of Subordinated Deferrable Interest Debentures and
(iii) engaging in only those other activities necessary or incidental thereto.
All of the Trust Common Securities will be directly or indirectly owned by the
Company. The Trust Common Securities will rank PARI PASSU, and payments will be
made thereon pro rata, with the Trust Preferred Securities except that upon the
occurrence and during the continuation of an Event of Default (as defined in the
Declaration), the rights of the holders of the Trust Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. The Company will, directly or indirectly, acquire Trust
Common Securities in an aggregate liquidation amount equal to 3% of the total
capital of each Trust. Each Trust has a term of approximately 55 years, but may
earlier terminate as provided in the applicable Declaration. Each Trust's
business and affairs will be conducted by the trustees (the "Trustees")
appointed by the Company, as the direct or indirect holder of all the Trust
Common Securities. The holder of the Trust Common Securities will be entitled to
appoint, remove or replace any of, or increase or reduce the number of, the
Trustees of a Trust. The duties and obligations of such Trustees shall be
governed by the Declaration of such Trust, the Trust Indenture Act of 1939, as
6
<PAGE>
amended (the "Trust Indenture Act"), and the Trust Act. A majority of the
Trustees (the "Regular Trustees") of each Trust will be persons who are
employees or officers of or affiliated with the Company. One Trustee of each
Trust will be a financial institution which will be unaffiliated with the
Company and which shall act as property trustee and as indenture trustee for
purposes of the Trust Indenture Act pursuant to the terms set forth in a
Prospectus Supplement (the "Property Trustee"). In addition, unless the Property
Trustee maintains a principal place of business in the State of Delaware, and
otherwise meets the requirements of applicable law, another Trustee of each
Trust will have its principal place of business or reside in the State of
Delaware (the "Delaware Trustee"). The Company will pay all fees, expenses,
debts and obligations (other than the Trust Securities) related to the Trusts
and the offering of Trust Securities. The office of the Delaware Trustee for
each Trust in the State of Delaware is The Bank of New York (Delaware), 400
White Clay Center, Route 273, Newark, Delaware 19711. The principal place of
business of each Trust shall be c/o Circus Circus Enterprises, Inc., 2880 Las
Vegas Boulevard South, Las Vegas, Nevada 89109 (telephone number 702-734-0410).
GAMING REGULATION
The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. In the States of Illinois, Mississippi and
Nevada licensed gaming operations are currently conducted by the Company through
wholly owned subsidiaries and/or by joint ventures in which entities wholly
owned by the Company are participants. A joint venture in which a wholly owned
subsidiary of the Company is a participant plans (subject to receipt of the
requisite approvals and licenses) to conduct licensed gaming operations in the
future in Detroit, Michigan. The Company and a wholly owned subsidiary of the
Company have also filed gaming applications in New Jersey in connection with
plans to acquire land in Atlantic City, construct a hotel-casino and conduct
gaming operations, subject to the successful resolution of currently pending
litigation, the receipt of applicable regulatory approvals and the satisfaction
of other conditions. Each of these states, as well as the applicable local
authorities in such states, requires various licenses, findings of suitability,
registrations, permits and approvals (individually, a "Gaming License" and
collectively, "Gaming Licenses") to be held by the Company and its subsidiaries
and joint ventures that are engaged in gaming operations. The Illinois Gaming
Board, the Michigan Gaming Control Board, the Mississippi Gaming Commission, the
Nevada Gaming Commission, the New Jersey Casino Control Commission and any other
governmental authority which now or hereafter has regulatory authority over any
gaming operations conducted or proposed to be conducted by the Company, any of
its subsidiaries or any joint ventures in which the Company or any entity
wholly-owned by the Company is a participant (individually, a "Gaming Authority"
and collectively, the "Gaming Authorities") may, among other things, deny,
limit, condition, suspend or revoke a Gaming License or approval to own the
stock or joint venture interest of any of the licensed operations conducted in
such states by the Company or its subsidiaries or joint ventures for any cause
deemed reasonable by such licensing authority. Substantial fines or forfeiture
of assets for violations of gaming laws or regulations may be levied against the
Company, such subsidiaries and joint ventures and the individuals involved. The
denial, suspension or revocation of any Gaming License of the Company or any of
its subsidiaries or joint ventures or the levy on the Company or any of such
subsidiaries or joint ventures of substantial fines or forfeiture of assets
could have a material adverse effect on the business of the Company.
To date, the Company has obtained all Gaming Licenses necessary for the
operation of its existing gaming activities. However, Gaming Licenses and
related approvals are deemed to be privileges under Illinois, Mississippi and
Nevada as well as Michigan and New Jersey law, and no assurance can be given
that any new Gaming License that may be required in the future will be granted
or that existing Gaming Licenses will not be revoked or suspended.
The Nevada Gaming Commission (the "Nevada Commission") may, in its
discretion, require the holder of any securities issued by the Company to file
applications, be investigated and be found suitable to own such securities if it
has reason to believe that such ownership would be inconsistent with the
declared
7
<PAGE>
policies of the State of Nevada. If the Nevada Commission determines that a
person is unsuitable to own such securities, then pursuant to the Nevada Gaming
Control Act and the regulations promulgated thereunder, the Company can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
The Illinois Gaming Board and the Mississippi Gaming Commission have
jurisdiction over the holders and beneficial owners of securities issued by the
Company similar to that of the Nevada Commission and may also require their
investigation and approval, the Michigan Gaming Control Board will have such
jurisdiction and authority if a joint venture which includes among its
participants a wholly owned subsidiary of the Company is subsequently licensed
to conduct gaming operations in Detroit, Michigan, and the New Jersey Casino
Control Commission will have such jurisdiction and authority if the Company and
a subsidiary of the Company are subsequently licensed to conduct gaming
operations in New Jersey. An applicant must pay all costs of investigation
incurred by a Gaming Authority in conducting an investigation relating to such
applicant.
In certain jurisdictions, including Mississippi and Nevada, the Company may
not make a public offering of its securities without prior approval of the
applicable Gaming Authorities if the securities or proceeds therefrom are
intended to be used to construct, acquire or finance gaming facilities in such
jurisdictions, or to retire or extend obligations incurred for such purposes or
for similar transactions. On May 22, 1997, the Nevada Commission granted the
Company prior approval to make public offerings of its securities for a period
of two years, subject to certain conditions (the "Nevada Shelf Approval"). The
Nevada Shelf Approval also applies to any affiliated company wholly owned by the
Company (a "Gaming Affiliate") which is a publicly traded corporation or would
become a publicly traded corporation pursuant to a public offering. The Nevada
Shelf Approval also includes approval for the Company's registered and licensed
subsidiaries to guarantee any security issued by, and to hypothecate their
assets to secure the payment or performance of any obligation issued by, the
Company or a Gaming Affiliate in a public offering under the Nevada Shelf
Approval. However, the Nevada Shelf Approval may be rescinded for good cause
without prior notice upon the issuance of an interlocutory stop order by the
Chairman of the Nevada State Gaming Control Board (the "Nevada Board") and must
be renewed biennially. The Nevada Shelf Approval does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of this Prospectus or any related Prospectus Supplement
or the investment merits of the Securities offered. Any representation to the
contrary is unlawful. The Company received a similar one-year waiver of approval
requirements from the Mississippi Gaming Commission on January 22, 1998 (the
"Mississippi Shelf Approval"). The public offering of the Debt Securities,
Subordinated Deferred Interest Debentures and the Trust Preferred Securities
Guarantees will be made pursuant to the Nevada Shelf Approval and the
Mississippi Shelf Approval, each as currently in effect or as may be renewed in
the discretion of the applicable Gaming Authority. The public offering of the
Trust Securities does not require any additional prior approval.
For information concerning the requirement that Debt Securities, Trust
Preferred Securities or Subordinated Deferrable Interest Debentures be disposed
of by holders or beneficial owners under certain circumstances, see "Description
of Debt Securities--Mandatory Disposition Pursuant to Gaming Laws," "Description
of the Trust Preferred Securities" and "Description of the Subordinated
Deferrable Interest Debentures--Mandatory Disposition Pursuant to Gaming Laws."
The foregoing is only a summary of the regulatory requirements applicable to
the Company and the holders of its securities. For additional information
regarding the gaming laws and regulations applicable to the Company's gaming
operations and the holders of its securities, see the discussion under the
caption "Regulation and Licensing" in Item I of the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1998, incorporated by reference
in this Prospectus.
8
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges of
the Company for the three months ended April 30, 1998 and each of the fiscal
years ended January 31, 1998, 1997, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED JANUARY 31,
APRIL 30, ------------------------------------
1998 1998 1997 1996 1995 1994
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)....................... 1.83x 1.99x 2.68x 3.85x 5.38x 5.40x
</TABLE>
- ------------------------
(1) For purposes of computing the ratio, "earnings" consist of income before
fixed charges and income taxes, adjusted to exclude capitalized interest and
equity in undistributed earnings of less-than-50%-owned ventures. "Fixed
charges" include interest, whether expensed or capitalized, amortization of
debt discount and issuance costs, the Company's proportionate share of the
interest cost of 50%-owned ventures, and the estimated interest component of
rental expense.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Securities
for general corporate purposes, which may include financing the development and
construction of new facilities, other capital expenditures, working capital, the
repayment or repurchase of outstanding indebtedness, share repurchases or such
other purposes as may be specified in an accompanying Prospectus Supplement.
ACCOUNTING TREATMENT RELATING TO TRUST SECURITIES
The financial statements of each Trust that has issued Trust Securities will
be consolidated with the Company's financial statements, with the Trust
Preferred Securities of each Trust shown on the Company's consolidated financial
statements as Company-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely subordinated debt securities of the Company.
The Company's financial statements will include a footnote that discloses, among
other things, that the sole asset of each Trust included therein consists of
Subordinated Deferrable Interest Debentures of the Company, and will specify the
designation, principal amount, interest rate and maturity date of such
Subordinated Deferrable Interest Debentures.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent to which such general
provisions may apply to the Debt Securities will be described in a Prospectus
Supplement relating to such Debt Securities.
The Debt Securities may constitute either senior secured debt ("Senior
Secured Debt Securities"), senior unsecured debt ("Senior Unsecured Debt
Securities"), senior subordinated debt ("Senior Subordinated Debt Securities")
or subordinated debt ("Subordinated Debt Securities" and, collectively with the
Senior Subordinated Debt Securities, the "Subordinated Securities"), or any
combination thereof, of the Company. Each such series of Debt Securities will be
issued under a separate indenture (the "Senior Secured Debt Indenture," the
"Senior Unsecured Debt Indenture," the "Senior Subordinated Debt Indenture" and
the "Subordinated Debt Indenture," respectively), in each case, between the
Company, as obligor, and The Bank of New York, as Trustee (the "Trustee"). The
Senior Secured Debt Indenture, the Senior Unsecured Debt Indenture, the Senior
Subordinated Debt Indenture and the Subordinated Debt Indenture are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures."
The terms of the Debt Securities include those stated in the applicable
Indenture and those made part of such Indenture by reference to the Trust
Indenture Act, and holders of the Debt Securities are referred
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to the Indentures and the Trust Indenture Act for a statement thereof. A copy of
the form of each Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The following summaries of certain
provisions of the Debt Securities and the Indentures, while including a
discussion of all material aspects or features thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Debt Securities and the Indentures, including the
definitions therein of certain terms which are not otherwise defined in this
Prospectus. Wherever particular provisions or defined terms of the Indentures
are referred to, such provisions or defined terms are incorporated herein by
reference.
GENERAL
The Indentures will not limit the aggregate principal amount of Debt
Securities which may be issued thereunder. Debt Securities may be issued
thereunder from time to time as a single series or in two or more separate
series up to the aggregate principal amount from time to time authorized by the
Company for each series.
The applicable Prospectus Supplement or Prospectus Supplements will
describe, among other things, the following terms of the Debt Securities, if
applicable to such Debt Securities: (i) the title of the Debt Securities; (ii)
any limit on the aggregate principal amount of the Debt Securities and whether
they will constitute Senior Secured Debt Securities, Senior Unsecured Debt
Securities, Senior Subordinated Debt Securities or Subordinated Debt Securities;
(iii) the price or prices (expressed as a percentage of the aggregate principal
amount thereof) at which the Debt Securities will be issued; (iv) the date or
dates on which the principal of the Debt Securities is payable or the method of
determination thereof; (v) the rate or rates (which may be fixed or variable) at
which the Debt Securities will bear interest (which rate may be zero in the case
of certain Debt Securities issued at an issue price representing a discount from
the principal amount payable at maturity), and the date or dates from which such
interest, if any, will accrue, and the circumstances, if any, in which the
Company may defer interest payments; (vi) the interest payment date or dates, if
any, on which any interest on the Debt Securities will be payable, and the
record date or dates for any interest payable on any Debt Securities; (vii) the
right or obligation, if any, of the Company to redeem or purchase Debt
Securities pursuant to any sinking fund or analogous provisions or at the option
of a holder thereof, or otherwise, the conditions, if any, giving rise to such
right or obligation, and the period or periods within which, and the price or
prices at which and the terms and conditions upon which Debt Securities shall be
redeemed or purchased, in whole or in part, and any provisions for the marketing
of such Debt Securities; (viii) if the amount of payments of principal of,
premium, if any, and interest, if any, on the Debt Securities is to be
determined by reference to an index, formula or other method, the manner in
which such amounts are to be determined and the calculation agent, if any, with
respect thereto; (ix) if other than the principal amount thereof, the portion of
the principal amount of the Debt Securities which will be payable upon
declaration or acceleration of the stated maturity thereof pursuant to an Event
of Default (as defined in the Indentures); (x) whether the Debt Securities will
be issued in certificated or book-entry form and, if applicable, the identity of
the depositary for the Debt Securities; (xi) any listing of the Debt Securities
on a securities exchange; (xii) any additional restrictive covenants included
for the benefit of holders of such Debt Securities; (xiii) any additional events
of default provided with respect to such Debt Securities; and (xiv) any other
material terms of the Debt Securities. Any such Prospectus Supplement will also
describe any special provisions for the payment of additional amounts with
respect to the Debt Securities.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
The Indentures will provide that each holder and beneficial owner of Debt
Securities, by accepting or otherwise acquiring an interest in the Debt
Securities, shall be deemed to have agreed that if the Gaming Authority of any
jurisdiction in which the Company or any of its subsidiaries (or any joint
venture in which the Company or a subsidiary of the Company is a participant)
now or hereafter conducts or proposes to conduct gaming requires that a person
who is a holder or beneficial owner of Debt Securities must be licensed,
qualified or found suitable, or comply with any other requirement under
applicable Gaming
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Laws, such holder or beneficial owner shall apply for a license, qualification
or a finding of suitability or comply with such other requirement, as the case
may be, within the prescribed time period. If such holder or beneficial owner
fails to apply to be, or fails to become, licensed or qualified, is found
unsuitable or fails to comply with any other requirement, as the case may be (a
"failure of compliance"), then the Company shall have the right, at its option
(i) to require such person to dispose of its Debt Securities or beneficial
interest therein within 30 days of receipt of notice of the Company's election
or such earlier date as may be requested or prescribed by the Gaming Authority
or (ii) to redeem such Debt Securities (which redemption may be less than 30
days following the notice of redemption if so requested or prescribed by the
Gaming Authority) at a redemption price equal to the lesser of (A) such person's
cost, (B) 100% of the principal amount thereof, plus accrued and unpaid interest
to the earlier of the redemption date and the date of any failure of compliance,
or (C) such lesser amount as may be required by applicable law or by order of
any Gaming Authority. The Company shall notify the Trustee in writing of any
such redemption as soon as practicable. The Company shall not be responsible for
any costs or expenses any such holder or beneficial owner may incur in
connection with its application for a license, qualification or a finding of
suitability or its compliance with any other requirement of a Gaming Authority.
The Indentures will also provide that immediately upon the imposition by a
Gaming Authority of a requirement that a holder or beneficial owner dispose of
Debt Securities, such holder or beneficial owner shall, to the extent required
by applicable Gaming Laws, have no further right (i) to exercise, directly or
indirectly, through any trustee, nominee or any other person or entity, any
right conferred by the Debt Securities or (ii) to receive any interest,
dividends or any other distributions or payments with respect to the Debt
Securities or any remuneration in any form with respect to the Debt Securities
from the Company or the Trustee, except the redemption price referred to above.
SUBORDINATION OF SECURITIES
The payment of the principal of, premium, if any, and interest on the
Subordinated Securities will be subordinated in right of payment, as described
below, to the prior payment in full of all current and future Senior
Indebtedness.
The Indentures will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Company, or any distribution of assets of the Company pursuant to liquidation,
dissolution or other winding-up or reorganization of the Company, whether
voluntary or involuntary, or any assignment for the benefit or creditors or
other marshalling of assets or liabilities of the Company, all Senior
Indebtedness must be paid in full before any payment or distribution is made on
account of the principal of, premium, if any, or interest on the Subordinated
Securities. Upon maturity of any Senior Indebtedness by lapse of time,
acceleration or otherwise, payment in full must be made on such Senior
Indebtedness before any payment is made on or in respect of the Subordinated
Securities. During the continuance of any event of default with respect to
Senior Indebtedness entitling the holders thereof to accelerate the maturity
thereof, or if such event of default would be caused by any payment upon or in
respect of the applicable Subordinated Securities, no payment may be made by the
Company upon or in respect of the Subordinated Securities; provided, however,
that if such event of default is other than a default in payment of any amount
due in connection with such Senior Indebtedness, the Company shall be permitted
to continue to make payments of interest on the Subordinated Securities.
In the event that, notwithstanding the foregoing, the Company makes any
payment or distribution to the Trustee or any holders of any Subordinated
Securities prohibited by the subordination provision of the applicable
Indenture, then such payment or distribution will be required to be paid over
and delivered to the holders (or their representative) of Senior Indebtedness.
If the Company fails to make any payment on Subordinated Securities when due
or within any applicable grace period, whether or not on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indentures and would enable the holders of such
Subordinated Securities to accelerate the maturity thereof and, subject to the
terms set forth under
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"Events of Default and Notice Thereof," would enable the holders of other Debt
Securities to accelerate the maturity thereof. See "--Events of Default and
Notice Thereof."
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Subordinated Securities and funds that
would be otherwise payable to the holders of the Subordinated Securities will be
paid to the holders of Senior Indebtedness to the extent necessary to pay the
Senior Indebtedness in full, and the Company may be unable to meet its
obligations fully with respect to the Subordinated Securities.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Credit Facility" means the Amended and Restated Loan Agreement dated as of
May 23, 1997 among the Company, as Borrower, Bank of America National Trust and
Savings Association, as Administrative Agent, and the lenders which are or
become parties from time to time thereto, as amended by Amendment No. 1 thereto
dated as of October 3, 1997 and Amendment No. 2 thereto dated as of May 15,
1998, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
without limitation any agreement extending the maturity of, refinancing or
otherwise restructuring (including adding guarantors) all or any portion of the
Indebtedness under such agreement or any successor agreement or increasing the
credit available thereunder.
"Interest Rate Protection Obligations" means, with respect to any person,
the obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such person against fluctuations
in interest rates.
"Senior Indebtedness" is defined in the Senior Subordinated Debt Indenture
as the principal, premium, if any, and interest on any Indebtedness of the
Company, whenever created, incurred, issued, assumed or guaranteed, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Senior
Subordinated Debt Securities. Without limiting the foregoing, Senior
Indebtedness shall include (a) the principal of and interest on and other
amounts due on or in connection with the Indebtedness of the Company under the
Credit Facility; (b) all Interest Rate Protection Obligations of the Company;
(c) all obligations of the Company under standby letters of credit; and (d)
Indebtedness evidenced by the Senior Secured Debt Securities, the Senior
Unsecured Debt Securities, the 6.45% Senior Notes of the Company Due 2006, the
7.0% Debentures of the Company Due 2036 and the 6.70% Debentures of the Company
Due 2096. Notwithstanding the foregoing, Senior Indebtedness shall not include
(a) to the extent that it may constitute Indebtedness, any obligation for
federal, state, local or other taxes; (b) any Indebtedness among or between the
Company and/or any one or more subsidiaries and Affiliates of the Company; (c)
to the extent that it may constitute Indebtedness, any obligation in respect to
any trade payable incurred for the purchase of goods or materials, or for
services obtained, in the ordinary course of business; (d) Indebtedness
evidenced by the 6 3/4% Senior Subordinated Notes of the Company Due 2003 and
the 7 5/8% Senior Subordinated Debentures of the Company Due 2013, with respect
to which the Senior Subordinated Debt Securities will rank PARI PASSU in right
of payment; (e) Indebtedness of the Company that is expressly subordinate or
junior in right of payment to any other Indebtedness of the Company; (f) to the
extent that it may constitute Indebtedness, any obligation owing under leases
(other than Capital Lease Obligations) or management agreements; and (g) any
obligation that by operation of law is subordinate to any general unsecured
obligations of the Company; provided, that any guaranty by the Company of
Indebtedness of a subsidiary of the Company to third parties shall constitute
Senior Indebtedness unless, in the case of any particular guaranty, the
instrument creating or evidencing the same provides that such guaranty is
subordinated to any other Indebtedness of the Company; provided further, that in
the event a subsidiary of the Company advances to
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the Company the proceeds attributable to Indebtedness incurred by such
subsidiary to a third party which Indebtedness has been guaranteed by the
Company pursuant to a guaranty which itself constitutes Senior Indebtedness,
then such obligation of the Company to repay such advance to the subsidiary
shall constitute Senior Indebtedness, unless such obligation is created or
evidenced by an instrument which provides that such obligation is subordinated
to any other Indebtedness of the Company.
"Senior Indebtedness" is defined in the Subordinated Debt Indenture as the
principal, premium, if any, and interest on any Indebtedness of the Company,
whenever created, incurred, issued, assumed or guaranteed, unless, in the case
of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Subordinated Debt
Securities. Without limiting the foregoing, Senior Indebtedness shall include
(a) the principal of and interest on and other amounts due on or in connection
with the Indebtedness of the Company under the Credit Facility; (b) all Interest
Rate Protection Obligations of the Company; (c) all obligations of the Company
under standby letters of credit; (d) Indebtedness evidenced by the Senior
Subordinated Debt Securities, the 6 3/4% Senior Subordinated Notes of the
Company Due 2003 and the 7 5/8% Senior Subordinated Debentures of the Company
Due 2013; and (e) Indebtedness evidenced by the Senior Secured Debt Securities,
the Senior Unsecured Debt Securities, the 6.45% Senior Notes of the Company Due
2006, the 7.0% Debentures of the Company Due 2036 and the 6.70% Debentures of
the Company Due 2096. Notwithstanding the foregoing, Senior Indebtedness shall
not include (a) to the extent that it may constitute Indebtedness, any
obligation for federal, state, local or other taxes; (b) any Indebtedness among
or between the Company and/or any one or more subsidiaries or Affiliates of the
Company; (c) to the extent that it may constitute Indebtedness, any obligation
in respect to any trade payable incurred for the purchase of goods or materials,
or for services obtained, in the ordinary course of business; (d) to the extent
that it may constitute Indebtedness, any obligation owing under leases (other
than Capital Lease obligations) or management agreements; and (e) any obligation
that by operation of law is subordinate to any general unsecured obligations of
the Company; provided, that any guaranty by the Company of Indebtedness of a
subsidiary of the Company to third parties shall constitute Senior Indebtedness
unless, in the case of any particular guaranty, the instrument creating or
evidencing the same provides that such guaranty does not constitute Senior
Indebtedness; provided further, that in the event a subsidiary of the Company
advances to the Company the proceeds attributable to Indebtedness incurred by
such subsidiary to a third party which Indebtedness has been guaranteed by the
Company pursuant to a guaranty which itself constitutes Senior Indebtedness,
then such obligation of the Company to repay such advance to the subsidiary
shall constitute Senior Indebtedness, unless such obligation is created or
evidenced by an instrument which provides that such advance does not constitute
Senior Indebtedness.
The claims of third parties to the assets of the Company's subsidiaries
incurring such obligations will be superior to those of the Company as a
stockholder and, therefore, the Debt Securities may be deemed to be effectively
subordinated to the claims of such third parties. Substantially all of the
Company's business operations are conducted through such subsidiaries, and the
Debt Securities are effectively subordinated to the repayment of the liabilities
arising from those operations. Unless the Prospectus Supplement otherwise
provides, the Indentures will not limit the amount of additional Indebtedness,
including Senior Indebtedness, which the Company or any subsidiary may create,
incur, assume or guarantee. As a result of the subordination provisions
contained in the Indentures, in the event of insolvency, holders of the
Subordinated Securities may recover less, ratably, than other creditors of the
Company or its subsidiaries.
REGISTERED GLOBAL SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more Registered Global Securities that will be deposited with and registered
in the name of a depositary (a "Depositary") or its nominee identified in the
applicable Prospectus Supplement. In such case, one or more Registered Global
Securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal amount of outstanding registered Debt
Securities of the series to be represented by
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such Registered Global Security or Securities. Unless and until it is exchanged
in whole or in part for Debt Securities in definitive registered form, a
Registered Global Security may not be transferred except as a whole by the
Depositary for such Registered Global Security to a nominee of such Depositary,
or by such a nominee to such Depositary or to another nominee of such
Depositary, or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global Security
will be described in the applicable Prospectus Supplement. The Company
anticipates that the following provisions will apply to all depositary
arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons holding interests through
participants. Upon the issuance of a Registered Global Security, the Depositary
for such Registered Global Security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Debt Securities represented by such Registered Global Security
beneficially owned by such participants. The accounts to be credited shall be
designated by any dealers, underwriters or agents participating in the
distribution of such Debt Securities. Ownership of beneficial interests in such
Registered Global Security will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by the Depositary
for such Registered Global Security (with respect to interests of participants)
and on the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer or
pledge beneficial interests in Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the Indentures. Except as set forth below, owners of beneficial
interests in a Registered Global Security will not be entitled to have the Debt
Securities represented by such Registered Global Security registered in their
names, will not receive or be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the Indentures. Accordingly, each person owning a beneficial
interest in a Registered Global Security must rely on the procedures of the
Depositary for such Registered Global Security and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interests, to exercise any rights of a holder under the Indentures. The
Company understands that under existing industry practices, if the Company
requests any action of holders or if an owner of a beneficial interest in a
Registered Global Security desires to give or take any action which a holder is
entitled to give or take under the applicable Indenture, the Depositary for such
Registered Global Security would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Registered Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Registered Global Security. None of
the Company, the Trustee or any other agent of the Company or agent of the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
such Registered Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest in respect of such Registered Global Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in such Registered Global Security as
shown on the records of such
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Depositary. The Company also expects that payments by participants to owners of
beneficial interests in such Registered Global Security held through such
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered Global
Security is at any time unwilling or unable to continue as Depositary or ceases
to be a clearing agency registered under the Exchange Act, and a successor
Depositary registered as a clearing agency under the Exchange Act is not
appointed by the Company within 90 days, the Company will issue such Debt
Securities in definitive form in exchange for such Registered Global Security.
In addition, the Company may at any time and in its sole discretion determine
not to have any of the Debt Securities of a series represented by one or more
Registered Global Securities and, in such event, will issue Debt Securities of
such series in definitive form in exchange for all of the Registered Global
Security or Securities representing such Debt Securities. Any Debt Securities
issued in definitive form in exchange for a Registered Global Security will be
registered in such name or names as the Depositary shall instruct the Trustees.
It is expected that such instructions will be based upon directions received by
the Depositary from participants with respect to ownership of beneficial
interests in such Registered Global Security.
CERTAIN COVENANTS
LIMITATION OF LIENS. Unless otherwise indicated in the applicable
Prospectus Supplement, the Senior Unsecured Debt Indenture and the Senior
Subordinated Debt Indenture will provide that neither the Company nor any of its
subsidiaries may issue, assume or guarantee any Indebtedness secured by a Lien
upon any Consolidated Property without effectively providing that the Debt
Securities shall be secured equally and ratably with (or prior to) such
Indebtedness so long as such Indebtedness shall be so secured, except that this
restriction will not apply to: (a) Liens existing on the date of original
issuance of the Debt Securities; (b) Liens affecting property of a corporation
or other entity existing at the time it becomes a subsidiary of the Company or
at the time it is merged into or consolidated with the Company or a subsidiary
of the Company; (c) Liens on property existing at the time of acquisition
thereof or incurred to secure payment of all or a part of the purchase price
thereof or to secure Indebtedness incurred prior to, at the time of, or within
24 months after the acquisition thereof for the purpose of financing all or part
of the purchase price thereof; (d) Liens on any property to secure all or part
of the cost of improvements or construction thereon or Indebtedness incurred to
provide funds for such purpose in a principal amount not exceeding the cost of
such improvements or construction; (e) Liens which secure Indebtedness owing by
a subsidiary of the Company to the Company or to a subsidiary of the Company;
(f) Liens securing Indebtedness of the Company the proceeds of which are used
substantially simultaneously with the incurrence of such Indebtedness to retire
Funded Debt; (g) purchase money security Liens on personal property; (h) Liens
securing Indebtedness of the Company the proceeds of which are used within 24
months of the incurrence of such Indebtedness for the Project Cost of the
construction and development or improvement of a Resort Property; (i) Liens on
the stock, partnership or other equity interest of the Company or any subsidiary
in any Joint Venture (as hereinafter defined) or any subsidiary which owns an
equity interest in such Joint Venture to secure Indebtedness, PROVIDED the
amount of such Indebtedness is contributed and/or advanced solely to such Joint
Venture; (j) Liens securing any Senior Indebtedness (as defined in the Senior
Subordinated Debt Indenture), including without limitation, the Senior Secured
Debt Securities; (k) certain Liens to government entities, including pollution
control or industrial revenue bond financing; (l) Liens required by any contract
or statute in order to permit the Company or a subsidiary of the Company to
perform any contract or subcontract made by it with or at the request of a
governmental entity; (m) mechanic's, materialman's, carrier's or other like
Liens, arising in the ordinary course of business; (n) certain Liens for taxes
or assessments and similar charges; (o) zoning restrictions, easements,
licenses, covenants, reservations, restrictions on the use of real property and
certain other minor irregularities of title; and (p) certain extensions,
renewals, replacements or refinancings of any Liens referred to in the foregoing
clauses (a) through (j). Notwithstanding the foregoing, the Company and any one
or more of its subsidiaries may, without securing the Debt Securities, issue,
assume or guarantee
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Indebtedness which would otherwise be subject to the foregoing restrictions in
an aggregate principal amount which, together with all other such Indebtedness
of the Company and its subsidiaries which would otherwise be subject to the
foregoing restrictions (not including Indebtedness permitted to be secured under
clauses (a) through (j) inclusive above) and the aggregate Value of Sale and
Lease-Back Transactions (other than those in connection with which the Company
has voluntarily retired Funded Debt) does not at any one time exceed 15% of
Consolidated Net Tangible Assets of the Company and its consolidated
subsidiaries.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Unless otherwise indicated
in the applicable Prospectus Supplement, the Senior Unsecured Debt Indenture and
the Senior Subordinated Debt Indenture will provide that neither the Company nor
any of its subsidiaries will enter into any Sale and Lease-Back Transaction
unless either (a) the Company or such subsidiary would be entitled, pursuant to
the above provisions, to incur Indebtedness in a principal amount equal to or
exceeding the Value of such Sale and Lease-Back Transaction, secured by a Lien
on the property to be leased, without equally and ratably securing such Debt
Securities or (b) the Company within 120 days after the effective date of such
Sale and Lease-Back Transaction applies to the voluntary retirement of its
Funded Debt an amount equal to the Value of the Sale and Lease-Back Transaction
(subject to credits for certain voluntary retirements of Funded Debt).
ADDITIONAL COVENANTS. Any additional covenants of the Company with respect
to any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
CERTAIN DEFINITIONS
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities (excluding any thereof which are by their
terms extendible or renewable at the option of the obligor thereon to a time
more than 12 months after the time as of which the amount thereof is being
computed) and (ii) all goodwill, trade names, trademarks, patents, purchased
technology, unamortized debt discount and other like intangible assets, all as
set forth in the most recent quarterly balance sheet of the Company and its
consolidated subsidiaries and computed in accordance with generally accepted
accounting principles.
"CONSOLIDATED PROPERTY" means any property of the Company or any subsidiary
of the Company.
"DETROIT JOINT VENTURE" means the Michigan limited liability company
governed by an Operating Agreement, dated October 7, 1997, by and between Circus
Circus Michigan, Inc., a wholly owned subsidiary of the Company, and Atwater
Casino Group, L.L.C.
"EXISTING AND PERMITTED COMPLETION GUARANTEES AND MAKE-WELL AGREEMENTS"
means (i) that certain Amended and Restated Make-Well Agreement by the Company
in favor of Bank of America National Trust and Savings Association dated as of
November 24, 1997 relating to the Circus and Eldorado Joint Venture, a Nevada
general partnership, as such agreement may be amended (including any amendment
and restatement thereof), supplemented or otherwise modified from time to time,
including any extension of the term thereof, (ii) any contract providing for the
completion of construction or other payment or performance with respect to the
construction, maintenance or improvement of property or equipment of the Detroit
Joint Venture, or (iii) any "make-well," "keep-well" or other agreement or
arrangement of whatever nature providing for the obligation to advance funds,
property or services on behalf of the Detroit Joint Venture, or given for the
purpose of assuring or holding harmless any governmental entity or agency and/or
any lender against loss with respect to any obligation of the Detroit Joint
Venture.
"FUNDED DEBT" means all Indebtedness of the Company which (i) matures by its
terms, or is renewable at the option of any obligor thereon to a date, more than
one year after the date of original issuance of such Indebtedness and (ii) ranks
at least pari passu with the Debt Securities.
"INDEBTEDNESS" of any person means (a) any indebtedness of such person,
contingent or otherwise, in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or
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letters of credit, or representing the balance deferred and unpaid of the
purchase price of any property, including any such indebtedness incurred in
connection with the acquisition by such person or any of its subsidiaries of any
other business or entity, if and to the extent such indebtedness would appear as
a liability upon a balance sheet of such person prepared in accordance with
generally accepted accounting principles, including for such purpose obligations
under capitalized leases, and (b) any guaranty, endorsement (other than for
collection or deposit in the ordinary course of business), discount with
recourse, agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire or to supply or advance funds with respect to, or to become
liable with respect to (directly or indirectly) any indebtedness, obligation,
liability or dividend of any person, but shall not include indebtedness or
amounts owed (except to banks or other financial institutions) for compensation
to employees, or for goods or materials purchased, or services utilized, in the
ordinary course of business of such person. Notwithstanding anything to the
contrary in the foregoing, "Indebtedness" shall not include (i) any contracts
providing for the completion of construction or other payment or performance
with respect to the construction, maintenance or improvement of property or
equipment of the Company or its Affiliates or (ii) any contracts providing for
the obligation to advance funds, property or services on behalf of an Affiliate
of the Company in order to maintain the financial condition of such Affiliate,
in each case, including Existing and Permitted Completion Guarantees and
Make-Well Agreements. For purposes hereof, a "capitalized lease" shall be deemed
to mean a lease of real or personal property which, in accordance with generally
accepted accounting principles, is required to be capitalized.
"JOINT VENTURE" means (i) with respect to properties located in the United
States, any partnership, corporation or other entity, in which up to and
including 50% of the partnership interests, outstanding voting stock or other
equity interests is owned, directly or indirectly, by the Company and/or one or
more subsidiaries, and (ii) with respect to properties located outside the
United States, any partnership, corporation or other entity, in which up to and
including 60% of the partnership interests, outstanding voting stock or other
equity interests is owned, directly or indirectly, by the Company and/or one or
more subsidiaries.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, security interest, lien (statutory or other), or
preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"PROJECT COST" means, with respect to any Resort Property, the aggregate
costs required to complete such construction project in accordance with the
plans therefor and applicable legal requirements, as set forth in an Officers'
Certificate submitted to the Trustee, setting forth in reasonable detail all
amounts theretofore expended and any anticipated costs and expenses estimated to
be incurred and reserves to be established in connection with the construction
and development of such future addition or improvement, including direct costs
related thereto such as construction management, architectural engineering and
interior design fees, site work, utility installations and hook-up fees,
construction permits, certificates and bonds, land acquisition costs and the
cost of furniture, fixtures, furnishings, machinery and equipment, but excluding
the following: principal or interest payments on any Indebtedness (other than
interest which is required to be capitalized in accordance with generally
accepted accounting principal, which shall be included in determining Project
Cost), or costs related to the operation of the Resort Property including, but
not limited to, non-construction supplies and pre-operating payroll.
"RESORT PROPERTY" means any property owned or to be owned by the Company or
any of its subsidiaries that is, or will be upon completion, a casino (including
a river boat casino), casino-hotel, destination resort or a theme park.
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"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any person
(other than the Company or a subsidiary of the Company), or to which any such
person is a party, providing for the leasing to the Company or a subsidiary of
the Company for a period of more than three years of any Consolidated Property
which has been or is to be sold or transferred by the Company or such subsidiary
to such person or to any other person (other than the Company or a subsidiary of
the Company), to which funds have been or are to be advanced by such person on
the security of the leased property.
"SUBSIDIARY" of any person means (i) any corporation of which at least a
majority in interest of the outstanding stock having by the terms thereof voting
power under ordinary circumstances to elect a majority of the directors of such
corporation, irrespective of whether or not at the time stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency, is at the time, directly or indirectly,
owned or controlled by such person, or by one or more other corporations a
majority in interest of such stock of which is similarly owned or controlled, or
by such person and one or more other corporations a majority in interest of such
stock of which is similarly owned or controlled and (ii) any other person (other
than a corporation, or a partnership, corporation or other entity described in
clause (ii) of the definition of Joint Venture) in which such person or any
subsidiary, directly or indirectly, has greater than a 50% ownership interest.
"VALUE" means, with respect to a Sale and Lease-Back Transaction, as of any
particular time, the amount equal to the greater of (i) the net proceeds of the
sale or transfer of property leased pursuant to such Sale and Lease-Back
Transaction or (ii) the fair value, in the opinion of the Company's Board of
Directors as evidenced by a board resolution, of such property at the time of
entering into such Sale and Lease-Back Transaction.
SUCCESSOR CORPORATION AND ASSIGNMENT
The Indentures provide that the Company may not consolidate with, merge into
or transfer all or substantially all of its assets to, another person unless (i)
the successor, if other than the Company, is a corporation organized under the
laws of the United States or any state thereof or the District of Columbia, (ii)
it assumes all obligations of the Company under the Debt Securities and the
Indentures, and (iii) immediately after such transaction no Default or Event of
Default exists. Thereafter, all such obligations of the Company will terminate.
EVENTS OF DEFAULT AND NOTICE THEREOF
Unless otherwise indicated in the applicable Prospectus Supplement, the term
"Event of Default," when used in an Indenture with respect to any series of Debt
Securities, will mean any one of the following: (i) failure of the Company to
pay (whether or not prohibited by the subordination provisions (if any))
interest for 30 days on, or the principal when due of, such series of Debt
Securities; (ii) failure to perform any other covenant contained in such
Indenture for 30 days after notice; (iii) the occurrence of an event of default
under any instrument evidencing Indebtedness of the Company or its subsidiaries
entitling the holder or holders thereof to accelerate the payment of an
aggregate principal amount of $10,000,000 or more of such Indebtedness, which
event of default is not cured or waived in accordance with the provisions of
such instrument, or such Indebtedness is not discharged, within 30 days after
the receipt by the Company of notice from the Trustee or the holders of 25% in
principal amount of such series of Debt Securities then outstanding of such
event of default and requiring the Company to cause such event of default to be
cured or such Indebtedness to be discharged; and (iv) certain events of
bankruptcy, insolvency or reorganization.
The Indentures will provide that the Trustee will, within 90 days after the
occurrence of a default that is known to the Trustee with respect to any series
of Debt Securities, give the holders of such series of Debt Securities notice of
such default (the term "default" to include the events specified above without
grace or notice), PROVIDED, that, except in the case of default in the payment
of principal of or interest on such series
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of Debt Securities, the Trustee shall be protected in withholding such notice if
it in good faith determines that the withholding of such notice is in the
interest of the holders of such series of Debt Securities.
In case an Event of Default occurs and is continuing with respect to any
series of Debt Securities, the Trustee or the holders of not less than 25% in
principal amount of such series of Debt Securities, by notice in writing to the
Company (and to the Trustee if given by the holders of such series of Debt
Securities), may declare the principal of and all accrued interest on all such
series of Debt Securities (but in no event more than the maximum amount of
principal and interest thereon allowed by law) to be due and payable
immediately. Such declaration may be rescinded by holders of a majority in
principal amount of such series of Debt Securities then outstanding if, among
other conditions, all existing Events of Default relating to such series of Debt
Securities have been cured or waived and if the rescission would not conflict
with any judgment or decree.
Defaults with respect to any series of Debt Securities (except, unless
theretofore cured, a default in payment of principal of or interest on such
series of Debt Securities or default with respect to a provision which cannot be
modified under the terms of the applicable Indenture without the consent of each
holder of the Debt Securities affected) may be waived by the holders of a
majority in principal amount of such series of Debt Securities then outstanding
upon the conditions provided in such Indenture.
The Indentures will include a covenant that the Company will file annually
with the Trustee a statement regarding compliance by the Company with the terms
thereof and specifying any defaults of which the signers may have knowledge.
MODIFICATION OF THE INDENTURES
Under the Indentures, the rights and obligations of the Company and the
rights of the holders of the Debt Securities may be modified by the Company and
the Trustee only with the consent of the holders of not less than a majority in
principal amount of the class of Debt Securities then outstanding affected by
such modification; but no reduction in the principal, or extension of the
maturity, of any Debt Securities in a manner adverse to the holders of the Debt
Securities, or reduction of the interest rate or extension of the time of
payment of interest on the Debt Securities in a manner adverse to the holders of
the Debt Securities, or any modification of the subordination provisions (if
any) in a manner adverse to the holders of the Debt Securities, or reduction of
the percentage required for modification, will be effective against any holder
of the Debt Securities without such holder's consent. Under certain
circumstances, however, the Company may amend or supplement the Indentures
without notice to or the consent of any holders of the Debt Securities.
SATISFACTION AND DISCHARGE OF INDENTURES
Unless otherwise indicated in the applicable Prospectus Supplement, each
Indenture with respect to any series of Debt Securities will be discharged upon
payment in full of such series of Debt Securities outstanding thereunder, or
upon the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will, without consideration of any
reinvestment of such interest, provide money in an amount sufficient to pay and
discharge the principal of and each installment of interest on such series of
Debt Securities on the maturity or redemption date, as the case may be, of such
payments in accordance with the terms of the applicable Indenture and such
series of Debt Securities issued thereunder. The Company will be entitled to
make such a deposit if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel, reasonably satisfactory to the Trustee, to the
effect that (i) the holders of such series of Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance of the applicable Indenture and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit
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and defeasance had not occurred and (ii) the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally.
COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, each
Indenture will provide that the Company may be released from its obligations
with respect to any series of Debt Securities relating to the Company's
obligations with respect to the payment of taxes and other claims, maintenance
of properties, limitations on Liens, limitations on sale and lease-back
transactions, limitations on when the Company may merge and any other covenants
specified in any Prospectus Supplement, and that such release will not be deemed
to be an Event of Default under such Indenture with respect to any series of
Debt Securities ("covenant defeasance"), upon the deposit with the Trustee (or
other qualifying trustee), in trust, of money and/or U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will, without consideration of any reinvestment of
such interest, provide money in an amount sufficient to pay and discharge the
principal of and each installment of interest on such series of Debt Securities
on the maturity of such payments in accordance with the terms of the applicable
Indenture and such series of Debt Securities issued thereunder. The Company will
be entitled to make such a deposit if, among other things, the Company has
delivered to the Trustee an Opinion of Counsel, reasonably satisfactory to the
Trustee, to the effect that (i) the holders of such series of Debt Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance of certain obligations 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 and
(ii) the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally.
CONCERNING THE TRUSTEE
Unless otherwise indicated in the applicable Prospectus Supplement, the Bank
of New York will be the Trustee under each of the Indentures. All payments of
principal of, and interest on, and all registration, transfer, exchange,
authentication, and delivery of, the Debt Securities (including authentication
and delivery on original issuance of the Debt Securities) will be effected by
the Trustee in New York, New York.
Each Indenture will contain certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict or resign.
The Trustee, as successor in interest to Wells Fargo Bank (Colorado), N.A.,
which was successor in interest to First Interstate Bank of Nevada, N.A., also
serves as a trustee with respect to the 6.45% Senior Notes of the Company Due
2006, the 6 3/4% Senior Subordinated Notes of the Company Due 2003, the 7 5/8%
Senior Subordinated Debentures of the Company Due 2013, the 7.0% Debentures of
the Company due 2036, and the 6.70% Debentures of the Company due 2096. In case
of any conflicting interest relating to the Trustee's duties with respect to the
foregoing securities or the Debt Securities, the Trustee shall either eliminate
such conflicting interest or, except as otherwise provided in the Trust
Indenture Act, resign.
The holders of a majority in principal amount of any series of Debt
Securities then outstanding will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee with respect to such series of Debt Securities, PROVIDED that such
direction would not conflict with any rule of law or with the applicable
Indenture, would not be unduly prejudicial to the rights of another holder of
the Debt Securities, and would not involve the Trustee in personal liability.
The Indentures will provide that in case an Event of Default shall occur and be
known to the Trustee (and not be cured), the Trustee will be required to use the
degree of care of a prudent man in the conduct of his own
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affairs in the exercise of its power. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indentures at the request of any of the holders of the Debt Securities, unless
they shall have offered to the Trustee security and indemnity satisfactory to
it.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, STOCKHOLDERS OR INCORPORATORS
The Indentures will provide that no past, present or future director,
officer, employee, stockholder or incorporator of the Company or any successor
corporation shall have any liability for any obligations of the Company under
the Debt Securities or the Indentures or for any claim based on, in respect of,
or by reason of such obligations or their creation, by reason of such person's
or entity's status as such director, officer, employee, stockholder or
incorporator.
CREDIT FACILITY
The Company's Credit Facility includes covenants which limit the respective
levels of "Senior Debt" and "Total Debt" (each as defined in the Credit
Facility) which may be incurred or maintained by the Company based on its
"Adjusted EBITDA" (as defined in the Credit Facility). Accordingly, the
Company's ability to issue Debt Securities, or Debt Securities constituting
senior indebtedness, may be limited by the Credit Facility.
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DESCRIPTION OF THE TRUST PREFERRED SECURITIES
Each Trust may issue only one series of Trust Preferred Securities having
terms described in the Prospectus Supplement relating thereto. The Declaration
of each Trust authorizes the Regular Trustees of such Trust to issue on behalf
of such Trust one series of Trust Preferred Securities. Each Declaration will be
qualified as an indenture under the Trust Indenture Act. The Trust Preferred
Securities will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in each Declaration or made part of each
Declaration by the Trust Indenture Act and the Trust Act. Reference is made to
the Prospectus Supplement relating to the Trust Preferred Securities of a Trust
for specific terms, including (i) the distinctive designation of such Trust
Preferred Securities; (ii) the number of Trust Preferred Securities issued by
such Trust; (iii) the annual distribution rate (or method of determining such
rate) for Trust Preferred Securities issued by such Trust and the date or dates
upon which such distributions shall be payable; PROVIDED, HOWEVER, that
distributions on such Trust Preferred Securities shall be payable on a quarterly
basis to holders of such Trust Preferred Securities as of a record date in each
quarter during which such Trust Preferred Securities are outstanding; (iv)
whether distributions on Trust Preferred Securities issued by such Trust shall
be cumulative, and, in the case of Trust Preferred Securities having such
cumulative distribution rights, the date or dates or method of determining the
date or dates from which distributions on Trust Preferred Securities issued by
such Trust shall be cumulative; (v) the amount or amounts which shall be paid
out of the assets of such Trust to purchase or redeem Trust Preferred Securities
issued by such Trust and the price or prices at which, the period or periods
within which, and the terms and conditions upon which, Trust Preferred
Securities issued by such Trust shall be purchased or redeemed, in whole or in
part, pursuant to such obligation; (vi) the voting rights, if any, of Trust
Preferred Securities issued by such Trust in addition to those required by law,
including any requirement for the approval by the holders of Trust Preferred
Securities, or of Trust Preferred Securities issued by one or more Trusts, or of
both, as a condition to specified action or amendments to the Declaration of
such Trust; (vii) whether the Trust Preferred Securities will be issued in
certificated or book-entry form and, if applicable, the identity of the
depositary for the Trust Preferred Securities and (viii) any other relevant
rights, preferences, privileges, limitations or restrictions of Trust Preferred
Securities issued by such Trust not inconsistent with the Declaration of such
Trust or with applicable law. All Trust Preferred Securities offered hereby will
be guaranteed by the Company as described under "Description of the Trust
Preferred Securities Guarantees". Any applicable United States federal income
tax considerations applicable to any offering of Trust Preferred Securities will
be described in the Prospectus Supplement relating thereto.
In connection with the issuance of Trust Preferred Securities, each Trust
will issue one series of Trust Common Securities. The Declaration of each Trust
authorizes the Regular Trustees of such Trust to issue on behalf of such Trust
one series of Trust Common Securities having such terms including distributions,
redemption, voting, liquidation rights or such restrictions as shall be set
forth therein. The terms of the Trust Common Securities issued by a Trust will
be substantially identical to the terms of the Trust Preferred Securities issued
by such Trust and the Trust Common Securities will rank PARI PASSU, and payments
will be made thereon pro rata, with the Trust Preferred Securities except that,
upon the occurrence and during the continuation of an event of default under the
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Trust Preferred
Securities. All of the Trust Common Securities of a Trust will be directly or
indirectly owned by the Company.
Trust Preferred Securities will be issued in registered form and in either
certificated form or represented by one or more global securities. If Trust
Preferred Securities are represented by one or more global securities (each, a
"Global Security"), the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
Global Security may exchange such interests for Trust Preferred Securities of
like tenor and amount in any authorized form and denomination. The specific
terms of any depositary arrangement with respect to Trust Preferred Securities
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to be represented by a Global Security will be described in the applicable
Prospectus Supplement. Reference is made to "Description of Debt
Securities--Registered Global Securities" for a description of provisions the
Company anticipates will apply to all depositary arrangements, including those
relating to Trust Preferred Securities.
The Declaration of Trust of each Trust will provide that each holder and
beneficial owner of Trust Preferred Securities, by accepting or otherwise
acquiring an interest in the Trust Preferred Securities, shall be deemed to have
agreed that if the Gaming Authority of any jurisdiction in which the Company or
any of its subsidiaries (or any joint venture in which the Company or a
subsidiary of the Company is a participant) now or hereafter conducts or
proposes to conduct gaming requires that a person who is a holder or beneficial
owner of Trust Preferred Securities must be licensed, qualified or found
suitable, or comply with any other requirement under applicable Gaming Laws,
such holder or beneficial owner shall apply for a license, qualification or a
finding of suitability or comply with such other requirement, as the case may
be, within the prescribed time period. If such holder or beneficial owner fails
to apply to be, or fails to become, licensed or qualified, is found unsuitable
or fails to comply with any other requirement, as the case may be (a "failure of
compliance"), then the Company shall have the right, at its option (i) to
require such person to dispose of its Trust Preferred Securities or beneficial
interest therein within 30 days of receipt of notice of the Company's election
or such earlier date as may be requested or prescribed by the Gaming Authority
or (ii) to purchase such Trust Preferred Securities (which purchase may be less
than 30 days following the notice of purchase if so requested or prescribed by
the Gaming Authority) at a purchase price equal to the lesser of (A) such
person's cost, (B) 100% of the liquidation amount thereof, plus accrued and
unpaid cash distributions to the earlier of the purchase date and the date of
any failure of compliance, or (C) such other amount as may be required by
applicable law or by order of any Gaming Authority. The Company shall notify the
trustees under the applicable Declaration of Trust in writing of any such
purchase as soon as practicable. Neither the Company nor the Trust shall be
responsible for any costs or expenses any such holder or beneficial owner may
incur in connection with its application for a license, qualification or a
finding of suitability or its compliance with any other requirement of a Gaming
Authority. The Declaration of Trust of each Trust will also provide that
immediately upon the imposition by a Gaming Authority of a requirement that a
holder or beneficial owner dispose of Trust Preferred Securities, such holder or
beneficial owner shall, to the extent required by applicable Gaming Laws, have
no further right (i) to exercise, directly or indirectly, through any trustee,
nominee or any other person or entity, any right conferred by the Trust
Preferred Securities or (ii) to receive any cash distributions, interest,
dividends or any other distributions or payments with respect to the Trust
Preferred Securities or any remuneration in any form with respect to the Trust
Preferred Securities from the Company, the Trust or the trustees under the
applicable Declaration of Trust, except the purchase price referred to above.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Trust Preferred
Securities Guarantees which will be executed and delivered by the Company for
the benefit of the holders from time to time of Trust Preferred Securities. Each
Trust Preferred Securities Guarantee will be qualified as an indenture under the
Trust Indenture Act. The Bank of New York will act as indenture trustee under
each Trust Preferred Securities Guarantee (the "Preferred Guarantee Trustee").
The terms of each Preferred Securities Guarantee will be those set forth in such
Trust Preferred Securities Guarantee and those made part of such Preferred
Securities Guarantee by the Trust Indenture Act. The following summary does not
purport to be complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the form of Trust Preferred
Securities Guarantee, which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part, and the Trust Indenture Act. Each Trust
Preferred Securities Guarantee will be held by the Preferred Guarantee Trustee
for the benefit of the holders of the Trust Preferred Securities of the
applicable Trust.
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GENERAL
Pursuant to each Trust Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree to pay in full, to the holders of the
Trust Preferred Securities issued by a Trust, the Guarantee Payments (as defined
herein) (except to the extent paid by such Trust), as and when due, regardless
of any defense, right to set-off or counterclaim which such Trust may have or
assert. The following payments with respect to Preferred Securities issued by a
Trust, to the extent not paid by such Trust (the "Guarantee Payments"), will be
subject to the Trust Preferred Securities Guarantee thereon (without
duplication): (i) any accrued and unpaid distributions which are required to be
paid on such Trust Preferred Securities, to the extent such Trust shall have
funds available therefor, (ii) the redemption price, including all accrued and
unpaid distributions to the redemption date (the "Redemption Price"), to the
extent such Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by such Trust and (iii) upon a voluntary or
involuntary termination, dissolution or winding-up of such Trust (other than in
connection with the distribution of Subordinated Deferrable Interest Debentures
to the holders of Trust Preferred Securities in exchange for their Trust
Preferred Securities), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on such Trust Preferred Securities to
the date of payment, to the extent such Trust shall have funds available
therefor, and (b) the amount of assets of such Trust remaining available for
distribution to holders of such Trust Preferred Securities in liquidation of
such Trust. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of Trust Preferred Securities or by causing the applicable Trust to pay
such amounts to such holders.
Each Trust Preferred Securities Guarantee will be a full and unconditional
guarantee with respect to the Trust Preferred Securities issued by the
applicable Trust from the time of issuance of such Trust Preferred Securities,
but will not apply to any payment of distributions when the Trust does not have
sufficient funds available to make such payment or distributions. If the Company
does not make interest payments on the Subordinated Deferrable Interest
Debentures purchased by a Trust, such Trust will not pay distributions on the
Trust Preferred Securities issued by such Trust and will not have funds
available therefor. See "Description of the Subordinated Deferrable Interest
Debentures--Certain Covenants."
The Company has also agreed separately to guarantee the obligations of the
Trusts with respect to the Trust Common Securities (the "Trust Common Securities
Guarantees") to the same extent as the Trust Preferred Securities Guarantee,
except that upon the occurrence and during the continuation of an event of
default under the Subordinated Debentures Indenture (as hereinafter defined),
holders of Trust Preferred Securities shall have priority over holders of Trust
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
For information concerning the requirement that Trust Preferred Securities
be disposed of by holders or beneficial owners under certain circumstances, see
"Description of the Trust Preferred Securities."
CERTAIN COVENANTS OF THE COMPANY
In each Trust Preferred Securities Guarantee, the Company will covenant
that, so long as any Trust Preferred Securities issued by the applicable Trust
remain outstanding, if any event that would constitute an event of default shall
exist under such Trust Preferred Securities Guarantee or the Declaration of such
Trust, then (a) the Company shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation payment
with respect to, any of its capital stock, (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company which rank PARI PASSU with or
junior to such Subordinated Deferrable Interest Debentures and (c) the Company
shall not make any guarantee payments (other than pursuant to the Trust
Preferred Security Guarantees) with respect to the foregoing. However, each
Trust Preferred Security Guarantee will except from the foregoing covenant any
dividend, redemption, liquidation, interest, principal or guarantee payment by
the Company where the payment is
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made by way of securities (including capital stock) that rank junior to the
securities on which such dividend, redemption, liquidation, interest, principal
or guarantee payment is being made.
MODIFICATION OF THE TRUST PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Trust Preferred Securities (in which case no vote will be
required), each Trust Preferred Securities Guarantee may be amended only with
the prior approval of the holders of not less than a majority in aggregate
liquidation amount of the outstanding Trust Preferred Securities issued by the
applicable Trust. The manner of obtaining any such approval of holders of such
Trust Preferred Securities will be as set forth in an accompanying Prospectus
Supplement. All guarantees and agreements contained in a Trust Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Trust Preferred Securities then outstanding of the applicable Trust.
TERMINATION
Each Trust Preferred Securities Guarantee will terminate as to the Trust
Preferred Securities issued by the applicable Trust upon full payment of the
Redemption Price of all Trust Preferred Securities of such Trust, upon
distribution of the Subordinated Deferrable Interest Debentures held by such
Trust to the holders of the Trust Securities of such Trust in liquidation of
such holders' interest in such Trust Securities or upon full payment of the
amounts payable in accordance with the Declaration of such Trust upon
liquidation of such Trust. Each Trust Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Trust Preferred Securities issued by the applicable Trust
must restore payment of any sums paid under such Trust Preferred Securities or
such Trust Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Trust Preferred Securities Guarantee will occur
upon the failure of the Company to perform any of its payment or other
obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities relating to such Trust Preferred Securities Guarantee have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Preferred Guarantee Trustee in respect of such Trust Preferred
Securities Guarantee or to direct the exercise of any trust or power conferred
upon the Trust Preferred Guarantee Trustee under such Trust Preferred Securities
Guarantee. If the Preferred Guarantee Trustee fails to enforce such Trust
Preferred Securities Guarantee, any holder of Trust Preferred Securities
relating to such Trust Preferred Securities Guarantee may institute a legal
proceeding directly against the Company to enforce the Preferred Guarantee
Trustee's rights under such Trust Preferred Securities Guarantee, without first
instituting a legal proceeding against the relevant Trust, the Preferred
Guarantee Trustee or any other person or entity. In addition, any record holder
of Trust Preferred Securities relating to such Trust Preferred Securities
Guarantee shall have the right, which is absolute and unconditional, to proceed
directly against the Company to obtain Guarantee Payments thereunder, without
first waiting to determine if the Preferred Guarantee Trustee has enforced such
Trust Preferred Security Guarantee or instituting a legal proceeding against the
Trust which issued such Trust Preferred Securities, the Preferred Guarantee
Trustee or any other person or entity.
STATUS OF THE TRUST PREFERRED SECURITIES GUARANTEES
The Trust Preferred Securities Guarantees will constitute unsecured
obligations of the Company and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Company, (ii) PARI PASSU with the most
senior preferred or preference stock now or hereafter issued by the Company and
with any guarantee now or hereafter entered into by the Company in respect of
any preferred or preference stock of any subsidiary or affiliate of the Company
and (iii) senior to the Company's common stock. The
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terms of the Trust Preferred Securities provide that each holder of Trust
Preferred Securities issued by such Trust by acceptance thereof agrees to the
subordination provisions and other terms of the Trust Preferred Securities
Guarantee relating thereto.
The Trust Preferred Securities Guarantees will constitute a guarantee of
payment and not of collection (that is, the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity).
The Company's obligations under the Declaration for each Trust, the Trust
Preferred Securities Guarantee with respect to the Trust Preferred Securities
issued by such Trust, the Subordinated Deferrable Interest Debentures purchased
by such Trust and the Subordinated Debentures Indenture, in the aggregate, will
provide a full and unconditional guarantee by the Company of payments due on the
Trust Preferred Securities issued by such Trust.
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to a Trust Preferred Securities Guarantee, undertakes to perform only
such duties as are specifically set forth in such Trust Preferred Securities
Guarantee and, after default, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of is or her own affairs.
Subject to such provisions, the Preferred Guaranteed Trustee is under no
obligation to exercise any of the powers vested in it by the Trust Preferred
Securities Guarantee at the request of any holder of Trust Preferred Securities,
unless offered reasonable indemnity against the costs, expenses and liabilities
which might be incurred thereby.
The Preferred Guarantee Trustee serves as trustee under other indentures
pursuant to which unsecured debt securities of the Company are outstanding.
GOVERNING LAW
The Trust Preferred Securities Guarantees will be governed by and construed
in accordance with the internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED DEFERRABLE INTEREST DEBENTURES
Subordinated Deferrable Interest Debentures may be issued from time to time
in one or more series under an Indenture (the "Subordinated Debentures
Indenture") to be entered into among the Company and The Bank of New York, as
Trustee (the "Subordinated Debentures Trustee"). The terms of the Subordinated
Deferrable Interest Debentures will include those stated in the Subordinated
Debentures Indenture and in a Supplemental Subordinated Debentures Indenture (as
defined below) and those made part of the Subordinated Debentures Indenture by
reference to the Trust Indenture Act. The following summary does not purport to
be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the form of Subordinated Debentures
Indenture, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the Trust Indenture Act. Whenever particular
provisions or defined terms in the Subordinated Debentures Indenture are
referred to herein, such provisions or defined terms are incorporated by
reference herein.
GENERAL
The Subordinated Deferrable Interest Debentures will be unsecured
subordinated obligations of the Company. The Subordinated Debentures Indenture
does not limit the aggregate principal amount of Subordinated Deferrable
Interest Debentures which may be issued thereunder and provides that the
Subordinated Deferrable Interest Debentures may be issued from time to time in
one or more series. The Subordinated Deferrable Interest Debentures are issuable
in one or more series pursuant to an indenture supplemental to the Subordinated
Debentures Indenture or a resolution of the Company's Board of Directors or a
special committee thereof (each, a "Supplemental Subordinated Debentures
Indenture").
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In the event Subordinated Deferrable Interest Debentures are issued to a
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by such Trust, such Subordinated Deferrable Interest Debentures
subsequently may be distributed pro rata to the holders of such Trust Securities
in connection with the termination of such Trust upon the occurrence of certain
events described in the Prospectus Supplement relating to such Trust Securities.
Only one series of Subordinated Deferrable Interest Debentures will be issued to
a Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by such Trust.
Reference is made to the accompanying Prospectus Supplement for the
following terms of the series of Subordinated Deferrable Interest Debentures
being offered thereby: (i) the specific title of such Subordinated Deferrable
Interest Debentures; (ii) any limit on the aggregate principal amount of such
Subordinated Deferrable Interest Debentures; (iii) the date or dates on which
the principal of such Subordinated Deferrable Interest Debentures is payable and
the right, if any, to extend such date or dates; (iv) the rate or rates at which
such Subordinated Deferrable Interest Debentures will bear interest or the
method of determination of such rate or rates; (v) the date or dates from which
such interest shall accrue, the interest payment dates on which such interest
will be payable or the manner of determination of such interest payment dates
and the record dates for the determination of holders to whom interest is
payable on any such interest payment dates; (vi) the right, if any, to extend
the interest payment periods and the duration of such extension; (vii) the
period or periods within which, the price or prices at which, and the terms and
conditions upon which, such Subordinated Deferrable Interest Debentures may be
redeemed, in whole or in part, at the option of the Company; (viii) the right
and/or obligation, if any, of the Company to redeem or purchase such
Subordinated Deferrable Interest Debentures pursuant to any sinking fund or
analogous provisions or at the option of the holder thereof and the period or
periods during which, the price or prices at which, and the terms and conditions
upon which, such Subordinated Deferrable Interest Debentures shall be redeemed
or purchased, in whole or part, pursuant to such right and/or obligation; (ix)
the terms of subordination; (x) if other than denominations of $25 or any
integral multiple thereof, the denominations in which such Subordinated
Deferrable Interest Debentures shall be issuable; (xi) any and all other terms
with respect to such series; and (xii) whether such Subordinated Deferrable
Interest Debentures are issuable as a global security, and in such case, the
identity of the depository.
The Subordinated Debentures Indenture does not contain any provisions that
afford holders of Subordinated Deferrable Interest Debentures protection in the
event of a highly leveraged transaction involving the Company.
SUBORDINATION
The Subordinated Deferrable Interest Debentures will be subordinated and
junior in right of payment to certain other indebtedness of the Company to the
extent set forth in the accompanying Prospectus Supplement.
CERTAIN COVENANTS
If Subordinated Deferrable Interest Debentures are issued to a Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such Trust and (i) there shall have occurred and be continuing any event that
would constitute an Event of Default under the Subordinated Debentures Indenture
or (ii) the Company shall be in default with respect to its payment of any
obligations under the related Trust Preferred Securities Guarantee or Trust
Common Securities Guarantee, and such default shall be continuing, then (a) the
Company shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock, (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank PARI PASSU with or junior to
such Subordinated Deferrable Interest Debentures and (c) the Company shall not
make any guarantee payments (other than pursuant to the Trust Preferred Security
Guarantees) with respect to the foregoing.
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If Subordinated Deferrable Interest Debentures are issued to a Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such Trust and the Company shall have given notice of its election to defer
payments of interest on such Subordinated Deferrable Interest Debentures by
extending the interest payment period as provided in the Subordinated Debentures
Indenture and such period, or any extension thereof, shall be continuing, then
(a) the Company shall not declare or pay any dividend on, make any distributions
with respect to, or redeem, purchase or make a liquidation payment with respect
to, any of its capital stock, (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank PARI PASSU with or junior to
such Subordinated Deferrable Interest Debentures and (c) the Company shall not
make any guarantee payments (other than pursuant to the Trust Preferred Security
Guarantees) with respect to the foregoing.
Notwithstanding the foregoing restrictions, the Company will be permitted,
in any event, to make dividend, redemption, liquidation and guarantee payments
on capital stock, and interest, principal, redemption and guarantee payments on
debt securities issued by the Company ranking PARI PASSU with or junior to
Subordinated Deferrable Interest Debentures, where the payment is made by way of
securities (including capital stock) that rank junior to the securities on which
such payment is being made.
In the event Subordinated Deferrable Interest Debentures are issued to a
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities of such Trust, for so long as such Trust Securities remain
outstanding, the Company will covenant (i) to directly or indirectly maintain
100% ownership of the Trust Common Securities of such Trust; PROVIDED, HOWEVER,
that any permitted successor of the Company under the Subordinated Debentures
Indenture may succeed to the Company's ownership of such Trust Common
Securities, (ii) not to cause, as sponsor of such Trust, or to permit, as holder
of the Trust Common Securities of such Trust, the termination, dissolution or
winding-up of such Trust, except in connection with a distribution of the
Subordinated Deferrable Interest Debentures as provided in the Declaration and
in connection with certain mergers, consolidations or amalgamations, (iii) to
use its reasonable efforts to cause such Trust (a) to remain a statutory
business trust, except in connection with the distribution of Subordinated
Deferrable Interest Debentures to the holders of Trust Securities in liquidation
of such Trust, the redemption of all of the Trust Securities of such Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration of such Trust, and (b) to otherwise continue not to be classified as
an association taxable as a corporation or partnership for United States federal
income tax purposes and (iv) to use reasonable efforts to cause each holder of
Trust Securities of such Trust to be treated as owning an undivided beneficial
interest in the Subordinated Deferrable Interest Debentures issued to such
Trust.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Subordinated Deferrable Interest Debentures of each series will be issued in
registered form and in either certificated form or represented by one or more
global securities. If not represented by one or more global securities,
Subordinated Deferrable Interest Debentures may be presented for registration or
transfer (with the form of transfer endorsed thereon duly executed) or exchange
at the office of the registrar for the Subordinated Deferrable Interest
Debentures or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Subordinated Deferrable Interest
Debentures and referred to in an applicable Prospectus Supplement, without
service charge and upon payment of any taxes and other governmental charges as
described in the Subordinated Debentures Indenture. Such transfer or exchange
will be effected upon the registrar for the Subordinated Deferrable Interest
Debentures or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Company
will appoint the Subordinated Debentures Trustee as registrar with respect to
each series of Subordinated Deferrable Interest Debentures. If a Prospectus
Supplement refers to any transfer agents (in addition to the Subordinated
Debentures Registrar) initially designated by the Company with respect to any
series of Subordinated Deferrable Interest Debentures, the Company may at any
time rescind the designation of any such transfer agent or
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approve a change in the location through which any such transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
place of payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Subordinated Deferrable
Interest Debentures.
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange any Subordinated Deferrable
Interest Debentures during a period beginning at the opening of business 15 days
before any selection for redemption of Subordinated Deferrable Interest
Debentures of like tenor and of the series of which such Subordinated Deferrable
Interest Debentures are a part, and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to have been
given to all holders of Subordinated Deferrable Interest Debentures of like
tenor and of such series to be redeemed and (ii) register the transfer of or
exchange any Subordinated Deferrable Interest Debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any
Subordinated Deferrable Interest Debentures being redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and premium, if any, on any Subordinated Deferrable Interest
Debentures will be made only against surrender to the Paying Agent of such
Subordinated Deferrable Interest Debentures. Unless otherwise indicated in an
applicable Prospectus Supplement, principal of, premium, if any, and interest,
if any, on Subordinated Deferrable Interest Debentures will be payable, subject
to any applicable laws and regulations, at the office of such Paying Agent or
Paying Agents as the Company may designate from time to time, except that at the
option of the Company, payment of any interest may be made by check mailed to
the address of the person entitled thereto as such address shall appear in the
register with respect to such Subordinated Deferrable Interest Debentures.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on a Subordinated Deferrable Interest Debenture on any Interest Payment
Date will be made to the person in whose name such Subordinated Deferrable
Interest Debenture (or predecessor security) is registered at the close of
business on the date described in the applicable Prospectus Supplement for such
interest payment.
The Subordinated Debentures Trustee will act as Paying Agent with respect to
each series of Subordinated Deferrable Interest Debentures. The Company may at
any time designate additional Paying Agents or rescind the designation of any
Paying Agents or approve a change in the office through which any Paying Agent
acts, except that the Company will be required to maintain a Paying Agent in
each place of payment for each series of Subordinated Deferrable Interest
Debentures.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or premium or interest, if any, on any Subordinated Deferrable
Interest Debentures of any series which remain unclaimed at the end of two years
after such principal or premium or interest, if any, shall have become due and
payable will be repaid to the Company and the holder of such Subordinated
Deferrable Interest Debentures will thereafter look only to the Company for
payment thereof.
GLOBAL SECURITIES
If any Subordinated Deferrable Interest Debentures of a series are
represented by one or more global securities (each, a "Global Security"), the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such Global Security may exchange
such interests for Subordinated Deferrable Interest Debentures of such series
and of like tenor and principal amount in any authorized form and denomination.
Principal of and any premium, if any, and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Subordinated Deferrable Interest Debentures to be represented by
a Global Security will be described in the applicable Prospectus Supplement.
Reference is made to "Description of Debt Securities--Registered
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Global Securities" for a description of provisions the Company anticipates will
apply to all depositary arrangements, including those relating to Subordinated
Deferrable Interest Debentures.
MODIFICATION OF THE SUBORDINATED DEBENTURES INDENTURE
The Subordinated Debentures Indenture contains provisions permitting the
Company and the Subordinated Debentures Trustee, with the consent of the holders
of not less than a majority in principal amount of the Subordinated Deferrable
Interest Debentures of each series which are affected by the modification, to
modify the Subordinated Debentures Indenture or any supplemental indenture
affecting that series or the rights of the holders of that series of
Subordinated Deferrable Interest Debentures; PROVIDED, HOWEVER, that no such
modification may, without the consent of the holder of each outstanding
Subordinated Deferrable Interest Debenture affected thereby, (i) extend the
fixed maturity of any Subordinated Deferrable Interest Debentures of any series,
or reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof, without the consent of the holder of each Subordinated Deferrable
Interest Debenture so affected or (ii) reduce the percentage of Subordinated
Deferrable Interest Debentures the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of each then
outstanding Subordinated Deferrable Interest Debenture affected thereby.
In addition, the Company and the Subordinated Debentures Trustee may
execute, without the consent of any holder of Subordinated Deferrable Interest
Debentures, any supplemental indenture for certain other usual purposes
including the creation of any new series of Subordinated Deferrable Interest
Debentures.
EVENTS OF DEFAULT
With respect to a particular series of Subordinated Deferrable Interest
Debentures, the Subordinated Debentures Indenture provides (or the Supplemental
Subordinated Debentures Indenture for such series will provide) that any one or
more of the following described events which has occurred and is continuing
constitutes an "Event of Default" with respect to such series of Subordinated
Deferrable Interest Debentures.
(a) failure for 30 days to pay interest on the Subordinated Deferrable
Interest Debentures of that series, including any Additional Interest in
respect thereof, when due; PROVIDED, HOWEVER, that a valid extension of the
interest payment period by the Company shall not constitute a default in the
payment of interest for this purpose; or
(b) failure to pay principal or premium, if any, on the Subordinated
Deferrable Interest Debentures of that series when due whether at maturity,
upon redemption, by declaration or otherwise, or to make any sinking fund
payment with respect to that series; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series) contained in the Subordinated
Debentures Indenture for 90 days after written notice to the Company from
the Subordinated Debentures Trustee or the holders of at least 25% in
principal amount of the outstanding Subordinated Deferrable Interest
Debentures of that series; or
(d) certain events of bankruptcy, insolvency or reorganization of the
Company; or
(e) in the event Subordinated Deferrable Interest Debentures are issued
to a Trust or a trustee of such Trust in connection with the issuance of
Trust Securities by such Trust, the voluntary or involuntary dissolution,
winding-up or termination of such Trust, except in connection with the
distribution of Subordinated Deferrable Interest Debentures to the holders
of Trust Securities in liquidation of such Trust, the redemption of all of
the Trust Securities of such Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such Trust.
The holders of a majority in aggregate outstanding amount of any series of
Subordinated Deferrable Interest Debentures have the right to direct the time,
method and place of conducting any proceeding for
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any remedy available to the Subordinated Debentures Trustee for the series. The
Subordinated Debentures Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of any particular series of the Subordinated
Deferrable Interest Debentures may declare the principal immediately due and
payable upon an Event of Default with respect to such series, but the holders of
a majority in aggregate outstanding principal amount of such series may annul
such declaration and waive the default with respect to such series if the Event
of Default has been cured and a sum sufficient to pay all matured installments
of interest and principal due otherwise than by acceleration and any applicable
premium has been deposited with the Subordinated Debentures Trustee. If an Event
of Default results from the failure of the Company to pay when due principal of
or interest on the Subordinated Deferrable Interest Debentures issued to a
Trust, during the continuance of such an Event of Default a holder of Trust
Preferred Securities issued by such Trust may immediately institute a legal
proceeding directly against the Company to obtain payment of such principal or
interest on Subordinated Deferrable Interest Debentures having a principal
amount equal to the aggregate liquidation amount of the Trust Preferred
Securities owned of record by such holder.
The holders of a majority in aggregate outstanding principal amount of any
series of Subordinated Deferrable Interest Debentures affected thereby may, on
behalf of the holders of all the Subordinated Deferrable Interest Debentures of
such series, waive any past default except (i) a default in the payment of
principal, premium, if any, or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and any applicable premium has been deposited
with the Subordinated Debentures Trustee) or (ii) a default in the covenants
described in the first or second paragraph under "--Certain Covenants" above.
CONSOLIDATION, MERGER AND SALE
The Subordinated Debentures Indenture does not contain any covenant which
restricts the ability of the Company to merge or consolidate with or into any
other corporation, sell or convey all or substantially all of its assets to any
person, firm or corporation or otherwise engage in restructuring transactions.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
The Subordinated Debentures Indenture will provide that each holder and
beneficial owner of Subordinated Deferrable Interest Debentures, by accepting or
otherwise acquiring an interest in the Subordinated Deferrable Interest
Debentures, shall be deemed to have agreed that if the Gaming Authority of any
jurisdiction in which the Company or any of its subsidiaries (or any joint
venture in which the Company or a subsidiary of the Company is a participant)
now or hereafter conducts or proposes to conduct gaming requires that a person
who is a holder or beneficial owner of Subordinated Deferrable Interest
Debentures must be licensed, qualified or found suitable, or comply with any
other requirement under applicable Gaming Laws, such holder or beneficial owner
shall apply for a license, qualification or a finding of suitability or comply
with such other requirement, as the case may be, within the prescribed time
period. If such holder or beneficial owner fails to apply to be, or fails to
become, licensed or qualified, is found unsuitable or fails to comply with any
other requirement, as the case may be (a "failure of compliance"), then the
Company shall have the right, at its option (i) to require such person to
dispose of its Subordinated Deferrable Interest Debentures or beneficial
interest therein within 30 days of receipt of notice of the Company's election
or such earlier date as may be requested or prescribed by the Gaming Authority
or (ii) to redeem such Subordinated Deferrable Interest Debentures (which
redemption may be less than 30 days following the notice of redemption if so
requested or prescribed by the Gaming Authority) at a redemption price equal to
the lesser of (A) such person's cost, (B) 100% of the principal amount thereof,
plus accrued and unpaid interest to the earlier of the redemption date and the
date of any failure of compliance, or (C) such other amount as may be required
by applicable law or by order of any Gaming Authority. The Company shall notify
the Trustee in writing of any such redemption as soon as practicable. The
Company shall not be responsible for any costs or expenses any such holder or
beneficial owner may incur in connection with its application for a license,
qualification or a finding of suitability or
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its compliance with any other requirement of a Gaming Authority. The
Subordinated Debentures Indenture will also provide that immediately upon the
imposition by a Gaming Authority of a requirement that a holder or beneficial
owner dispose of Subordinated Deferrable Interest Debentures, such holder or
beneficial owner shall, to the extent required by applicable Gaming Laws, have
no further right (i) to exercise, directly or indirectly, through any trustee,
nominee or any other person or entity, any right conferred by the Subordinated
Deferrable Interest Debentures or (ii) to receive any interest, dividends or any
other distributions or payments with respect to the Subordinated Deferrable
Interest Debentures or any remuneration in any form with respect to the
Subordinated Deferrable Interest Debentures from the Company or the Trustee,
except the redemption price referred to above.
DEFEASANCE AND DISCHARGE
Under the terms of the Subordinated Debentures Indenture, the Company will
be discharged from any and all obligations in respect of the Subordinated
Deferrable Interest Debentures of any series (except in each case for certain
obligations to register the transfer or exchange of Subordinated Deferrable
Interest Debentures, replace stolen, lost or mutilated Subordinated Deferrable
Interest Debentures, maintain paying agencies and hold moneys for payment in
trust) if the Company deposits with the Subordinated Debentures Trustee, in
trust, moneys or U.S. Government Obligations in an amount sufficient to pay all
the principal of, and interest on, the Subordinated Deferrable Interest
Debentures of such series on the dates such payments are due in accordance with
the terms of such Subordinated Deferrable Interest Debentures.
GOVERNING LAW
The Subordinated Debentures Indenture and the Subordinated Deferrable
Interest Debentures will be governed by, and construed in accordance with, the
internal laws of the State of New York.
INFORMATION CONCERNING THE SUBORDINATED DEBENTURES TRUSTEE
The Subordinated Debentures Trustee, prior to default, undertakes to perform
only such duties as are specifically set forth in the Subordinated Debentures
Indenture and, after default, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the Subordinated Debentures Trustee is under no
obligation to exercise any of the powers vested in it by the Subordinated
Debentures Indenture at the request of any holder of Subordinated Deferrable
Interest Debentures, unless offered reasonable indemnity by such holder against
the costs, expenses and liabilities which might be incurred thereby. The
Subordinated Debentures Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if the Subordinated Debentures Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
The Subordinated Debentures Trustee serves as trustee under other indentures
pursuant to which unsecured debt securities of the Company are outstanding.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Subordinated Debentures Indenture to a direct or indirect
wholly-owned subsidiary of the Company; PROVIDED, HOWEVER, that in the event of
any such assignment, the Company will remain liable for all of its obligations
thereunder. Subject to the foregoing, the Subordinated Debentures Indenture will
be binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. The Subordinated Debentures Indenture
provides that it may not otherwise be assigned by the parties thereto.
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PLAN OF DISTRIBUTION
The Company or a Trust may offer and sell the Securities directly to
purchasers or to or through underwriters, dealers or agents. Any such
underwriter, dealer or agent involved in the offer and sale of the Securities in
respect of which this Prospectus is delivered will be named in the applicable
Prospectus Supplement. The applicable Prospectus Supplement with respect to such
Securities will also set forth the terms of the offering of such Securities,
including the purchase price of such Securities and the proceeds to the Company
or the applicable Trust from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which such Securities may be listed.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or from
time to time at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The applicable
Prospectus Supplement will describe the method of distribution of the
Securities.
If underwriters are used in an offering of Securities, the name of each
managing underwriter, if any, and any other underwriters and terms of the
transaction, including any underwriting discounts and other items constituting
compensation of the underwriters and dealers, if any, will be set forth in the
applicable Prospectus Supplement relating to such offering and the Securities
will be acquired by the underwriters for their own accounts and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time. Underwriters, dealers and agents may be entitled, under agreements which
may be entered into with the Company, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act, and to reimbursement by the Company of certain expenses.
If a dealer is used in an offering of Securities, the Company will sell such
Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of the dealer and the terms of the transaction will
be set forth in the applicable Prospectus Supplement relating thereto.
If an agent is used in an offering of Securities, the agent will be named,
and the terms of the agency will be set forth, in the applicable Prospectus
Supplement relating thereto. Unless otherwise indicated in such applicable
Prospectus Supplement, an agent will act on a best efforts basis for the period
of its appointment.
Dealers and agents named in an applicable Prospectus Supplement may be
deemed to be underwriters (within the meaning of the Securities Act) of the
Securities described therein and, under agreements which may be entered into
with the Company and/or an applicable Trust, may be entitled to indemnification
by the Company and/or an applicable Trust against certain civil liabilities
under the Securities Act. Underwriters, dealers and agents may be customers of,
engage in transactions with or perform services for, the Company and/or the
applicable Trust in the ordinary course of business.
Offers to purchase Securities may be solicited, and sales thereof may be
made, by the Company or the applicable Trust directly to institutional investors
or others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resales thereof. The terms of any such offer
will be set forth in the applicable Prospectus Supplement relating thereto.
If so indicated in the applicable Prospectus Supplement, the Company or the
applicable Trust will authorize underwriters or other agents to solicit offers
by certain institutional investors to purchase Securities from the Company or
the applicable Trust pursuant to contracts providing for payment and delivery at
a future date. Institutional investors with which such contracts may be made
include commercial
33
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and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
purchasers must be approved by the Company or the applicable Trust. The
obligations of any purchaser under any such contract will not be subject to any
conditions except that (i) the purchase of the Securities shall not at the time
of delivery be prohibited under the laws of any jurisdiction to which such
purchaser is subject and (ii) if the Securities are also being sold to
underwriters, the Company or the applicable Trust shall have sold to such
underwriters the Securities not subject to delayed delivery. Underwriters and
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
In addition, the Securities may be offered and sold by the holders thereof
in one or more of the transactions described above, which transactions may be
effected at any time and from time to time. Upon any such sale of Securities,
the respective holders thereof and any broker, dealer or underwriter
participating therewith may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act, and any commissions, discounts or
concessions upon such sale, or any profit on the resale of such Securities,
received thereby in connection with such sale may be deemed to be underwriting
commissions or discounts under the Securities Act. The compensation, including
commissions, discounts. concessions and other profits, received by any broker,
dealer or underwriter in connection with the sale of any of such Securities may
be less than or in excess of customary commissions.
The anticipated date of delivery of Securities will be set forth in the
applicable Prospectus Supplement relating to each offering.
The Securities may or may not be listed on a national securities exchange or
a foreign securities exchange. No assurances can be given that there will be a
market for any of the Securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company and the Trusts by
Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia, Pennsylvania, and certain
matters of Nevada law will be passed upon for the Company and the Trusts by
Schreck Morris, Las Vegas, Nevada.
EXPERTS
The consolidated financial statements incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998,
incorporated by reference herein, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of such firm as experts in giving said report.
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$275,000,000
[LOGO]
CIRCUS CIRCUS ENTERPRISES, INC.
9 1/4% SENIOR SUBORDINATED NOTES DUE 2005
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PROSPECTUS SUPPLEMENT
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JOINT BOOK-RUNNING MANAGERS
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
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CREDIT LYONNAIS SECURITIES (USA) INC.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
SG COWEN
NOVEMBER 17, 1998
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