UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 5, 2000
FITZGERALDS GAMING CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA
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(State or other jurisdiction of incorporation)
0-26518 88-0329170
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(Commission File Number) (IRS Employer Identification No.)
301 FREMONT STREET, LAS VEGAS, NEVADA 89101
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(Address of principal executive offices) (Zip code)
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(Registrant's telephone number, including area code): (702) 388-2400
NA
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(Former name or former address, if changed since last report)
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Exhibit Index at Page 9
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
ITEM 5. OTHER EVENTS.
THE DESCRIPTIONS OF THE AGREEMENTS THAT FOLLOW ARE SUMMARIES ONLY, ARE
NOT INTENDED TO BE COMPLETE DESCRIPTIONS OF ALL MATERIAL TERMS AND ARE
QUALIFIED IN THEIR ENTIRETY BY THE FULL TEXTS OF THE AGREEMENTS INCLUDED IN
THIS FORM 8-K AS EXHIBITS. YOU ARE ENCOURAGED TO READ THE AGREEMENTS IN
THEIR ENTIRETY.
Background
On December 5, 2000, Fitzgeralds Gaming Corporation (together with its
subsidiaries, the "Company") each commenced cases under Chapter 11 of the
Bankruptcy Code (collectively, the "Bankruptcy Cases") in the United States
Bankruptcy Court for the Northern District of Nevada (the "Bankruptcy
Court"). The Bankruptcy Cases are jointly administered and co-ordinated
under Case No. BK-N-00-33467 GWZ. The Bankruptcy Cases were commenced in
accordance with an Agreement Regarding Pre-Negotiated Restructuring, dated as
of December 1, 2000 (the "Restructuring Agreement") with the holders (the
"Consenting Noteholders") of a majority in interest of the Company's 12.25%
Senior Secured Notes (the "Notes") issued under an indenture dated December
30, 1997 (the "Indenture"). As summarized below, the Restructuring Agreement
contemplates an expeditious and orderly sale of all of the Company's
operating assets and properties as going concerns.
As part of the restructuring contemplated in the Restructuring
Agreement, the Company, as debtor in possession, is seeking Bankruptcy Court
approval to sell substantially all of its assets used in its operations in
Las Vegas, Nevada, Black Hawk, Colorado and Tunica, Mississippi to an
affiliate of The Majestic Star Casino, LLC, an Indiana limited liability
company ("Majestic"), pursuant to a Purchase and Sale Agreement, dated as of
November 22, 2000, as amended on December 4, 2000 (the "Purchase Agreement")
summarized below.
Restructuring Agreement
The Restructuring Agreement provides for a vehicle for liquidating the
assets of the Company in the Bankruptcy Court through Chapter 11 of the
Bankruptcy Code. Upon execution of the Restructuring Agreement and before
commencement of the Bankruptcy Cases, the Company distributed $13.0 million
in Excess Cash (as that term is defined in the Restructuring Agreement) to
the trustee under the Indenture (the "Indenture Trustee") to be applied to
unpaid and accrued Indenture Trustee's fees and expenses incurred and as
partial payment of accrued and unpaid interest and principal as provided in
the Indenture. As part of the Restructuring Agreement, the Consenting
Noteholders and Indenture Trustee agree to forbear from exercising certain of
their rights otherwise allowable under the Notes and the Indenture.
The parties to the Restructuring Agreement have each concluded that the
fair market value of the Company's real and personal property given as
collateral for the Notes is less than the total outstanding principal and
interest due under the Notes, and that the fair market value of the real and
personal property not securing the Notes is less than the amount of the
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unsecured deficiency claim of the holders of the Notes. As a result, it is not
expected that any distribution will be made to holders of the existing capital
stock of the Company. The Restructuring Agreement requires that as part of the
liquidation process, all of the existing common stock and preferred stock of the
Company is to be canceled and extinguished.
Under the terms of the Restructuring Agreement, the Company is required
to seek buyers for each of its operating businesses. In order to effectuate
this liquidation, the Company commenced the Bankruptcy Cases and is seeking
approval to sell its operating businesses through negotiated sales agreements
either by way of motion to sell free and clear of liens under Section 363 of
the Bankruptcy Code, or under one or more plans of reorganization. The
Restructuring Agreement contemplates an auction in the Bankruptcy Court with
respect to those assets not sold pursuant to negotiated sales agreements.
Under the terms of the Restructuring Agreement, upon the closing of
each sale of the Company's assets, the net proceeds, less certain reserves
for management incentives and other liabilities, must be distributed to the
Indenture Trustee for the benefit of and distribution to the holders of the
Notes in accordance with the Indenture. All of the Company's assets
remaining after such sales, including any notes received as part of the
consideration for the sales of the Company's assets, will be transferred to a
liquidating trust created for the benefit of the holders of the Notes and
others under the terms of the Restructuring Agreement.
In light of the regulatory approvals needed to accomplish the
liquidations, and recognizing the need to retain senior management in order
to insure continuity and compliance with all gaming regulations and licensing
requirements in the Company's operations during the process, the
Restructuring Agreement requires implementation of a senior management
incentive and retention program. Subject to Bankruptcy Court approval, this
program will be adopted by the Company in order to retain Philip D. Griffith,
Michael E. McPherson, Max L. Page and Paul H. Manske, each an officer,
director and/or senior executive of the Company, as key executives and to
compensate them for their continued employment with the Company during the
process. The approval of these compensation measures by the Bankruptcy Court
within 30 days of the commencement of the Bankruptcy Cases is a condition to
the continued participation of senior management in the Bankruptcy Cases. In
this regard, the Bankruptcy Court has set a hearing date of December 21, 2000.
In the Restructuring Agreement, the Consenting Noteholders have agreed
to transfer restrictions on their Notes and have also agreed not to contest
or challenge any provisions of the Restructuring Agreement. Accordingly, no
transfer of Notes will be permitted by any Consenting Noteholder unless the
transferee agrees, among other things, to be bound by the terms of the
Restructuring Agreement.
The Restructuring Agreement includes provisions for termination by the
Company if: (i) certain applications are not granted by the Bankruptcy Court
within a specified time, or (ii) there is a default by the Consenting
Noteholders. Additionally, those Consenting Noteholders who are beneficial
owners of a majority of principal amount of the Notes may terminate the
Restructuring Agreement if: (i) certain applications are not granted by the
Bankruptcy Court within a specified time, (ii) there is a default by the
Company, or (iii) an
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examiner with expanded powers or trustee is appointed in the Bankruptcy
Cases, or any of the Bankruptcy Cases is converted to a case under Chapter 7
of the Bankruptcy Code or is dismissed. The Restructuring Agreement includes
other provisions related to termination, and the rights and remedies
available to the parties.
Purchase Agreement
Pursuant to the Purchase Agreement, the Company has agreed to sell to
Majestic substantially all of the Company's assets used in its operations in
Las Vegas Nevada (Fitzgeralds Las Vegas), Black Hawk, Colorado (Fitzgeralds
Black Hawk), and Tunica, Mississippi (Fitzgeralds Tunica), as well as the
Company's interest in The Fremont Street Experience Limited Liability Company
(collectively, the "Assets") for $149 million in cash, subject to certain
holdbacks and adjustments, plus the assumption of certain liabilities
relating to the Assets. Majestic has deposited in escrow $2.0 million of the
cash portion of the purchase price as an earnest money deposit. The Purchase
Agreement contains customary representations, warranties, conditions and
covenants, provides for a dollar-for-dollar purchase price adjustment based
on changes in each of the target properties working capital and long-term
debt, excluding debt related to the Notes, at closing, and adjustment if the
Company's earnings before interest, income taxes, depreciation and
amortization for the 12-month period prior to closing vary by 5% or more from
a target earnings amount for such period and adjustments as may apply in the
event that the Company fails to obtain certain consents.
Consummation of the transactions contemplated by the Purchase Agreement
is subject to the Bankruptcy Cases. The Purchase Agreement provided that, by
not later than December 5, 2000, the Company have commenced all necessary
actions before the Bankruptcy Court to seek an order allowing the Company to
sell the Assets free and clear of all liens and claims. The Bankruptcy Cases
were commenced on December 5, 2000. Any such sale, including the sale to
Majestic contemplated by the Purchase Agreement, will be subject to approval
by the Bankruptcy Court. The Company has agreed to certain interim
standstill and "no shop" obligations, and will seek to have the Bankruptcy
Court approve a payment of $4.0 million to Majestic, in addition to a
reimbursement of expenses not to exceed $800,000 (together, the "Break Up
Fees"), in the event that a person other than Majestic acquires Assets
relating to one or more of Fitzgeralds Las Vegas, Fitzgeralds Black Hawk or
Fitzgeralds Tunica in an auction conducted by or before the Bankruptcy Court
or otherwise.
Majestic may terminate the Purchase Agreement if (i) the Company or the
Consenting Noteholders breach certain standstill and "no shop" obligations,
(ii) the Company fails to meet certain earnings targets, (iii) the Bankruptcy
Court fails, within one day after commencement of the Bankruptcy Cases, to
grant interim approval for the use of the Company's cash in the manner
stipulated by the Consenting Noteholders, the Indenture Trustee and the
Company, including without limitation to reimburse Majestic for expenses
incurred in connection with its proposed purchase of the Assets in the event
the Company violates the "no shop" provisions, (iv) the Bankruptcy Court
fails to approve payment of the Break Up Fees within 21 days of commencement
of the Bankruptcy Cases, (v) the Bankruptcy Court fails to approve the
proposed sale of the Assets to Majestic within 85 days of commencement of the
Bankruptcy Cases (unless the Company can cause a plan of reorganization
allowing the consummation of the transactions
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contemplated by the Agreement to be (x) filed within 30 days after the
earlier to occur of (1) the Bankruptcy Court's actual rejection of the
proposed sale of Assets to Majestic and (2) the 85th day immediately
following commencement of the Bankruptcy Cases (such earlier date, the
"Measuring Date"), (y) the subject of a solicitation for votes within 70 days
after the Measuring Date, and (z) confirmed within 120 days after the
Measuring Date) or (vi) certain noncompetition obligations of Philip D.
Griffith, Michael E. McPherson, Max L. Page and Paul H. Manske will not
become effective due to a termination of the Restructuring Agreement
Either party may terminate the Purchase Agreement if the closing
thereunder has not occurred within 21 months after the date when the
Bankruptcy Court grants approval of a sale of the Assets to Majestic. Either
party may also terminate the Agreement for customary reasons such as
(i) failure by the other party to cure breaches within 20 days,
(ii) inability of such party to satisfy closing conditions or (iii) actual
failure by the other party to satisfy closing conditions. Majestic may also
terminate the Purchase Agreement if the Company notifies it that an event has
occurred that resulted in a breach of a representation or covenant of the
Company, and such event has also resulted in a material adverse effect, and
may also terminate the Purchase Agreement in connection with certain real
property title exceptions. The Company may also terminate the Agreement if
Majestic abandons its efforts to seek regulatory approvals or any regulatory
body refuses to grant a necessary approval, and the Company may terminate the
Purchase Agreement if it accepts another person's offer to buy the Assets
relating to any of Fitzgeralds Las Vegas, Fitzgeralds Black Hawk or
Fitzgeralds Tunica, or the Bankruptcy Court enters an order approving any
such sale (in which case Majestic may be entitled to the Break Up Fees).
Majestic's obligation to purchase the Assets is subject to its having
obtained financing, in the form of senior secured notes, of an aggregate
principal amount not exceeding $137 million, on terms reasonably acceptable
to it. Concurrently with the execution and delivery of the Purchase
Agreement, Majestic provided the Company with a letter, dated December 1,
2000, from Jefferies & Company stating, with customary wording and
qualifications, that it is "highly confident" that Majestic will be able to
obtain the required financing within 60 days after the date when all other
closing conditions have been satisfied. Majestic has also provided the
Company with a commitment letter from Don H. Barden, Majestic's principal
shareholder, to the effect that he or his affiliates will provide an infusion
of equity capital in an amount sufficient, taken together with the maximum of
$137 million debt financing mentioned above, to consummate the purchase of
Assets by Majestic under the Purchase Agreement. There can be no assurance,
however, that Majestic will obtain such debt financing or that Mr. Barden
will cause such capital infusion to be made. Majestic's obligation to
purchase the Assets is also subject to various gaming and other regulatory
approvals and obtaining certain third party consents. There can be no
assurance that all such approvals and consents will be obtained.
The Purchase Agreement also provides for a license back to the Company
of certain intellectual property included in the Assets, noncompetition
agreements by the Company and certain of its affiliates, and a six-month
post-closing transition period during which the Company will be required,
through its Fitzgeralds Reno subsidiary, to provide computer systems and
administrative support to the operations in Black Hawk, Colorado.
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The proposed sale of Assets to Majestic is subject to several
conditions beyond the Company's control, many of which entail a high degree
of uncertainty. Any sale of assets of the Company, or disposition of the
Company's business by merger, consolidation or otherwise, would be subject to
similar conditions, such as regulatory approvals and Bankruptcy Court
approvals. Accordingly, there can be no assurance that the Company will be
able to consummate any such transaction, with Majestic or any other person.
Non-Public Information
As disclosed in the Company's Current Report on Form 8-K for July 15,
1999 and thereafter in the Company's subsequent filings with the Securities
and Exchange Commission, the Company has had discussions with an informal
committee (the "Committee") representing a majority of the Noteholders that
culminated in the Restructuring Agreement with the Consenting Noteholders.
In conjunction with those discussions and subject to appropriate
confidentiality agreements, the Company provided certain non-public and
proprietary information regarding its business, operations, assets and
liabilities and certain projections relating thereto (the "Evaluation
Material") to the Committee. In connection with those discussions, the
Company also provided certain other information to the Committee, all
material portions of which information was subsequently disclosed in the
Company's filings with the SEC and/or the Bankruptcy Court (the "Public
Material") or which information has become stale or moot as the result of the
passage of time and changed conditions, including the execution of the
Restructuring Agreement and the Purchase Agreement and the commencement of
the Bankruptcy Cases (the "Non-Material Information"). However, although the
Company now deems it Non-Material Information, in July 2000 the Company
provided the Committee with an updated preliminary draft of summary projected
financial information through 2004 (the "Summary Information"). The Company
believes that the Summary Information has now become stale or moot because of
the passage of time and changed conditions, including the Restructuring
Agreement, the Purchase Agreement and the commencement of the Bankruptcy
Cases. However, the Summary Information is attached to this Form 8-K as an
exhibit and is being provided only as a matter of full disclosure in view of
the recent adoption of Regulation FD by the SEC.
The Company did not and does not make any representation or warranty,
express or implied, as to the accuracy or completeness of any information
contained in the Evaluation Material, and did not and does not make any
representation or warranty, express or implied, as to the accuracy or
completeness of any information contained in the Summary Information. The
Summary Information has not been examined or reviewed by independent public
accountants. The Summary Information was necessarily based upon a number of
estimates and assumptions that, while presented with numerical specificity,
are inherently subject to significant business, economic and competitive
uncertainties, contingencies and risks, many of which are beyond the
Company's control, and upon assumptions with respect to future business
decisions which are subject to change and, particularly in view of the
Restructuring Agreement, the Purchase Agreement and the commencement of the
Bankruptcy Cases, will not be under the Company's control. The Summary
Information was not and will not be undated to reflect current facts and
circumstances and the Company disclaims any obligation to do so.
Accordingly, there can be no assurance that the expectations as to projected
future results presented in the Summary Information could be achieved and
actual results will vary materially.
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For the above reasons, the Summary Information should not be relied
upon as reflecting the Company's current expectations with regard to future
operations or for any other purpose. The Company has not provided the
Committee with any information other than the Evaluation Material, the Public
Material and the Non-Material Information, including the Summary Information.
RENO TRANSPORTATION RAIL ACCESS CORRIDOR (RETRAC) PROJECT
In October 1998, the Reno City Council approved a special assessment
district to finance a portion of the costs to lower the railroad tracks that
run through downtown Reno, Nevada (the "ReTRAC Project"). Preliminary plans
for the ReTRAC Project provided for the construction of a temporary rail
bypass that would be used to divert rail traffic around the main railroad
during construction. The City estimated that a period of approximately two
and one half years would be required to complete the ReTRAC Project. The
southern boundary of the bypass would extend out into the middle of
Commercial Row, the street adjacent to the Fitzgeralds Reno hotel entrance,
valet parking area and hotel loading zone.
On November 30, 1998, the Company filed a lawsuit against the City of
Reno to challenge the by which the special assessment to be levied against
the Company was determined. Based on preliminary plans prepared by the City
of Reno, Fitzgeralds Reno would expect to lose several parking spaces, the
current valet parking area, an outdoor billboard structure advertising
available rooms and a building used to house administrative offices, and be
required to relocate the hotel entrance currently on Commercial Row. The
City of Reno also subsequently indicated that the ReTRAC Project might
require the demolition of the Fitzgeralds Reno Rainbow Skyway.
Implementation of the ReTRAC Project as currently proposed would cause the
Company to suffer significant and permanent loss in: business revenue and
income; certain operating efficiencies from demolished or impaired physical
structures; and a portion of its existing customer base as a result of the
construction and operation of the proposed rail bypass.
The City of Reno filed an answer to the Company's lawsuit on January
19, 1999. Subsequent thereto, George Karadanis and Robert Maloff d/b/a
Sundowner Hotel and Casino (the "Sundowner") were permitted by court order to
file a Complaint in Intervention. Notwithstanding said intervention, on
December 22, 1999, the court granted the City of Reno's Motion for Summary
Judgment against the Sundowner which motion was joined in by the Company.
After hearing oral arguments and considering the parties' post-hearing
briefs, the Court concluded that there was insufficient evidence before the
Reno City Council to support a finding that the ReTRAC Project confers a
special benefit on Fitzgeralds Reno as is required by statute before a
special assessment may be imposed. The Court remanded the matter to the Reno
City Council and directed the council to conduct a new evidentiary hearing to
consider new evidence as to whether Fitzgeralds Reno would receive a special
benefit from the proposed project.
The Company cannot predict what action the City of Reno will take or
whether or when the City of Reno will negotiate mitigation measures or
whether such measures could or would
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fully compensate the Company for the fair market value of its property and
anticipated operating losses.
Except for historical information contained herein, the matters
discussed in this Form 8-K are forward-looking statements that involve
significant risks and uncertainties and actual results and developments could
differ materially from the Company's current expectations. In compliance
with the Private Securities Litigation Reform Act of 1995, the Company urges
careful consideration of the risks detailed in this Form 8-K and in the
Company's other filings with the Securities and Exchange Commission.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 5, 2000 FITZGERALDS GAMING CORPORATION
(Registrant)
By: /S/ MICHAEL E. MCPHERSON
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Michael E. McPherson
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
<S> <C>
10.1 Purchase and Sale Agreement, as amended
10.2 Agreement Regarding Pre-Negotiated
Restructuring
10.3 Highly Confident Letter of Jefferies &
Company
10.4 Draft Summary Projected Financial
Information
</TABLE>
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