Item 1.01 Entry into a Material Definitive Agreement
Indenture and Notes Issuance
On February 12, 2021, Full House Resorts, Inc. (the “Company”) closed its previously announced private offering of $310 million aggregate principal amount of 8.25% Senior Secured Notes due 2028 (the “Notes” and the offering of the Notes, the “Notes Offering”). The Notes were issued pursuant to an indenture, dated as of February 12, 2021 (the “Indenture”), among the Company, the guarantors party thereto and Wilmington Trust, National Association, as trustee.
The Notes bear interest at a rate of 8.25% per year and mature on February 15, 2028. Interest on the Notes is payable on February 15 and August 15 of each year, with interest beginning to accrue on February 12, 2021. The first interest payment date is August 15, 2021. The net proceeds from the sale of the Notes are expected to be used (i) to redeem all of the outstanding Senior Secured Notes due 2024, (ii) to fund the expansion and redevelopment of the Cripple Creek project, including designing, developing, constructing, equipping and opening the planned redevelopment and expansion (the “Cripple Creek Project”), (iii) to pay the transaction fees and expenses related to the Notes Offering, (iv) to repurchase warrants, and (v) for general corporate purposes, including acquisitions and investments.
The Company may redeem some or all of the Notes at any time on or after February 15, 2024, for cash at the redemption prices set forth set forth in the Indenture plus accrued and unpaid interest to the redemption date. On or prior to February 15, 2024, the Company may redeem up to 35% of the original principal amount of the Notes with proceeds of certain equity offerings at a redemption price of 108.25%, plus accrued and unpaid interest to the redemption date. In addition, the Company may redeem some or all of the Notes prior to February 15, 2024 at a redemption price of 100% of the principal amount of the Notes, plus accrued and unpaid interest to the redemption date and a “make-whole” premium. In addition, the Notes are subject to disposition and redemption requirements imposed by gaming laws and regulations of applicable gaming regulatory authorities. The Company may also be required to offer to purchase some or all of the Notes upon the sale of certain assets, upon certain changes of control, or should the Company have certain unused funds in the construction disbursement account following the completion date of the Cripple Creek Project.
The Notes are guaranteed, jointly and severally (such guarantees, the “Guarantees”), by each of the Company’s restricted subsidiaries (collectively, the “Guarantors”). The Notes and the Guarantees will be the Company’s and the Guarantor’s general senior secured obligations, subject to the terms of the Collateral Trust Agreement (as defined in the Indenture) ranking senior in right of payment to all of the Company’s and the Guarantor’s existing and future debt that is expressly subordinated in right of payment to the Notes and the Guarantees, if any, ranking equally in right of payment with all of the Company’s and the Guarantors’ existing and future senior debt, including borrowings under a planned $15.0 million revolving credit facility (“Credit Facility”). Under the Collateral Trust Agreement, the proceeds of any collection or realization of collateral securing the Notes, or any other value received on account or in connection with remedies with respect to the collateral securing the Notes (in each case other than in respect of the securities accounts and the deposit accounts established pursuant to the Cash Collateral and Disbursement Agreement, as defined in the Indenture) and certain other amounts will be applied to borrowings under the Credit Facility prior to payment on the Notes.
The Notes, together with borrowings under the Credit Facility, are equally and ratably secured by a first priority security interest in, subject to certain exceptions and limitations and the terms of the Collateral Trust Agreement, the Company’s and the Guarantors’ furniture, equipment, inventory, accounts receivable, other personal property and real property. Additionally, the Notes (but not the borrowings under the Credit Facility) will be secured by a first priority security interest in the securities accounts and the deposit accounts established pursuant to the Cash Collateral and Disbursement Agreement.
The Indenture contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things: (i) pay dividends or distributions or make certain other restricted payments or investments; (ii) incur or guarantee additional indebtedness or issue certain disqualified or preferred stock; (iii) create subsidiaries; (iv) create liens; (v) transfer and sell assets; (vi) merge, consolidate or sell, transfer or otherwise dispose of all or substantially all of their assets; and (vii) enter into certain transactions with affiliates. Additionally, upon the occurrence of specified change of control triggering events, the Company will be required to offer to repurchase the Notes at a repurchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date. The Indenture also contains customary events of default, which, if any of them occurs, would permit or require the principal, premium, if any, and interest on all the then-outstanding Notes issued under the Indenture to be due and payable.