MTR Gaming, Eldorado to use $30 million cash to fund stock portion of merger; debt refinancing likely

By Lisa Kerner

Charlotte, N.C., Sept. 10 - MTR Gaming Group, Inc. agreed to combine with the parent company of Eldorado Resorts, LLC in a stock merger, the companies announced yesterday.

John Bittner, MTR's chief financial officer, said each outstanding share of MTR stock will be exchanged for a share in the new combined company and new shares will be issued for Eldorado.

The transaction is based on an MTR share price of $5.15.

"Up to $30 million of cash will be available to fund the cash offer option" for up to 5.8 million shares, or 20.9% of the company's basis shares outstanding, Bittner said on Tuesday during a conference call to discuss the transaction details.

MTR's remaining common shares will be exchanged for shares in the combined new company, which will remain publicly traded and will be named Eldorado Resorts, Inc.

The $30 million will come from either MTR or through a combination of MTR and Eldorado, according to executives during the Q-and-A portion of the call, who said they are "agnostic" when it comes to the origin of the cash.

According to the presentation, MTR has cash of about $96 million and Eldorado has cash of about $38 million.

Once the transaction is completed, most likely in mid-2014, each company's existing capital structures will remain in place, Eldorado senior vice president of strategic development Tom Reeg said on the call.

Eldorado has $168 million of senior notes and MTR has about $571 million of senior notes.

"We think that there's going to be an opportunity to refinance that debt and generate significant free cash flow savings for the combined company if the market allows us to do that we fully expect to take advantage of that opportunity," said Reeg.

Combined, the new company will have about $70 million of NOLs to protect its free cash flow.

When asked about use of cash going forward, executives said once integration of the companies is completed, the focus will likely be on further consolidation within the industry versus paying down debt.

MTR Gaming owns and operates casinos and racetracks. It is based in Chester, W.Va.

Eldorado Resorts is an owner and operator of gaming properties in Nevada and Louisiana. The company is based in Reno, Nev.

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