Florida Gaming subsidiary gets $87 million 15.75% five-year term loan

By Angela McDaniels

Tacoma, Wash., April 27 - Florida Gaming Corp. subsidiary Florida Gaming Centers, Inc. entered into an $87 million five-year senior secured term loan on Monday, according to an 8-K filing with the Securities and Exchange Commission.

The loan was issued at a price of 98. The initial interest rate is 15.75%. This will increase to 16.5% if competitor Hialeah Park Race Track brings 100 or more slot machines online.

The loan is subject to prepayments under an annual excess cash flow sweep.

The financial covenants include maximum leverage, minimum fixed charge coverage, maximum capital expenditures and minimum EBITDAM.

Proceeds will be used to fund the expansion project at the company's Miami Jai-Alai casino, to repay about $8.8 million of existing debt and other payables and for working capital and general corporate purposes.

At closing, the lenders received warrants equal to 35% of the stock in Florida Gaming Centers, and this percentage will increase by 0.01%, up to a maximum of 10%, for each slot machine made available at Hialeah Park Race Track. The exercise price is $0.01 per share.

Florida Gaming Centers must offer to repurchase the warrants if a trigger event occurs. The trigger events include the term loan maturing or being repaid in full, among others.

The lenders also received warrants equal to 30% of Florida Gaming's fully diluted common equity ownership. The exercise price is $25.00, but this will be lowered to $0.01 if the company needs to access any amount of a $3 million completion guarantee, which has been funded by the term loan, to complete the expansion project on time and on budget and if the company has not raised new equity to replace the completion guarantee and thereby cancel the warrants.

If the company successfully raises the new equity, the $3 million will be used to prepay the term loan at par.

In connection with the term loan, the company executed a deed in lieu of foreclosure to satisfy about $355,000 owed to H2C, Inc. The deed conveys about 18 acres of unimproved real property in St. Lucie County in Florida.

The company also entered into agreements with three holders of $2.45 million of notes to extend the maturity dates of the notes by at least six months after the maturity date of the term loan, to subordinate the notes to the term loan and to allow the company to pay interest in kind.

ABC Funding, LLC is the administrative agent for the term loan. Innovation Capital, LLC acted as placement agent.

Based in Miami, Florida Gaming owns and operates gaming facilities.

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