Scientific Games buys $57.9 million 12½% notes in tender

New York, Dec. 23 - Scientific Games Corp. said it completed its tender for its 12½% senior subordinated notes due 2010, buying $57.9 million or 88.34% of the amount outstanding.

As a result, there is now $7.6 million of the notes remaining.

The purchase of the notes was part of a series of transactions to complete a refinancing by the company. It also closed on a new $350 million credit facility, a $200 million offering of 6¼% senior subordinated notes due 2012 and a $250 million sale of 0.75% convertible senior subordinated debentures due 2024. The underwriters have said they will exercise the $25 million greenshoe on the convertibles.

The tender offer expired on Dec. 22.

At the previous announcement on Dec. 9, Scientific Games said that it received the required consents to proposed indenture changes from the holders of its 12½% notes and that it has set the prices it will pay for the tendered notes.

As of the consent deadline of 5 p.m. ET on Dec. 8, Scientific Games had received consents from the registered holders of 88.34% of the outstanding notes.

Earlier that day, the company set the tender offer consideration and total consideration it is offering for the notes, using a previously announced formula. Tender offer consideration is $1,098.43 per $1,000 principal amount. Total consideration (the tender offer consideration, plus a $20 per $1,000 principal amount consent payment for holders who tendered and delivered consents by the consent deadline) is $1,118.43 per $1,000 principal amount. All tendering holders will also receive accrued interest on their notes up to but not including the payment date.

As previously announced, Scientific Games, a New York-based supplier of instant tickets, wagering systems and services to lotteries and to pari-mutuel operators, said on Nov. 24 that it had begun a cash tender offer for any and all of its $65,584,125 of outstanding 12½% notes and was also soliciting noteholder consents to proposed indenture changes that would eliminate substantially all of the restrictive covenants and certain default provisions.

The company said the price it would pay for the notes would be set at 2 p.m. ET on Dec. 8, and it set a consent deadline of 5 p.m. ET on Dec. 8 and an expiration deadline of 5 p.m. ET on Dec. 22, subject to possible extension.

Scientific Games said that it would set the total consideration being offered to holders of the notes on the price determination date, using a formula based on a 100 basis point fixed spread over the yield at that time on a designated reference security, the 6.5% U.S. Treasury note due Aug. 15, 2005. The total consideration would be equal to the present value on the payment date of $1,062.50 per $1,000 principal amount of notes tendered and accepted by the company for payment, (i.e., the redemption price for the notes on Aug. 15, 2005, the first call date for the notes), plus the present value of the interest that would accrue from the payment date until the first call date. In each case, these would be determined based on the fixed spread over the reference security yield.

The total consideration, to be paid only to those holders tendering their notes by the consent deadline and thus delivering their consents to the proposed indenture changes, would include a $20 per $1,000 principal amount consent payment. Holders tendering their notes after the consent deadline would receive the tender offer consideration, which does not include the consent payment. All tendering holders will additionally receive unpaid and accrued interest on their notes up to but not including the payment date.

The company said holders could not tender their notes without also delivering a consent and could not deliver a consent without also tendering their notes. The proposed indenture amendments would require the consent of holders of at least a majority of the notes' outstanding principal amount for their adoption. Notes tendered before the consent deadline could be withdrawn at any time before that deadline but not afterward.

Scientific Games said the closing of the tender offer would be subject to the satisfaction or waiver of certain conditions, including the valid tender to the company of a majority of the outstanding principal amount of the notes; the receipt by Scientific Games of the required consents to the proposed indenture amendments and the execution by Scientific Games, the subsidiary guarantors to the indenture and the notes' trustee of a supplemental indenture incorporating the proposed amendment; and the consent of Scientific Games' senior secured lenders to the completion of the tender offer.

The dealer managers and solicitation agents for the tender offer are J.P. Morgan Securities Inc. (call Lenny Carey, collect, at 212 270-9769) and Bear, Stearns & Co. Inc. (call the Global Liability Management Group at 877 696-2327 or call collect at 212 272-5112). D.F. King & Co. Inc. is the information agent for the offer (call Fran Beckesh, collect at 212 269-5550, ext. 6831).

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