Tropicana affiliates to pay $165 million under ground lease lawsuit settlement

By Caroline Salls

Pittsburgh, April 8 -Tropicana Entertainment, LLC and some of its unrestricted affiliates have agreed to settle a ground lease dispute lawsuit with Park Cattle Co., according to an 8-K filed with the Securities and Exchange Commission.

According to the 8-K, Park Cattle is the lessor under Tropicana's Lake Tahoe Horizon Casino and Resort and MontBleu Casino ground leases. Both ground lease disputes are covered under the settlement.

Under the settlement, the affiliates have agreed to make $165 million in cash payments to Park Cattle over the next three years, the first of which was a $40 million payment made on April 2.

Also under the settlement, the Tropicana parties have agreed to dismiss their claims against Park Cattle.

In turn, Park Cattle has agreed to dismiss its claims against the Tropicana parties, provided that the affiliates make the settlement payments on time and the Tropicana parties comply with some ongoing covenants. Those covenants include complying with Park Cattle protections in any future Tropicana bankruptcy cases, providing Park Cattle with quarterly and annual financial statements and maintaining permits and licenses for the Horizon Resort and the MontBleu Casino.

If the Tropicana Parties fail to comply with the terms of the settlement before the payments are made in full, Park Cattle has the right to seek some remedies, including having a $290 million liquidated judgment against the Tropicana parties.

If any of the Tropicana parties files bankruptcy, Park Cattle will be entitled to file contingent proofs of claim in the liquidated judgment amount. These claims would become $150 million or $175 million fixed claims under some events of default.

In addition, the settlement requires the Tropicana parties to seek the consent of its senior credit facility lenders to amend the ground leases in question.

Tropicana said the proposed Horizon Resort lease amendment provides that the ground lease will terminate on March 31, 2011.

If the Tropicana parties are unable to secure the lender consent by April 2, 2011, then Park Cattle has the right to terminate the Tahoe Horizon lease. Park Cattle also has an option to operate the Horizon Resort for two years beginning April 1, 2011, according to the 8-K.

Meanwhile, the proposed MontBleu Casino lease amendment allows Park Cattle to terminate the ground lease effective Jan. 1, 2018, which is 10 years earlier than the current termination date, by paying Tahoe Horizon $15 million.

If Tropicana's CP Tahoe affiliate assigns the MontBleu lease to a third party, it would be obligated to pay Park Cattle a $15 million fee, plus the assignment fee already included in the lease.

Park Cattle would also enjoy a right of first refusal of the sale of the MontBleu and would receive a $15 million credit against the purchase price plus the amount of the assignment fee in connection with the right of first refusal.

If the Tropicana parties are unable to secure lender consent for the MontBleu Casino lease amendment by Nov. 30, 2008, then CP Tahoe will be obligated to pay Park Cattle $15 million.

However, if CP Tahoe makes this $15 million payment, Park Cattle will not be entitled to the additional assignment fee or the purchase credit.

Tropicana is a Fort Mitchell, Ky.-based gaming entertainment provider.

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