Empire Resorts gets additional default notice for 5.5% convertibles

By Jennifer Chiou

New York, Nov. 13 - Empire Resorts, Inc. received a notice of default on Nov. 9 for its 5.5% senior convertible notes due July 31, 2014 from the Bank of New York Mellon Corp., according to an 8-K filing with the Securities and Exchange Commission.

In the notice, the trustee asserted that an event of default has occurred and is continuing - not waived - as a result of the company's failure to pay the principal amount plus accrued interest and liquidated damages on the notes.

On Oct. 14, the company said that three holders of the 5.5% notes had agreed to withdraw the two notices of default and acceleration they sent to the company in August.

As already reported, the three holders agreed to withdraw the notices of default under a stipulation reached in connection with a declaratory judgment action, under which the company asked the Supreme Court of the State of New York to rule that the July 31 put options on the convertibles were not properly exercised.

As a result of the new notice, the Bank of New York Mellon has declared the entire $65 million unpaid principal amount of the notes and all accrued interest immediately due and payable.

Again, Empire's legal position is that no exercise of any put rights has occurred and, consequently, no event of default has occurred under the indenture, the 8-K added.

A failure to have repurchased the notes when required would result in an event of default under the indenture and could result in a cross-default under the company's loan agreement with the Park Avenue Bank of New York.

The filing said that this event would permit the bank to accelerate the debt outstanding under the loan agreement.

Empire said that it held a special meeting of stockholders on Tuesday at which stockholders approved, among other things, the issuance of shares and related proposals to facilitate the issue of 27,701,852 company shares to Kien Huat Realty III Ltd. for consideration of $44 million as well as additional shares under an investment agreement.

According to the filing, the company previously issued 6,804,188 shares, or 19.9% of the then-outstanding common stock on a pre-transaction basis, for a total consideration of $11 million.

Empire also closed a second tranche of 27,701,852 shares on Thursday for consideration of $44 million.

The proceeds are earmarked for the payment of interest on existing debt and for general working capital.

The company previously agreed to discontinue its claims against the aforementioned holders, and the holders further agreed to be bound by any final judgment made by the court.

The three holders - Plainfield Special Solutions Master Fund Ltd., Highbridge International LLC and Whitebox Advisors LLC - held $48.73 million of the $65 million principal amount of convertibles.

As previously reported, the company said it asked the indenture trustee on July 30, July 31 and Aug. 3 to provide copies of any election for the company to purchase the convertibles, but the election forms were never received.

The three holders had delivered a default notice when the company did not repurchase their convertibles, and they delivered a second default notice when the company did not make the $2.6 million interest payment due July 31 on the notes.

Empire Resorts operates the Monticello Casino & Raceway and is based in Monticello, N.Y.

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