Empire Resorts says notes purchase forms not delivered by deadline

By Caroline Salls

Pittsburgh, Aug. 17 - Empire Resorts, Inc. has filed a declaratory judgment action that asks the Supreme Court of the State of New York to rule that the holders of its senior convertible notes due July 31, 2014 did not properly exercise their July 31 put option, according to a 10-Q filed with the Securities and Exchange Commission.

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

Empire said the forms had to be completed, signed and delivered to the trustee by close of business on July 31 to require the company to purchase the notes.

Since the completed forms were not delivered, Empire said it is not obligated to purchase the notes before their July 31, 2014 maturity date.

As previously reported, the company received a default notice from three holders of $48.73 million in principal amount of the notes in connection with its failure to purchase the notes.

As a result, the company is also asking the court to rule that the three noteholders did not invoke the default consequences under the notes indenture.

In addition, Empire said it did not make the $2.6 million interest payment due July 31 on the notes, and it is required to pay 9% interest on the overdue installment. The company will be in default on the notes if the payment is not made by Aug. 31.

The company said the same three noteholders delivered a default notice on Aug. 11 in connection with the missed interest payment.

Empire said it does not have an immediate source of funding to repay the notes or its loan agreement obligations if the put option has been validly exercised.

Additionally, the company said its current operations will not provide enough cash flow to repay these obligations at maturity if it is required to do so.

If a settlement or restructuring transaction is reached within 90 days of the July 28 maturity date of the loan agreement, the company said the maturity date could be extended to July 28, 2011.

Under a side letter agreement with The Park Avenue Bank, any agreement with the noteholders to extend the maturity or redemption date of the notes, the July 28, 2011 loan agreement maturity date would be extended to at least seven days before that new notes maturity or redemption date.

Empire Resorts is a Monticello, N.Y.-based operator of the Monticello Casino & Raceway.

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