Sands plans exchange for GB Property notes

New York, July 14 - GB Holdings Inc., which operates the Sands Hotel and Casino in Atlantic City, N.J. through its Greate Bay Hotel & Casino, Inc. said its board directors have approved an exchange offer for GB Property Funding Corp.'s debt.

The company is offering to exchange the existing $110 million of 11% secured notes due September 2005 for new securities with a longer maturity, lower interest rate and convertible into stock along with a cash payment.

Under the proposed exchange, the indenture of the existing notes would be amended to remove certain provisions and covenants and release the liens on The Sands assets, which are the collateral for the existing notes. The change would allow the transfer of the assets and those now held at GB Holdings to a newly formed wholly owned subsidiary of the company.

The existing notes would be exchanged for an identical par amount of new notes due September 2008 bearing interest at 3% per annum, payable at maturity. The notes will have a first lien on the assets of the new subsidiary.

For each $1,000 principal amount of notes exchanged, the company will pay $100 in cash plus accrued interest.

Holders of a majority of the principal amount of the new notes will have the option at any time prior to maturity to cause the entire class of new notes to simultaneously convert into shares of the new subsidiary. If all holders participate, on exchange the noteholders will own 72.5% of the stock of the subsidiary. A majority of the holders may also vote to give holders the ability to convert the notes into stock at their option.

As part of the exchange, the company's stockholders will be given warrants for 27.5% of the stock of the new subsidiary.

If some of the noteholders do not participate, the company will own the stock that would otherwise have been allocated.

"This transaction will relieve The Sands of a substantial portion of its indebtedness that would otherwise come due in 2005 and extend that debt until at least 2008," said Richard P. Brown, chief executive officer of Sands, in a news release.

The company noted that the exchange is supported by Carl C. Icahn and his affiliated companies, which own more than 77% of the company's stock and 58% of the debt.

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