Inn of the Mountain Gods holders' committee, IMG Resort in negotiations on 12% senior notes

By Jennifer Chiou

New York, Nov. 9 - Inn of the Mountain Gods Resort and Casino announced that the ad hoc committee of bondholders of its 12% senior notes due 2010 has been negotiating with the IMG Resort and Casino and the Mescalero Apache Tribe on restructuring the outstanding 12% senior notes due 2010.

The committee represents holders of more than two-thirds of the outstanding principal amount of the notes.

After some negotiations on Sept. 8, IMG Resort proposed to the committee an exchange of the notes for two new series of notes, which the committee rejected.

According to a news release, the proposed exchange notes contained the following terms:

• One series of the proposed exchange notes, the first-out notes, would have been for $80 million total, bearing a cash interest rate of 8% with a 10-year maturity, callable any time at par; and

• The second-out notes, also amounting to $80 million, would have had a 20-year maturity, callable at par after three years and bearing a 5% interest rate payable in kind until the first-out notes were repaid in full and a 10% interest rate payable in cash after the first-out notes were repaid in full.

Under this offer, holders of the proposed exchange notes would have received 100% of excess cash flow for principal repayment to the extent unadjusted EBITDA was $35 million or less.

If unadjusted EBITDA exceeded $35 million, the Tribe would have received 20% of the unadjusted EBITDA above $35 million and holders of the proposed exchange notes would have received the remaining excess cash flow as principal repayment.

Additionally, the Tribe would have been entitled to one-12th of $10 million as a monthly distribution to the Tribe with a 2.5% annual inflation escalator irrespective of EBITDA levels.

Inn of the Mountain Gods said that the committee rejected the last issuer offer and made a counter proposal on the following terms, which IMG Resort is assumed to have rejected:

• Holders of the notes would have received $5 million upon completion of a notes exchange as reduction in principal;

• The notes would have received $50 million of first-out notes, bearing a 9% cash interest rate with a 10.5-year maturity, callable any time at par and $145 million of second-out notes with a 15.5-year maturity, callable at par three years after payment in full of the first-out notes, bearing a 2.5% interest rate payable in kind until the first-out notes were repaid in full and a 13.5% interest rate payable in cash after the first-out notes are repaid in full;

• Holders of the proposed exchange notes would have also received 100% of excess cash flow as a reduction in principal;

• The Tribe would have received monthly distributions of one-12th of $9 million, with a CPI annual inflation escalator beginning in 2015, a $1 million payment upon repayment in full of the first-out notes and a $0.75 million payment for every $10 million of second-out notes that were repaid; and

• The counter proposal also required additional security and financial covenants.

As already reported in a prior 8-K filing with the Securities and Exchange Commission, the company did not make the $12 million interest payment due on May 15 on the notes.

Inn of the Mountain Gods is a Mescalero, N.M.-based resort and casino owned by the Mescalero Apache tribe.

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