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EX-31.2 - SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - NGA Holdco, LLCdex312.htm
EX-31.1 - SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - NGA Holdco, LLCdex311.htm
EX-32.1 - SECTION 906 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - NGA Holdco, LLCdex321.htm
EX-32.2 - SECTION 906 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - NGA Holdco, LLCdex322.htm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period              to             

Commission File No. 0-52734

 

 

NGA HOLDCO, LLC

(Exact name of registrant as specified in its charter)

 

 

 

Nevada   20-8349236

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

22 Waterway Avenue, Suite 150

The Woodlands, TX 77380

(Address of principal executive offices)

Telephone: (713) 559-7400

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ¨   Accelerated filer  ¨   Non-accelerated filer  ¨   Smaller reporting company  x
   

(Do not check if a smaller

reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

 

 

 


Table of Contents

NGA HOLDCO, LLC

FORM 10-Q

INDEX

 

          Page No.
PART I. FINANCIAL INFORMATION   

Item 1.

   Financial Statements (Unaudited):    1
   Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008    1
   Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008    2
   Consolidated Statement of Changes in Members’ Equity for the Nine Months Ended September 30, 2009    3
   Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008    4
   Notes to Condensed Consolidated Financial Statements    5

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations    11

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk    12

Item 4.

   Controls and Procedures    12
PART II. OTHER INFORMATION   

Item 6.

   Exhibits    13

SIGNATURES

   14

 

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Table of Contents

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited).

NGA HOLDCO, LLC

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

     September 30, 2009     December 31, 2008  
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 263,054      $ 262,938   

Federal tax asset

     82,411        235,000   
                

Total current assets

     345,465        497,938   

Deferred federal tax asset

     2,472,163        2,472,163   

Investment in Eldorado

     30,054,321        29,666,633   

Due from related party

     5,179,772        5,179,772   
                

Total Assets

   $ 38,051,721      $ 37,816,506   
                
LIABILITIES AND MEMBERS’ EQUITY     

Current Liabilities:

    

Accounts payable and accrued liabilities

   $ —        $ 22,225   
                

Total current liabilities

     —          22,225   

Due to related party

     1,947,599        1,719,870   
                

Total Liabilities

     1,947,599        1,742,095   
                

Members’ Equity:

    

Class A unit (1 Unit issued and outstanding)

     3,806        3,806   

Class B units (9,999 Units issued and outstanding)

     36,322,652        36,322,652   

Accumulated deficit

     (222,336     (252,047
                

Total Members’ equity

     36,104,122        36,074,411   
                

Total Liabilities & Members’ equity

   $ 38,051,721      $ 37,816,506   
                

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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Table of Contents

NGA HOLDCO, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

     Three Months
Ended September 30,
    Nine Months
Ended September 30,
     2009     2008     2009     2008

(Loss) income:

        

Equity (loss) income on Eldorado

   $ (166,627   $ 750,261      $ 387,688      $ 320,616
                              

Total (loss) income

     (166,627     750,261        387,688        320,616

Expenses:

        

Legal, licensing, and other expenses

     29,774        (210,533     205,388        109,132
                              

Net (loss) income before income taxes

     (196,401     960,794        182,300        211,484

Income tax (expense) benefit

     4,880        49,929        (152,589     130,298
                              

Net (loss) income

   $ (191,521   $ 1,010,723      $ 29,711      $ 341,782
                              

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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NGA HOLDCO, LLC

CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS’ EQUITY (Unaudited)

 

     Class A
Unit
   Class B
Units
   Accumulated
Deficit
    Total
Members’
Equity

Balance, December 31, 2008

   $ 3,806    $ 36,322,652    $ (252,047   $ 36,074,411

Net Income

     —        —        29,711        29,711
                            

Balance, September 30, 2009

   $ 3,806    $ 36,322,652    $ (222,336   $ 36,104,122
                            

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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Table of Contents

NGA HOLDCO, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

     Nine Months
Ended
September 30, 2009
    Nine Months
Ended
September 30, 2008
 

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 29,711      $ 341,782   

Adjustments to reconcile income from operations to net cash provided by operating activities:

    

Equity income on Eldorado

     (387,688     (320,616

Decrease (increase) in federal tax asset

     152,589        (70,000

Decrease in due from related parties

     —          3,802   

Decrease in accounts payable and accrued liabilities

     (22,225     (229,443

Increase in due to related parties

     227,729        573,680   

Decrease in federal tax liability

     —          (295,308

Distributions from equity investment in Eldorado

     —          258,911   
                

Net cash provided by operating activities:

   $ 116      $ 262,208   
                

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Net cash provided by investing activities:

   $ —        $ —     
                

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net cash provided by financing activities:

   $ —        $ —     
                

Net increase in cash

   $ 116      $ 262,808   
                

Cash at beginning of the year

   $ 262,938      $ —     
                

Cash at end of the year

   $ 263,054      $ 262,808   
                

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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Table of Contents

NGA HoldCo, LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization

NGA HoldCo, LLC, a Nevada limited liability company (the “Company”), was formed on January 8, 2007 at the direction of Newport Global Opportunities Fund LP (“Newport”), a Delaware limited partnership, for the purpose of holding equity, either directly or indirectly through affiliates, in one or more entities related to the gaming industry. The unaudited condensed consolidated financial statements represent the financial position and results of operations of the Company and its two wholly owned subsidiaries; NGA Blocker, LLC (“Blocker”) and NGA Acquisition Co. LLC (“Acquisition Co”).

On December 14, 2007, the date of the closing of its acquisition of a 17.0359% interest in Eldorado Resorts, LLC, a Nevada Limited Liability Company (“Resorts”), the Company transferred in part to Resorts and in part to Donald L. Carano (“Carano”), respectively, free and clear of any liens, ownership of a total of $38,045,363 original principal amount of First Mortgage Bonds due 2012, co-issued by Eldorado Casino Shreveport Joint Venture (the “Louisiana Partnership”), and Shreveport Capital Corporation, a wholly owned subsidiary of the Louisiana Partnership (the “New Shreveport Notes”), together with 11,000 preferred shares issued by Shreveport Gaming Holdings, Inc. (“SGH”), then a partner of the Louisiana Partnership that is not affiliated with Resorts or the Company, in exchange for a 17.0359% interest in Resorts. In May 2007, Newport contributed 100% of the New Shreveport Notes held by Newport since August 2006 and 11% of the preferred shares held since August 2006 (collectively, the “Eldorado Shreveport Investments”) to the Company. These Eldorado Shreveport Investments were transferred to the Company at the fair value as of the transfer date.

Effective April 1, 2009, Resorts became a wholly-owned subsidiary of Eldorado HoldCo LLC, a Nevada limited liability company (“Eldorado”), when all of the members of Resorts, including Acquisition Co., the subsidiary of the Company through which the Company held its interest in Resorts, exchanged their interests in Resorts for identical interests in Eldorado. Eldorado, which was formed to be a holding company for Resorts, conducts no operations of its own and, other than its ownership of Resorts, has no assets or liabilities.

The Company has had no revenue generating business since inception. Its current business plan consists primarily of its holding of a 17.0359% equity interest in Eldorado. Eldorado, through Resorts, owns and operates the Eldorado Hotel and Casino (the “Eldorado-Reno”) located in Reno, Nevada. Through two wholly owned subsidiaries, Resorts owns all of the partnership interests of the Louisiana Partnership, and operates, pursuant to a management agreement, the Eldorado Shreveport Hotel and Casino in Shreveport, Louisiana (the “Eldorado-Shreveport”), which is owned by the Louisiana Partnership. Eldorado Limited Liability Company (“ELLC”), a Nevada limited liability company 96.1858% owned by Resorts, is a 50% joint venture partner in a general partnership that owns and operates the Silver Legacy Resort Casino (“Silver Legacy”), a hotel and casino property adjacent to Eldorado-Reno. Resorts also owns a 21.25% interest in Tamarack Junction, a small casino in South Reno.

The Company’s one issued and outstanding Class A Unit, representing all of its voting equity, is held by NGA VoteCo, LLC, a Nevada limited liability company (“VoteCo”). All of the Company’s issued and outstanding Class B Units, representing all of its non-voting equity, are held by NGA No VoteCo, LLC, a Nevada limited liability company (“InvestCo”). VoteCo is owned by Thomas R. Reeg, Timothy T. Janszen and Ryan L. Langdon, each of whom owns a 30% interest, and Roger A. May, who owns a 10% interest. Messrs. Reeg, Janszen, Langdon and May collectively are referred to as the “VoteCo Equityholders”. InvestCo is owned by Newport, a Delaware limited partnership formed primarily for the purpose of seeking long-term capital appreciation and current income by acquiring, holding and disposing of investments made in distressed debt securities and equities. Newport holds all of InvestCo’s issued and outstanding voting securities. At present, the Company has no plans to issue any additional Class A Units or Class B Units.

The VoteCo Equityholders, through VoteCo, control all matters of the Company that are subject to the vote of members, including the appointment and removal of managers. Messrs. Reeg, Janszen, Langdon and May are the Company’s managers and Mr. Reeg is also the Company’s operating manager. The Class B Units issued to InvestCo allow it and its investors to invest in the Company without having any voting power or power to control the operations or affairs of the Company, except as otherwise required by law. If InvestCo and its investors had any of the power to control the operations or affairs of the Company afforded to the holders of the Class A Units, they and their respective constituent equityholders would generally be required, in connection with the Company’s investment in Eldorado, to be licensed or found suitable under the gaming laws and regulations of the States of Nevada and Louisiana as well as various local regulations in those states.

VoteCo, InvestCo, the Company and each of the Company’s wholly owned subsidiaries are managed by Thomas R. Reeg, the operating manager of each entity. NGA Blocker, LLC, a Nevada limited liability company (“Blocker”), is a holding company that has elected to be taxed as a corporation. Because Blocker is a separately taxed, non-flow through entity, Blocker is taxed on its share of the income relating to the Company’s investment in Resorts rather than the Company’s investors.

        The Company’s acquisition in December 2007 of a 17.0359% interest in Resorts was pursuant to the terms and conditions of a Purchase Agreement, dated July 20, 2007 (the “Purchase Agreement”). The parties to the Purchase Agreement were Resorts, AcquisitionCo, which is the subsidiary through which the Company acquired its interest in Resorts, and Carano, now the presiding member of Eldorado’s Board of Managers and the Chief Executive Officer of Eldorado who then held the same positions with Resorts, from whom a portion of the 17.0359% interest was acquired. The closing of this transaction occurred on December 14, 2007 (“Closing”) after necessary gaming licenses and approvals were obtained from Nevada and Louisiana, respectively. The Company owns indirectly through its subsidiaries 17.0359% of Eldorado, and Carano or members of his family own directly or indirectly approximately 51% of Eldorado. Carano continues in the roles in the management of Eldorado and Resorts in which he served Resorts prior to Closing.

 

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The 17.0359% equity interest in Resorts acquired by the Company included a new 14.47% membership interest acquired directly from Resorts (the “14.47% Interest”) and a previously outstanding 3% membership interest (that, as a result of the issuance of the 14.47% Interest, was reduced to a 2.5659% interest) acquired from Carano (the “2.5659% Interest”). Subject to the closing adjustment described below, in consideration for its equity interest, AcquisitionCo:

 

   

transferred to Resorts, free and clear of any liens, ownership of $31,133,250 original principal amount of the New Shreveport Notes together with the right to all interest paid with respect thereto after the closing date, and

 

   

transferred to Carano, free and clear of any liens, $6,912,113 original principal amount of New Shreveport Notes together with the right to all interest paid with respect thereto after the closing date and a preferred stock equity interest representing a capital contribution amount of $286,889 issued by SGH.

At closing, Resorts and Carano paid Newport in cash the respective amounts owed to AcquisitionCo for interest on the respective amounts of New Shreveport Notes received at closing that was accrued and unpaid through the date of closing.

Under the terms of the Purchase Agreement, Resorts was entitled, prior to or immediately following the Company’s acquisition of its interest in Resorts, to make a distribution to the members of Resorts other than AcquisitionCo of up to $10 million. On July 25, 2007 Resorts made the $10 million distribution to its members which was funded through borrowings under Resorts’ credit facility as permitted by the Purchase Agreement.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Company prepares its financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid instruments purchased with an original maturity of three months or less at the time of purchase. Cash equivalents are stated at cost plus accrued interest, which approximates fair value.

Investment in Eldorado

The Company accounts for its 17.0359% investment in Eldorado using the equity method of accounting. The Company considers on a quarterly basis whether the fair value of its equity method investment has declined below its carrying value whenever adverse events or changes in circumstances indicate that the recorded value may not be recoverable. If the Company considers any such decline to be other than temporary, then a write-down would be recorded to estimated fair value. Evidence of a loss in value that may be other than temporary might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of our investment or the inability of Eldorado to sustain an earnings capacity that would justify the carrying amount of the investment. In evaluating whether the loss in value is other than temporary, we consider: 1) the length of time and the extent to which the fair value has been less than cost; 2) the financial condition and near-term prospects of Eldorado, including any specific events which may influence the operations of Eldorado; 3) our intent and ability to retain our investment in Eldorado for a period of time sufficient to allow for any anticipated recovery in fair value; 4) the condition and trend of the economic cycle; 5) Eldorado financial performance and projections; 6) trends in the general market; and 7) Eldorado capital strength and liquidity.

In determining whether the fair value of our investment in Eldorado is less than our carrying value, we use a discounted cash flow model as our principal technique. Our model incorporates an estimated weighted-average cost of capital that a market participant would use in evaluating the investment in a purchase transaction. The estimated weighted-average cost of capital is based on the risk free interest rate and other factors such as current risk premiums. We use the discounted cash flow model as it provides greater detail and opportunity to reflect specific facts, circumstances and economic conditions for our investment. Comparable business transactions are often limited in number, the information can be dated, and often require significant adjustments due to differences in the size of the business, markets served and other factors. We therefore believe that in our circumstance, this makes comparisons to business transactions less reliable than the discounted cash flows model. However, we do consider comparable business transactions as a reasonableness test of our principal technique.

In performing this impairment test, we take steps to ensure that appropriate and reasonable cash flow projections and assumptions are used. We also perform sensitivity analyses on the key assumptions used, including the weighted-average cost of capital.

Fair Value of Financial Instruments

The fair value of accounts payable approximates their carrying value due to the immediate or short term maturity of these financial instruments.

Principles of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Blocker and AcquisitionCo. All intercompany transactions have been eliminated in consolidation.

In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments, all of which are normal and recurring, necessary to present fairly the financial position of the Company as of September 30, 2009 and December 31, 2008, and the results of its operations for the three and nine months ended September 30, 2009 and 2008, and its cash flows for the nine months ended September 30, 2009 and 2008. The results of operations for such periods are not necessarily indicative of the results to be expected for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on May 22, 2009.

 

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Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) approved the FASB Accounting Standards Codification (the “Codification”). The Codification will serve as the single source of authoritative non-governmental Generally Accepted Accounting Principles (“GAAP”). The Codification does not change GAAP, but provides a new structure combining all authoritative standards into a comprehensive, topically organized online database. References to authoritative accounting literature, if any, included in these unaudited consolidated financial statements will be in accordance with the Codification.

In July 2009, the FASB issued Codification topic 105 (formerly, Statement of Financial Standards No. 168, “The Hierarchy of Generally Accepted Accounting Principles”), which became effective September 15, 2009. Codification topic 105 contains guidance which reduces the GAAP hierarchy to two levels, one that is authoritative and one that is not. Adoption of Codification topic 105 during the quarter ended September 30, 2009 did not have a material impact on our unaudited consolidated financial statements.

In May 2009, ASC 855, Subsequent Events (“ASC 855”), was issued. Effective for interim and annual periods ending after June 15, 2009, ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. We completed our evaluation for subsequent events on November 16, 2009, the issuance date of these financial statements, and we determined there were no subsequent events to be reported.

3. Membership Units and Related Rights

The Company’s Operating Agreement has created two classes of membership units, the Class A Units and the Class B Units. VoteCo holds one Class A Unit of the Company, representing the Company’s only outstanding voting equity. InvestCo holds 9,999 Class B Units of the Company, representing all of the Company’s outstanding non-voting equity. With the exception of voting rights, the rights of a Class A Unit and a Class B Unit are identical.

Each of the Company’s membership units, both Class A and Class B, represent a percentage interest in the Company equal to the quotient determined by dividing one by the aggregate number of units, both Class A and Class B, held by all members as of the date of the determination. The economic rights, risks and rewards are all shared by the members ratably according to their respective percentage interests.

Distributions

Subject to all applicable gaming approvals, distributions by the Company will be to its members at such times and in such amounts as approved by the Operating Manager in good faith in accordance with the provisions of the Company’s operating agreement and, if and when made, will be distributed by the Company to its members in proportion to their respective percentage interests in the Company. There is no formal agreement between Newport and the Company regarding the settlement of the due to/from related parties, however, such amounts are expected to be settled upon sale of the Company’s investment in Eldorado.

 

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Restrictions on Transfer

Unless approved in advance by the Operating Manager and by applicable gaming authorities, no member of the Company may transfer all or any portion of its membership units. In addition, transfers or issuances of any membership units to any person who is required to be, and has not been, found suitable to be licensed or to hold such membership units by applicable gaming authorities, are prohibited and will be null and void and of no force or effect as of the inception of the attempted transfer or issuance.

Furthermore, as of the date the Company receives notice from any applicable gaming authority that a member of the Company or a transferee of any membership interest in the Company (1) is required to be licensed but is unsuitable to be licensed or (2) is unsuitable to hold a membership interest in the Company, then the unsuitable member or transferee may not, for so long as the unsuitability determination remains in force and effect,

 

   

receive any share of any cash distribution, or any other property or payments upon the dissolution of the Company,

 

   

exercise directly or through a trustee or nominee any voting rights conferred by any membership interest in the Company,

 

   

participate in the management of the business or affairs of the Company, or

 

   

receive any remuneration in any form from the Company for services rendered or otherwise.

Member and Company Manager Compensation

No member or manager of the Company is entitled to receive any compensation from the Company for any services rendered to or on behalf of the Company, or otherwise, in his, her or its capacity as a member or manager of the Company. A manager of the Company is entitled to reimbursement from the first available funds of the Company for direct out-of-pocket costs and expenses incurred by the manager on behalf of the Company that directly related to the business and affairs of the Company.

4. Investment in Eldorado

The Company’s 17.0359% investment in Eldorado (which was acquired on April 1, 2009 in exchange for a 17.0359% interest originally acquired in Resorts, as described in Note 1) is accounted for under the equity method. The original investment was recorded at fair value and is adjusted by the Company’s share of earnings, losses, distributions, and adjustments related to the amortization of definite-lived intangibles of the investment and is recorded in Equity income (loss) on Eldorado on the consolidated statement of operations. Management used a discount rate of 11.4% as one of the components in determining the Company’s fair value as of September 30, 2009. The evaluation was performed as a result of continued softness in Eldorado’s Reno related operations. After incorporating various modifications of the fair value calculation relating to improvements in the debt and equity markets, the changes in projected property level cash flow and lower debt levels when compared to year-ended December 31, 2008, it was determined that the fair value at September 30, 2009 was approximately $41 million versus the carrying value of $30 million. A 1% change in the discount rate would result in a change of approximately $3.1 to $3.0 million depending on the direction and assuming all other variables are held constant. The Company’s allocated income and loss related to Eldorado/Resorts for the nine months ended September 30, 2009 and 2008, respectively, is included as a component of income (loss) on the consolidated statement of operations.

A rollforward of the Company’s equity investment in Eldorado is as follows:

 

     Total

Beginning balance at January 1, 2009

   $ 29,666,633

Equity income on Eldorado

     387,688
      

Ending balance at September 30, 2009

   $ 30,054,321
      

Summarized balance sheet information for Eldorado is as follows (in thousands):

 

     September 30,
2009
   December 31,
2008

Current assets

   $ 44,353    $ 47,106

Investment in joint ventures

     49,860      50,151

Property and equipment, net

     227,376      238,219

Intangible assets, net

     21,012      21,335

Other assets, net

     2,343      2,103
             

Total assets

   $ 344,944    $ 358,914
             

Current liabilities

   $ 28,348    $ 30,252

Long-term liabilities

     190,350      205,326

13% Preferred equity interest

     19,289      19,289

Noncontrolling interest

     5,065      5,080

Partners’ equity

     101,892      98,967
             

Total liabilities and partners’ equity

   $ 344,944    $ 358,914
             

 

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Summarized results of operations for Eldorado are as follows (in thousands):

 

     Three months
ended
September 30,

2009
    Nine months
ended
September 30,
2009
 

Net revenues

   $ 68,890      $ 207,725   

Operating expenses

     (64,319     (189,438

Loss on sale/disposition of long-lived assets

     (1     (27

Equity (loss) income of unconsolidated affiliates

     (135     474   
                

Operating income

     4,435        18,734   

Other expense, net

     (5,269     (15,996
                

Net (loss) income

     (834     2,738   

Less net income attributable to noncontrolling interest

     15        15   
                

Net (loss) income attributable to the Company

   $ (819   $ 2,753   
                

Effective March 1, 1994, ELLC (96% owned by Resorts) and Galleon, Inc. (a Nevada corporation and now an indirect wholly owned subsidiary of MGM MIRAGE) entered into a joint venture (the “Silver Legacy Joint Venture”) pursuant to a joint venture agreement to develop the Silver Legacy Resort Casino (the “Silver Legacy”). The Silver Legacy consists of a casino and hotel located in Reno, Nevada, which began operations on July 28, 1995. Each partner owns a 50% interest in the Silver Legacy Joint Venture.

Summarized balance sheet information for the Silver Legacy Joint Venture is as follows (in thousands):

 

     September 30,
2009
   December 31,
2008

Current assets

   $ 40,668    $ 52,397

Property and equipment, net

     237,597      247,689

Other assets, net

     7,175      7,235
             

Total assets

   $ 285,440    $ 307,321
             

Current liabilities

   $ 15,761    $ 20,422

Long-term liabilities

     149,965      166,421

Partners’ equity

     119,714      120,478
             

Total liabilities and partners’ equity

   $ 285,440    $ 307,321
             

Summarized results of operations for the Silver Legacy Joint Venture are as follows (in thousands):

 

     Three months
ended
September 30,

2009
    Nine months
ended
September 30,

2009
 

Net revenues

   $ 32,623      $ 94,269   

Operating expenses

     (29,678     (89,067
                

Operating income

     2,945        5,202   

Other expense, net

     (3,763     (5,966
                

Net loss

   $ (818   $ (764
                

On May 12, 2009, Resorts and Newport executed an agreement (the “Agreement”), which was terminated on August 18, 2009, pursuant to which Resorts might have, at any time it believed that it might in the reasonably foreseeable future have been in default of any of the provisions of Sections 6.13, 6.14, 6.15 or 6.16 of its credit facility, make a written request to Newport for a loan in an amount not to exceed the lesser of (i) the maximum amount which might at the time be borrowed by Resorts without causing it to be in default of the limitations on indebtedness contained in Section 4.09 of the indenture (the “Indenture”) relating to the 9% senior notes due 2014 co-issued by Resorts and its wholly owned subsidiary, Eldorado Capital Corp. (the “9% Notes”), or (ii) such amount which was equal to the greater of (A) the excess of (1) the aggregate unpaid principal balance of the loans made to Resorts under (I) Resorts’ credit facility and (II) the Loan and Aircraft Security Agreement (the “Aircraft Loan Agreement”) dated as of December 30, 2005 between Resorts and Banc of America Leasing and Capital, LLC (including for this purpose any amendments, replacements or extensions thereof) at the time of the written request, over (2) $5,000,000, or (B) at Newport’s option, the amount of the unpaid principal and accrued interest then outstanding under

 

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Resorts’ credit facility. On May 13, 2009, Resorts sold to the Louisiana Partnership the aircraft, which served as collateral under the Aircraft Loan Agreement, for $2.7 million in cash and the proceeds were used to pay in full the indebtedness remaining under the Aircraft Loan Agreement and, at September 30, 2009, there was no indebtedness outstanding under Resorts’ credit facility.

5. Related Parties

InvestCo owns 99.99% of the Company which is a non-voting interest. The other .01% of the Company, which is the only voting interest of the Company, is owned by VoteCo. InvestCo is solely owned by Newport. In May 2007, Newport contributed to the Company 100% of the New Shreveport Notes held by Newport since August 2006 and 11% of the SGH preferred shares held since August 2006 that comprised the Company’s Eldorado Shreveport investments (the “Eldorado Shreveport Investments”). The Eldorado Shreveport Investments were transferred to the Company at fair market value at the date of transfer. VoteCo is responsible for the operations of the Company and is solely owned by the managers of Newport.

At September 30, 2009 and December 31, 2008, the Company was owed $5,179,772 from Newport, representing $5,118,168 of interest earned and received on the Eldorado Shreveport Investments and $61,600 of preferred dividend earned and received on the 11,000 SGH preferred shares. At September 30, 2009 and December 31, 2008, the Company owed $1,947,599 and $1,719,870, respectively, to Newport for expenses paid by Newport on the Company’s behalf. There is no formal agreement outlining the settlement of the receivable and payable between Newport and the Company. Accordingly, the receivable and payable are reflected as a non current asset and a non current liability, respectively, at September 30, 2009 and December 31, 2008.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The following management’s discussion and analysis relates to the Company’s unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this report.

The Company and its subsidiaries were formed as legal entities in January 2007 for the primary purpose of holding equity, directly or indirectly through affiliates, in one or more entities related to the gaming industry, and to exercise the rights, and manage the distributions received, in connection with those holdings. On December 14, 2007, our affiliate, Acquisition Co, acquired a 17.0359% interest in Resorts. Effective April 1, 2009, Resorts became a wholly-owned subsidiary of Eldorado HoldCo LLC, a Nevada limited liability company (“Eldorado”), when all of the members of Resorts, including Acquisition Co., the subsidiary of the Company through which the Company held its interest in Resorts, exchanged their interests in Resorts for identical interests in Eldorado. Eldorado, which was formed to be a holding company for Resorts, conducts no operations of its own and, other than its ownership of Resorts, has no assets or liabilities (see note 1 of the notes to the Company’s unaudited condensed consolidated financial statements included in this report).

From the date the investments conveyed by the Company for its 17.0359% interest in a Resorts were first acquired by Newport Global in August 2006 until the Company’s acquisition of the 17.0359% interest in Resorts, the unaudited condensed consolidated financial statements presented reflect the activity of the Company’s investments associated with Eldorado Shreveport, which consisted principally of bonds and preferred shares (which we refer to as the “Eldorado Shreveport Investments”). The related statements of operations reflect the interest earned by Newport Global associated with the Eldorado Shreveport Investments from August 2006 and any other direct expenses associated with the acquisition of the 17.0359% interest in Resorts.

The Company has had no revenue generating business since inception and its current business plan consists primarily of its 17.0359% equity interest in Eldorado. Its only operations have consisted of interest income earned on the Eldorado Shreveport Investments and, since December 14, 2007, the pro-rata net income (loss) allocation (as the case may be) related to the Resorts/Eldorado investment and nominal administrative expenses.

Eldorado, through Resorts, owns and operates the Eldorado Hotel & Casino (the “Eldorado-Reno”), a premier hotel/casino and entertainment facility in Reno, Nevada. Resorts, through two wholly owned subsidiaries, indirectly owns and, pursuant to a management agreement, operates the Eldorado Casino Shreveport, an all suite art deco-style hotel and a tri-level riverboat dockside casino complex situated on the Red River in Shreveport, Louisiana (the “Eldorado-Shreveport”). Resorts’ 96% owned subsidiary, Eldorado Limited Liability Company, a Nevada limited liability company (“ELLC”), owns a 50% interest in a general partnership (the “Silver Legacy Joint Venture”) which owns the Silver Legacy Resort Casino (the “Silver Legacy”), a major, themed hotel/casino located adjacent to Eldorado-Reno. In addition, Resorts owns a 21.25% interest in Tamarack, a small casino in south Reno.

Operational highlights for Eldorado for the three months ended September 30, 2009 included net revenues of $68.9 million and operating expenses of $64.3 million. Interest expense for the quarter was approximately $5.3 million. The net result for the quarter was a net loss of $(0.8) million. When compared to the same period last year, the results represent a net decrease of approximately $5.2 million as Eldorado was unable to offset significantly lower revenues with lower costs. For the nine months ended September 30, 2009, net revenues were $207.7 million and operating expenses were $189.4 million. Interest expense over this same period was approximately $16.0 million, resulting in net income of approximately $2.8 million for the year to date period ended September 30, 2009. The nine month performance through September 30, 2009 represents an increase in year over year net income of approximately $0.9 million as cost containment initiatives implemented during February 2009 helped to offset revenue declines.

Three months ended September 30, 2009 versus three months ended September 30, 2008

The three months ended September 30, 2009 largely reflects the Company’s share of the net loss of Eldorado for the quarter in the amount of $(0.2) million compared to net income of $0.8 million for the same quarter last year. The decrease in net income was a function of the combination of the net loss at Eldorado and higher expenses incurred by the Company. The decline in the net income at Eldorado was largely attributable to the decrease in revenues which more than offset cost reduction initiatives realized in the third quarter of 2009 compared to the same period in 2008. Specifically, revenues declined at Eldorado primarily as a result of lower revenues from casino related activities. Resorts’ management believes the decline in revenue was attributable to factors impacting Reno’s gaming and tourism market as a whole, including the weak national economy and troubled housing market, continued increase in competition generated by growth in Native American gaming, and declines in citywide convention room nights. Expenses at Eldorado declined as a result of decreased business levels and due to several cost reductions implemented during February 2009.

Expenses during the quarter increased approximately $0.2 million when compared to last year as prior period expenses were impacted by a refund of previously expensed gaming application deposits and the reversal in the Texas Franchise Tax accrual for 2006 and 2007, both of which occurred during the third quarter of 2008. No such offsets to expenses occurred during the third quarter of 2009.

Nine months ended September 30, 2009 versus nine months ended September 30, 2008

For the nine months ended September 30, 2009, the Company’s share of the net income on Eldorado was approximately $0.4 million compared to net income of $0.3 million for the same period last year. The increase in the net income was attributable to improved earnings at Eldorado. Improvement in the net income at Eldorado was largely attributable to the successful cost reduction initiatives realized through the first nine months of 2009 and improvement in the income of unconsolidated affiliates when compared to the same period in 2008. The improvement in income of unconsolidated affiliates derives largely from the discounted debt repurchases and subsequent gain realized by Silver Legacy during the first quarter of 2009. The aforementioned cost reductions at Eldorado were implemented during the first quarter of 2009 and also contributed to the higher net income for Eldorado during the first nine months of 2009 compared to the same prior year period.

Expenses during the first nine months of 2009 increased approximately $0.1 million when compared to the same prior year period as expenses were impacted by a refund of previously expensed gaming application deposits and the reversal in the Texas Franchise Tax accrual for 2006 and 2007, both of which occurred during the third quarter of 2008. No such offsets to expenses occurred during the third quarter of 2009.

 

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Liquidity and Capital Resources

During the nine month period ended September 30, 2008 the Company incurred approximately $0.1 million of costs associated with its investment in Eldorado. The primary component was related to accounting and legal expenses associated with being a public filer.

In contrast, the Company incurred approximately $0.2 million of costs associated with its investment in Eldorado during the nine month period ended September 30, 2009. Expenses incurred related primarily to legal and accounting fees for preparation of regulatory filings. For the remainder of 2009 the Company expects to incur additional costs of approximately $0.1 million. These costs will be financed by Member contributions.

Critical Accounting Estimates and Policies

A description of our critical accounting policies can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008. There have been no material changes to those policies during the nine months ended September 30, 2009.

 

Item 3. Quantative and Qualitative Disclosures About Market Risk.

Not Applicable.

 

Item 4. Controls and Procedures.

An evaluation was performed by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2009, our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II

OTHER INFORMATION

 

Item 6. Exhibits.

The following exhibits are filed or furnished with this report:

 

31.1    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Principal Executive Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification of Principal Financial Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  NGA HOLDCO, LLC
Date: November 16, 2009   By:  

  /s/ Thomas R. Reeg

      Thomas R. Reeg
      Operating Manager
      (Principal Executive Officer)
Date: November 16, 2009   By:  

  /s/ Roger A. May

      Roger A. May
      Manager
      (Principal Financial Officer)

 

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EXHIBIT INDEX

 

Exhibit No.

  

Description

31.1    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Principal Executive Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification of Principal Financial Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002.

 

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