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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 March 31, 2011

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.)

21 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   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   x

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 March 31, 2011 and December 31, 2010

     1   
 

Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010

     2   
 

Consolidated Statement of Changes in Members’ Equity for the Three Months Ended March 31, 2011

     3   
 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010

     4   
 

Notes to Condensed Consolidated Financial Statements

     5   

Item 2.

 

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

     10   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     12   

Item 4.

 

Controls and Procedures

     12   

PART II. OTHER INFORMATION

  

Item 6.

 

Exhibits

     12   

SIGNATURES

     13   

 

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Table of Contents

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited).

NGA HOLDCO, LLC

CONSOLIDATED BALANCE SHEETS

March 31, 2011 and December 31, 2010 (unaudited)

 

     March 31, 2011     December 31, 2010  
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 498,325      $ 498,299   
                

Total current assets

     498,325        498,299   

Investment in Eldorado

     28,071,759        28,197,330   

Due from related party

     5,179,772        5,179,772   
                

Total Assets

   $ 33,749,856      $ 33,875,401   
                
LIABILITIES AND MEMBERS’ EQUITY     

Current Liabilities:

    

Accounts payable and accrued liabilities

   $ 125,526      $ 30,064   
                

Total current liabilities

     125,526        30,064   

Due to related party

     2,587,497        2,568,903   
                

Total Liabilities

     2,713,023        2,598,967   
                

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

     (5,289,625     (5,050,024
                

Total Members’ equity

     31,036,833        31,276,434   
                

Total Liabilities & Members’ equity

   $ 33,749,856      $ 33,875,401   
                

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

 

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NGA HOLDCO, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended March 31, 2011 and 2010 (unaudited)

 

     Three Months
Ended
March 31, 2011
    Three Months
Ended
March 31, 2010
 

Loss:

    

Equity loss on Eldorado

   $ (125,571   $ (624,382
                

Total loss

     (125,571     (624,382

Expenses:

    

Legal, licensing, and other expenses

     114,030        132,647   
                

Net loss before income taxes

     (239,601     (757,029

Income tax benefit

     —          —     
                

Net loss

   $ (239,601   $ (757,029
                

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

Three months ended March 31, 2011 (unaudited)

 

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

Balance, December 31, 2010

   $ 3,806       $ 36,322,652       $ (5,050,024   $ 31,276,434   

Net loss

     —           —           (239,601     (239,601
                                  

Balance, March 31, 2011

   $ 3,806       $ 36,322,652       $ (5,289,625   $ 31,036,833   
                                  

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

 

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NGA HOLDCO, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31, 2011 and 2010 (unaudited)

 

     Three Months Ended
March 31,
 
     2011     2010  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net loss

   $ (239,601   $ (757,029

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Equity loss on Eldorado

     125,571        624,382   

Increase in accounts payable and accrued liabilities

     95,462        100,823   

Increase in due to related parties

     18,594        31,868   
                

Net cash provided by operating activities:

   $ 26      $ 44   
                

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

   $ 26      $ 44   
                

Cash at beginning of the period

   $ 498,299      $ 473,093   
                

Cash at end of the period

   $ 498,325      $ 473,137   
                

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

 

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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. The 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. For information concerning the possible acquisition of an interest in another gaming company, see Note 6 below. 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 own 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 Timothy T. Janszen and Ryan L. Langdon, each of whom owns a 42.85% interest, and Roger A. May, who owns a 14.3% interest. Messrs. 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. Janszen, Langdon and May are the Company’s managers and Mr. Janszen 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 Timothy T. Janszen, 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 Eldorado rather than the Company’s investors.

 

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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.

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”). 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 and Principles of Consolidation

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).

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 March 31, 2011 and December 31, 2010, and the results of its operations for the three months ended March 31, 2011 and 2010, and its cash flows for the three months ended March 31, 2011 and 2010. 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 U.S. GAAP 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, 2010 filed with the Securities and Exchange Commission on April 13, 2011.

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.

 

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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 the Company’s 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, the Company considers: 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) the Company’s intent and ability to retain its 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’s financial performance and projections; 6) trends in the general market; and 7) Eldorado’s capital strength and liquidity.

In determining whether the fair value of the investment in Eldorado is less than its carrying value, the Company uses a discounted cash flow model as its principal technique. The Company’s 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. The Company uses the discounted cash flow model as it provides greater detail and opportunity to reflect specific facts, circumstances and economic conditions for its investment. Comparable business transactions are often limited in number, contain dated information, and require significant adjustments due to differences in the size of the business, markets served and other factors. The Company therefore believes that in its circumstance, this makes comparisons to business transactions less reliable than the discounted cash flows model. However, the Company does consider comparable business transactions as a reasonableness test of our principal technique.

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

Fair Value of Financial Instruments

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

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 made 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.

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.

 

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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 investment, which is reported as Equity income (loss) on Eldorado on the consolidated statement of operations, was originally 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. The Company’s allocated income and loss related to Eldorado for the three months ended March 31, 2011 and 2010, respectively, are included as a component of net loss on the consolidated statement of operations. As of March 31, 2011 and December 31, 2010, there was no indication that impairment may have existed in relation to the investment in Eldorado.

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

 

     Total  

Beginning balance at January 1, 2011

   $ 28,197,330   

Equity loss on Eldorado

     (125,571
        

Ending balance at March 31, 2011

   $ 28,071,759   
        

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

 

     March 31,
2011
     December 31,
2010
 

Current assets

   $ 61,238       $ 57,747   

Investment in joint ventures

     41,033         42,994   

Property and equipment, net

     206,957         209,996   

Intangible assets, net

     20,720         20,720   

Other assets, net

     1,957         2,186   
                 

Total assets

   $ 331,905       $ 333,643   
                 

Current liabilities

   $ 25,850       $ 27,685   

Long-term liabilities

     190,730         190,764   

13% Preferred equity interest

     19,289         19,289   

Non-controlling interest

     4,732         4,807   

Partners’ equity

     91,304         91,098   
                 

Total liabilities and partners’ equity

   $ 331,905       $ 333,643   
                 

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

 

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     Three Months Ended
March 31,
 
     2011     2010  

Net operating revenues

   $ 63,841      $ 64,030   

Operating expenses

     (57,700     (60,692

Loss on sale/disposition of long-lived assets

     (12     (151

Equity loss of unconsolidated affiliates

     (1,706     (1,495
                

Operating income

     4,423        1,692   

Other expense, net

     (5,076     (5,266
                

Net loss

     (653     (3,574

Less net income attributable to noncontrolling interest

     75        68   
                

Net loss attributable to the Company

   $ (578   $ (3,506
                

Effective March 1, 1994, ELLC (96% owned by Resorts) and Galleon, Inc. (a Nevada corporation and now an indirect wholly owned subsidiary of MGM Resorts International (formerly 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):

 

     March 31,
2011
     December 31,
2010
 

Current assets

   $ 35,376       $ 38,817   

Property and equipment, net

     225,849         229,119   

Other assets, net

     7,344         7,315   
                 

Total assets

   $ 268,569       $ 275,251   
                 

Current liabilities

   $ 157,723       $ 18,510   

Long-term liabilities

     8,278         150,911   

Partners’ equity

     102,568         105,830   
                 

Total liabilities and partners’ equity

   $ 268,569       $ 275,251   
                 

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

 

     Three Months Ended
March 31,
 
     2011     2010  

Net revenues

   $ 27,575      $ 27,807   

Operating expenses

     (27,723     (27,588
                

Operating income

     (148     219   

Other expense, net

     (3,760     (3,765
                

Net loss

   $ (3,908   $ (3,546
                

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 wholly 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 wholly owned by the managers of Newport.

At March 31, 2011 and December 31, 2010, 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 March 31, 2011 and December 31, 2010, the Company owed $2,587,497 and $2,568,903,

 

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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 March 31, 2011 and December 31, 2010.

6. Proposed Acquisition

As more fully described in Item 1 of our annual report on Form 10-K for the year ended December 31, 2010, on February 23, 2010, Black Gaming, LLC (“Black Gaming”) and its subsidiaries (collectively with Black Gaming, the “Debtors”) filed petitions with the United States Bankruptcy Court for the District of Nevada (the “Bankruptcy Court”) for relief under Title 11, Chapter 11 of the United States Code (the “Bankruptcy Code”). On March 1, 2010, the Debtors filed with the Bankruptcy Court a Joint Plan of Reorganization (the “Plan”). The Plan was approved by the Bankruptcy Court on June 28, 2010. If all of the conditions specified in the Plan are satisfied, then, according to the terms of the Plan, a new entity (“New Black Gaming”) is to acquire all of the assets of Black Gaming, including its direct and indirect ownership interests in the debtor subsidiaries, and New Black Gaming is to issue to a group of investors all of the equity interests in New Black Gaming, including the issuance of 40% of the total equity interests in New Black Gaming to Newport or an affiliate of Newport for $8,222,222 in cash. The Plan also provides for the issuance to a class of Black Gaming’s creditors of warrants to purchase five percent of the fully-diluted equity interests in New Black Gaming that will be exercisable for a period of five years and, if exercised in full, would reduce the percentage interest issuable to Newport or an affiliate of Newport from 40% to 38%. The assets to be acquired by New Black Gaming pursuant to the Plan include the CasaBlanca Hotel & Casino and the Virgin River Hotel & Casino, each in Mesquite, Nevada, two championship golf courses, a full-service spa, a bowling center, a gun club, restaurants, and banquet and conference facilities, all as more fully described in our aforementioned Form 10-K. Though no official date has been set, Black Gaming has a plan in place for the demolition of the casino and some of the 900 rooms at its inoperative Oasis Hotel & Casino. Due to weak business conditions, operations were reduced at the Oasis property beginning in December 2008, and the only current operations involve a portion of the hotel facilities used to accommodate overflow from the other hotels.

If all of the conditions specified in the Plan are satisfied, Newport and Newport Global Credit Fund (Master) LP (“Master” and, collectively with Newport, the “Newport Funds”) intend to acquire the 40% equity interest in New Black Gaming utilizing the Company’s wholly owned subsidiary, AcquisitionCo, to make the acquisition. In that event, the Newport Funds will contribute to InvestCo the full amount of the cash purchase price which in turn will be contributed by InvestCo to the Company, then by the Company to Blocker, and finally by Blocker to AcquisitionCo, which will pay the purchase price and acquire the 40% interest in New Black Gaming. As a result of the aforementioned contribution from the Newport Funds down to AcquisitionCo, Master will become a second member of InvestCo, but the transaction will not result in any other change in the ownership of InvestCo, the Company, Blocker or AcquisitionCo. If the acquisition is consummated, the Company’s financial statements will, from the date of consummation of such acquisition, reflect the Company’s allocable share of the net income (loss) related to the investment in New Black Gaming. The potential acquisition is subject to a number of conditions including, but not limited to, the receipt of all requisite gaming approvals required in order for AcquisitionCo to be able to acquire an equity interest in New Black Gaming. While there can be no assurances that all of the conditions to closing can be satisfied, management anticipates that the transaction will be completed during the latter part of the second quarter of this year; however, this is subject to change depending, upon other things, on the aforementioned receipt of all requisite gaming approvals.

 

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 Company’s activity with respect to such investments, which consisted principally of bonds and preferred shares associated with Eldorado Shreveport (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 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, other than as described under “Proposed Acquisition” below, consists primarily of its 17.0359% equity interest in Eldorado. Its only operations have consisted

 

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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. Through two wholly owned subsidiaries, Resorts 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 March 31, 2011 included net operating revenues of approximately $63.8million and operating expenses of approximately $57.7 million. In addition, Eldorado’s equity in net loss of unconsolidated affiliates was approximately $1.7 million and interest expense was approximately $5.1 million for the period. The net result for the quarter was a net loss of approximately $0.6 million, compared with a net loss of approximately $3.5 million for the corresponding quarter of 2010.

Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010

The Company’s net loss, which largely reflects the Company’s share of the net loss of Eldorado, was $239,601 for the quarter ended March 31, 2011 compared to a net loss of $757,029 for the same period in 2010. Primarily as a result of consistent revenues and a $3 million decrease in operating expenses for Eldorado when compared to the same period in 2010, the Company’s equity loss on Eldorado decreased by $498,811. This decrease in equity loss was also positively affected by an $18,617 decrease to the Company’s legal and licensing expenses during the quarter when compared to the same period in 2010. This decrease was due to fewer expenses being incurred in connection with the proposed acquisition of a 40% interest in New Black Gaming (see Proposed Acquisition, below).

Liquidity and Capital Resources

The Company incurred approximately $0.1 million of costs associated with its investment in Eldorado and the proposed New Black Gaming acquisition during the three month periods ended March 31, 2011 and March 31, 2010. Expenses incurred related to accounting and legal fees for the preparation of regulatory filings, along with travel and legal expenses related to the proposed acquisition of a 40% interest in New Black Gaming (see Proposed Acquisition, below). For the remainder of 2011, the Company expects to incur additional costs of approximately $0.1 million. These costs will be financed by member contributions.

Proposed Acquisition

As more fully described in Item 1 of our annual report on Form 10-K for the year ended December 31, 2010, on February 23, 2010, Black Gaming, LLC (“Black Gaming”) and its subsidiaries (collectively with Black Gaming, the “Debtors”) filed petitions with the United States Bankruptcy Court for the District of Nevada (the “Bankruptcy Court”) for relief under Title 11, Chapter 11 of the United States Code (the “Bankruptcy Code”). On March 1, 2010, the Debtors filed with the Bankruptcy Court a Joint Plan of Reorganization (the “Plan”). The plan was approved by the Bankruptcy Court on June 28, 2010. If all of the conditions specified in the Plan are satisfied, then, according to the terms of the Plan, a new entity (“New Black Gaming”) is to acquire all of the assets of Black Gaming, including its direct and indirect ownership interests in the debtor subsidiaries, and New Black Gaming is to issue to a group of investors all of the equity interests in New Black Gaming, including the issuance of 40% of the total equity interests in New Black Gaming to Newport or an affiliate of Newport for $8,222,222 in cash. The Plan also provides for the issuance to a class of Black Gaming’s creditors of warrants to purchase five percent of the fully-diluted equity interests in New Black Gaming that will be exercisable for a period of five years and, if exercised in full, would reduce the percentage interest issuable to Newport or an affiliate of Newport from 40% to 38%. The assets to be acquired by New Black Gaming pursuant to the Plan include the CasaBlanca Hotel & Casino and the Virgin River Hotel & Casino, each in Mesquite, Nevada, two championship golf courses, a full-service spa, a bowling center, a gun club, restaurants, and banquet and conference facilities, all as more fully described in our aforementioned Form 10-K. Though no official date has been set, Black Gaming has a plan in place for the demolition of the casino and some of the 900 rooms at its inoperative Oasis Hotel & Casino. Due to weak business conditions, operations were reduced at the Oasis property beginning in December 2008, and the only current operations involve a portion of the hotel facilities which are used to accommodate overflow from the other hotels.

If all of the conditions specified in the Plan are satisfied, Newport and Newport Global Credit Fund (Master) LP (“Master” and, collectively with Newport, the “Newport Funds”) intend to acquire the 40% equity interest in New Black Gaming utilizing the Company’s wholly owned subsidiary, AcquisitionCo, to make the acquisition. In that event, the Newport Funds will contribute to InvestCo the full amount of the cash purchase price which in turn will be contributed by InvestCo to the Company, then by the Company to Blocker, and finally by Blocker to AcquisitionCo, which will pay the purchase price and acquire the 40% interest in New Black Gaming. As a result of the aforementioned contribution from the Newport Funds down to AcquisitionCo, Master will become a

 

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second member of InvestCo, but the transaction will not result in any other change in the ownership of InvestCo, the Company, Blocker or AcquisitionCo. If the acquisition is consummated, the Company’s financial statements will, from the date of consummation of such acquisition, reflect the Company’s allocable share of the net income (loss) related to the investment in New Black Gaming. The potential acquisition is subject to a number of conditions including, but not limited to, the receipt of all requisite gaming approvals required in order for AcquisitionCo to be able to acquire an equity interest in New Black Gaming. While there can be no assurances that all of the conditions to closing can be satisfied, management anticipates that the transaction will be completed during the latter part of the second quarter of this year; however, this is subject to change depending, upon other things, on the aforementioned receipt of all requisite gaming approvals.

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, 2010. There have been no material changes to those policies during the three months ended March 31, 2011.

 

Item 3. Quantative and Qualitative Disclosures About Market Risk.

Not Applicable.

 

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that as of the end of the period covered by this report our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective.

Changes in internal control over financial reporting

As required by Rule 13a-15(d) under the Exchange Act, our management, including our principal executive officer and principal financial officer, has evaluated our internal control over financial reporting to determine whether any changes to our internal control over financial reporting occurred during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, no such changes to our internal control over financial reporting occurred during the quarter ended March 31, 2011.

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: May 16, 2011     By:  

/S/    Timothy T. Janszen        

      Timothy T. Janszen
      Operating Manager
      (Principal Executive Officer)
Date: May 16, 2011     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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