Santa Fe Gaming wants debt payment deferred

Santa Fe Gaming Corp. said its Pioneer Finance Corp. subsidiary is unable to pay almost $65 million due Dec. 1 and is asking holders of $60 million of first-mortgage notes to exchange them for new notes payable later.

The company also said today it expects to write off at least $43.6 million in assets from the balance sheet of its Pioneer Hotel Inc. unit, which owns the Pioneer Hotel & Gambling Hall in Laughlin.

Santa Fe said the impairment to the carrying value of Pioneer Hotel assets, which will be recorded in results for the Sept. 30 quarter, is due to "recent changes in the regulatory environment concerning gaming operations on Indian reservations in Southern California, which management believes will further affect the long-term competitive environment in the Laughlin market."

Santa Fe said Pioneer Finance is asking note holders to exchange the $60 million of 13.5 percent first-mortgage notes due Dec. 1 for new notes bearing the same interest rate but due 2006.

The new notes would allow Pioneer Finance to pay up to half the interest due through Dec. 1, 2000, in kind by issuing additional new notes with a principal amount equal to the interest owed.

So-called "PIK" notes give flexibility to borrowers who aren't certain cash flow will be stable enough to cover interest payments. In such an event, they can issue new notes instead of cash, hoping cash flow improves enough in the future to pay off the underlying debt.

Pioneer Finance also wants current note holders to consent to forebear until the year 2000 any exercise of "rights and remedies as a result of a failure by PFC to pay principal or interest" due Dec. 1.

If Pioneer Finance files for Chapter 11 bankruptcy reorganization, Santa Fe Gaming said, it wants current note holders "to vote to accept a plan of reorganization that provides for treatment of the 13.5 percent notes in a manner substantially the same as proposed in the exchange."

Both the exchange offer and consent solicitation expire Nov. 20, Santa Fe said. The exchange offer requires all outstanding 13.5 percent notes to be tendered and not withdrawn.

The consent solicitation, which would be effective only if the exchange offer isn't consummated, requires the consent of holders owning at least $47 million of the outstanding notes.

As of last June 30, Santa Fe Gaming had about $146 million of long-term debt, including $65.7 million due by June 1999. The latter amount includes principal on $60 million of 13.5 percent first-mortgage notes and a $4.8 million balloon payment Sierra Construction Corp., both due Dec. 1, 1998.

The company reported cash and short-term investments of $19.6 million as of June 30.

Santa Fe Gaming, which has about 6.2 million shares outstanding, last traded at 81.25 cents, giving it a market capitalization of about $5 million.

Company officials couldn't be reached for comment this morning. Santa Fe also owns the Santa Fe hotel-casino in Las Vegas and plans another hotel-casino in Henderson, but has not announced how the Henderson project will be financed.

archive