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LONG-TERM DEBT
 12 Months Ended
Dec. 31, 2011
LONG-TERM DEBT  
LONG-TERM DEBT

NOTE 5.  LONG-TERM DEBT

 

Old Credit Facility

 

Until February 20, 2004, the Company had a reducing revolving term loan credit facility with a consortium of banks (the “First Credit Facility”).  On February 20, 2004, the First Credit Facility was refinanced (the “Second Credit Facility”) for $50 million. The maturity date of the Second Credit Facility was to be April 18, 2009; however, on January 20, 2009, the Second Credit Facility was amended and refinanced (the “Old Credit Facility”) for $60 million.  The Old Credit Facility was to be utilized by the Company for working capital needs, general corporate purposes and for ongoing capital expenditure requirements.

 

The maturity date of the Old Credit Facility was January 20, 2012 but was amended and restated (the “New Credit Facility”) on November 15, 2011.  Borrowings were secured by liens on substantially all of the real and personal property of the Atlantis and are guaranteed by Monarch.

 

New Credit Facility

 

The New Credit Facility may be utilized by the Company for financing the expected acquisition of Riviera Black Hawk, Inc., working capital needs, general corporate purposes and for ongoing capital expenditure requirements.  The maximum available borrowings under the New Credit Facility are $30 million with an additional $70 million to be available subject to the closing of the Acquisition (see Note 10.).

 

The maturity date of the New Credit Facility is November 15, 2016.  Borrowings are secured by liens on substantially all of the real and personal property of Monarch, Golden Road, and Monarch Growth.

 

The New Credit Facility contains covenants customary and typical for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of the Company’s assets and covenants restricting our ability to merge, transfer ownership of Monarch, incur additional indebtedness, encumber assets and make certain investments.  The New Credit Facility contains covenants requiring that the Company maintains certain financial ratios and achieves a minimum level of Earnings-Before-Interest-Taxes-Depreciation and Amortization (EBITDA) on a trailing four-quarter basis.  It also contains provisions that restrict cash transfers between Monarch and its affiliates and contains provisions requiring the achievement of certain financial ratios before the Company can repurchase common stock or pay dividends. Management does not consider the covenants to restrict normal functioning of day-to-day operations.

 

As of December 31, 2011, the Company was required to maintain a leverage ratio, defined as consolidated debt divided by EBITDA, of no more than 3.25:1 and a fixed charge coverage ratio (EBITDA divided by fixed charges, as defined) of at least 1.15:1.  As of December 31, 2011, the Company’s leverage ratio and fixed charge coverage ratios were 0.84:1 and 22.0:1, respectively.  As of December 31, 2010, the Company’s leverage ratio and fixed charge coverage ratios were 0.97:1 and 14.0:1, respectively.

 

The maximum principal available under the New Credit Facility is reduced by 1.5% per quarter beginning in the first quarter of 2013.  The Company may permanently reduce the maximum principal available at any time so long as the amount of such reduction is at least $500 thousand and a multiple of $50 thousand.  Maturities of the Company’s borrowings for each of the next three years and thereafter as of December 31, 2011 are as follows (amounts in thousands):

 

Year

 

Maturities

 

2012

 

$

—

 

2013

 

—

 

2014

 

—

 

Thereafter

 

24,680

 

 

 

$

24,680

 

 

The Company may prepay borrowings under the New Credit Facility without penalty (subject to certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period).  Amounts prepaid may be reborrowed so long as the total borrowings outstanding do not exceed the maximum principal available.

 

The Company paid various one-time fees and other loan costs upon the closing of the refinancing of the New Credit Facility that are amortized over the facility’s term using the straight-line method which approximates the effective interest method.

 

At December 31, 2011, the Company had $24.7 million outstanding under the New Credit Facility, none of which was classified as short-term debt.  The interest rate under the New Credit Facility is LIBOR, or a base rate (as defined in the Credit Facility agreement), plus an interest rate margin ranging from 1.25% to 2.50% depending on the Company’s leverage ratio.  The interest rate is adjusted quarterly based on the Company’s leverage ratio calculated using operating results over the previous four quarters and borrowings at the end of the most recent quarter.  At December 31, 2011 pricing was set at the opening pricing point of LIBOR plus 2.250% and will be adjusted in subsequent quarters in accordance with the Company’s leverage ratio.  At December 31, 2011, the one-month LIBOR rate was 0.29%.  The carrying value of the debt outstanding under the New Facility approximates fair value because the interest fluctuates with the lender’s prime rate or other market rates of interest.

 

Short-term debt represents the difference between the amount outstanding at end of the year and the maximum principal allowed under the New Credit Facility at the end of the following year.  At December 31, 2011 and 2010 the Company had no short-term debt.