Indianapolis Downs, LLC ("INDDWN" or the "Company") has an off-the-run $75mm TL under its Senior Secured Bank Credit Facility that might be one of the more mispriced pieces of paper out there.  INDDWN is a racino located in Shelbyville, IN, approximately 25 miles southeast of Indianapolis on Interestate 74.  INDDWN operates Indiana Live! Casino and Indiana Downs racetracker.  Indiana Live opened on June 9 , 2008 and offers ~1,980 slot machines (or electronic gaming devices, EGDs), restaruants, and covered parking.  The Company will be restructured.  If you're interested in the distressed gaming equity play lower down in the capital structure, this would involve a larger discussion on Hossier Park and Hollywood Lawrenceburg.  We can discuss in the Q&A.

 

In Oct 2007, the Company raised $425mm in order to pay for the first installment of its gaming license fees, repay existing indebtedness and build Indian Live Casino.  The Indiana Live permanent facility opened mid-March 2009 and 1Q10 and 2Q10 comps reflect the opening and seasoning of the permanent facility.  You can find limited operating data on the Indiana Gaming Commission site.  http://www.in.gov/igc/  According to S&P, the Company experienced 20%+ total revenue growth and 50%+ EBITDA growth in 1Q10.  Given the cap structure and market value of the Senior and Sub Notes, it's safe to say that INDDWN is performing below plan.  Moody's says the Company's permanent facility has experienced slower growth in gaming revenues and higher operating costs with the resulting EBITDA well below operating projections.  According to Debtwire, S&P, and Moody's,  the Company has fully drawn its $25mm revolver and is currently running fixed charges of $70-$72mm, with cash interest at $54mm, capital leases at $13mm, and maintenance capex at $3-$5mm.  In July S&P gave the INDDWN a CCC issuer credit rating, with a negative outlook due to concerns about the Company's liquidity, high leverage, large cash interest, and reliance on a single property for cash flow generation.  S&P doesn't expect meaningful revenue growth at Indiana Live Casino over the next several quarters likely resulting in insufficient EBITDA to meet the $70-$72mm in fixed charges.  Moody's views the Company's capital sturcture as unsustainable and likely to be resturctured as the Company will likely experience difficulty in maintaining compliance with its financial covenants as the leverage covenant starts stepping down in 3Q10.

 

 

INDDWN is private and doesn't publicly release out financials, but the cap structure can be put together from public sources.  Moody's cites total leverage at over 10x.  Given $540mm in total debt, this implies an LTM EBITDA of $54mm.  Debtwire cited $13.3mm EBITDA for 1Q10, implying a run-rate of $53mm, and FY09 EBITDA of $40mm.

 

 

(US$ in millions)
SECURITY INFO:
Issue			Rate	Amount	Maturity	Price	CY	YTM	Ratings
$25mm Revolver			L + < 900	$25.0	20-Apr-12				B2 / B-
$75mm Term Loan			L + 900	75.0	20-Apr-12	101.000	9.2%	8.58%	B2 / B-
$375mm Sr Sec Notes			11.0%	375.0	1-Nov-12	82.000	13.4%	22.31%	Caa3 / CCC
$50mm Sr Sub Sec PIK Notes			15.5%	50.0	1-Nov-13	42.000	36.9%	57.95%	Ca / CC
								LIBOR:	0.29%
CAPITALIZATION TABLE:								Implied LTM EBITDA:	$54.0mm
						Market
					Market	Value of		BV Debt /	MV Debt /
Capital			29-Jul-10	% of Cap	Quote	Debt	Rating	LTM EBITDA	LTM EBITDA
Cash and Equivalents
$25mm Revolver			$25.0	4.6%	NM	25.0	B2 / B-	0.5x	0.5x
$75mm Term Loan			75.0	13.9%	101.000	75.8	B2 / B-	1.4x	1.4x
Total Sr Sec Bank Credit Facility			$100.0	18.5%		$100.8		1.9x	1.9x
$375mm Sr Sec Notes			375.0	69.4%	82.000	307.5	Caa3 / CCC	6.9x	5.7x
$50mm Sr Sub Sec PIK Notes			50.0	9.3%	42.000	21.0	Ca / CC	0.9x	0.4x
Total Senior Debt			$525.0	106.5%		$429.3		9.7x	7.9x
$15mm FF&E Facility			15.0		100.000	15.0		0.3x	0.3x
Total Debt			$540.0	115.7%		$444.3		10.0x	8.2x
Book Equity			-	-
Total Capitalization			$540.0	115.7%

 

 

The Senior Secured Bank Credit Facility is made up of a $75mm TL and $25mm revolver, both maturing 4/20/12. The TL is at L+900.  My understanding is that the credit facility was amended/refinanced/etc in the depths of 2008; that explains the LIBOR spread.  I don't have a spread on the revolver, but the S&P analyst said the revolver is at a lower spread than the TL.  For L+900, you are at 1.9x EBITDA on a single-property, regional gaming asset that is set up to restructure.  The gaming axes I see are currently quoting INDDWN's $75mm TL at 100/101.

 

 

Other considerations:

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