Resorts International Inc. filed with the Securities and Exchange Commission to restructure through a prepackaged bankruptcy, the company said yesterday.
The plan is similar to one the company announced last spring, but was amended to accommodate an agreement under which Sun International Hotels Limited would acquire a 60% interest in Resorts' holdings and operations in Paradise Island in the Bahamas, according to Charles Perkins, a Resorts spokesman.
The old plan would have given the bondholders 100% of the Paradise Island Casino. Under the new plan, Sun International would pay bondholders for its 60% stake and bondholders would keep the remaining 40%.
"It eliminates some uncertainty because it places a value on that asset," said Steven L. Patricola, a vice president in Citicorp Securities Inc.'s high-yield group.
Perkins was unable to say when the agreement reached between bondholders and Sun International would be final. Resorts announced that the Sun International acquisition would be a part of the restructuring on Oct. 12.
Once the SEC declares its registration statement effective, Resorts will send ballots to its those noteholders and shareholders so they can vote on the proposed reorganization.
The company's 15% series A and B debt due 1994, which totals about $482 million, were trading slightly softer yesterday, but prices were still in the high 60s, Patricola said. That softness could be attributed in part to a provision that would give bondholders $65 million if the Sun deal closes; market expectations were $75 million.
Asked whether he thought noteholders should vote for the plan, Patricola said, "The alternative to the consenual reorganization is a contentious bankruptcy."
Such a protracted bankruptcy wouldn't be in the bondholders' interest considering that 15% debt matures next April, he said.
The restructuring caps months of negotiations between Resorts and its major noteholders, Fidelity Management and Research Company, and Trust Company of the West, a Resorts release says. The company expects to complete the restructuring by early 1994.
Under the proposed plan, Resorts would exchange its holdings and operations in Paradise Island, new secured debt, and approximately 40% of its equity for the roughly $482 million of debt owed to the series noteholders.
The company will continue to own and operate Merv Griffin's Resorts Casino Hotel in Altantic City. Merv Griffin will continue as Resorts' chairman, the release says.
The bankruptcy will occur at the holding company level only and won't affect the company's operating subsidiaries. The company's outstanding First Mortgage Non-Recourse Pass-Through Notes, also known as the Showboat notes, would also be unaffected, the release says.
Under the plan, series noteholders would receive the following:
* Excess cash on the company's balance sheet as of the restructuring's effective date. The present estimate puts that figure as at least $30 million. The holders would also get any cash proceeds the company receives as a result of expected disbursements from the litigation trust created in connection with the company's 1990 restructuring.
* New 11% senior mortgage notes due 2003 totaling $125 million. A Resorts subsidiary would issue the notes and a lien on the property, and improvements of Merv Griffin's Resorts Casino Hotel would secure them. Interest on the notes would be paid semiannually in cash and would accrue from the restructuring's effective date.
* New 11.375% junior mortgage notes due 2004 totaling $35 million. A Resorts subsidiary would issue the notes and they would also be secured by a lien on the Atlantic City casino. Interest would also be paid semiannually in cash and would accrue from the effective date. Under certain circumstances, the issuer would have the option to pay interest on the notes with additional 11.375% junior mortgage notes due 2004.
* About 40% of Resorts' common stock.
* If the Sun International transaction closes, a 40% interest in Resorts' holdings and operations in Paradise Island. If the Sun deal fails, a 100% interest in those holdings and operations.
* If the Sun international deal closes, $65 million.
For a year following the restructuring, the company would have the ability to draw down on a single occasion, and an eight-year senior bank facility for up to $20 million. The facility would bear interest at 11% annually. Interest would be payable semiannually in cash and would accrue from the date of the drawdown. A lien on the property and improvements of the Atlantic city casino hotel would secure the facility. The lien would be senior to the liens securing the 11% senior mortgage notes due 2003 and the 11.375% junior mortgage notes due 2004.
The reorganization plan contemplates that the company's board of directors would be expanded from six members to nine, and that the 11.375% holders would have the right to name the three additional members. Griffin would continue as the board's chairman.
The plan also provides that as long as the 11.375% notes remain outstanding, control of the company's board of directors would be transferred to the holders if on more than six occasions the company either fails to pay interest on the notes or pays in kind instead of cash. The noteholders right to appoint directors and the designees right to sit as directors, expires upon the notes retirement.
New Issues
Philadelphia Electric Co. issued $225 million of 7 1/4% first and refunding mortgage bonds due 2024. Non-callable for five years, the bonds were priced at 99.025 to yield 7.33%, or 114 basis points over comparable Treasuries. Moody's rates the offering Baa1, while Standard & Poor's rates it BBB-plus. A group led by Lehman Brothers won competitive bidding to underwrite the offering.
Philadelphia Electric issued $250 million of 5.625% first and refunding mortgage bonds due 2001. The non-callable bonds were priced at 98.391 to yield 57 basis points over the Treasuries 7 1/2% notes of 2001. A group led by Citicorp Securities Inc. won competitive bidding to underwrite the offering.
Rykoff-Sexton issued $130 million of 8.875% senior subordinated notes due 2003. The notes were priced at 99.187 to yield 9%. The notes are callable after five years at 104.44 and at par in 2001. Merrill Lynch & Co. managed the offering. Moody's rates the offering Ba2, while Standard & Poor's rates it BB-minus.
Federal Home Loan Mortgage Corp. issued $50 million of 3.95% step-up notes due 1996 at par. The notes are noncallable for a year after which the coupon steps up to 4.53%. Lehman Brothers was the sole manager for the offering.
