Mohegan announces credit agreement amendment and debt conversion

(PRESS RELEASE) -- On 8 August 2023, MGE Niagara Entertainment Inc., an indirect subsidiary of the Mohegan Tribal Gaming Authority, entered into a Second Amended and Restated Credit Agreement (the “Second ARCA”) with, among others, Bank of Montreal, as administrative agent, and the lenders party thereto, providing for senior secured credit facilities in the aggregate principal amount of 265.0 million Canadian dollars (the “Credit Facilities”).

The Credit Facilities are comprised of a revolving credit facility in the amount of 85.0 million Canadian dollars (the “Revolving Facility”), a term loan facility in the amount of 80.0 million Canadian dollars (the “Term Facility”), and a return of capital loan facility in the amount of 100.0 million Canadian dollars (the “ROC Facility”).

The proceeds from the Term Facility were used to refinance all of the term loans previously outstanding under MGE Niagara’s Amended and Restated Credit Agreement, dated as of 14 July 2021, as amended by that certain Amending Agreement, dated as of 20 September 2022 (the “Previous Credit Agreement”). The proceeds from the ROC Facility were used to make return of capital payments to the shareholders of MGE Niagara as described further below. The Revolving Facility may be used by MGE Niagara for general corporate purposes, including working capital, capital expenditures, and the issuance of letters of credit.

The Credit Facilities mature on August 8, 2028. The Term Facility will amortize in equal quarterly installments in an amount equal to 1.25 million Canadian dollars, and the ROC Facility will amortize in equal quarterly installments in an amount equal to 1.56 million Canadian dollars, in each case beginning on 29 September 2023. Borrowings under the Credit Facilities accrue interest at a base rate plus a leverage-based spread. MGE Niagara is also required to pay a leverage-based undrawn fee under the Revolving Facility.

The lenders agreed to make certain other amendments to the terms of the Previous Credit Agreement, including to modify the total leverage ratio covenant contained therein to be set at not greater than 3.30x for the duration of the Credit Facilities, to replace the interest rate based on the London Interbank Offered Rate with an interest rate based on a secured overnight financing rate, and to provide for the transition from an interest rate based on the Canadian
Dollar Offered Rate (“CDOR”) to an interest rate based on the Canadian Overnight Repo Rate Average upon the cessation of CDOR.

In 2019, MGE Niagara issued a convertible debenture (the “Niagara Convertible Debenture”) to a third-party investor (the “Convertible Debenture Holder”) in an aggregate principal amount of 40.0 million Canadian dollars.

Commencing in June 2023, the Niagara Convertible Debenture was convertible at the option of the Convertible Debenture Holder into Class B Special shares representing 40% of the capital of MGE Niagara, and the Convertible Debenture Holder exercised this conversion option in connection with the closing of the Second ARCA. The Class B Special shares are similar in nature to the Common shares representing 60% of the capital of MGE Niagara that remain owned by the Company’s indirect wholly-owned subsidiary.

As a result of this conversion, and in connection with the use of proceeds from the ROC Facility, the Company, through its indirect wholly-owned subsidiary, received 60.0 million Canadian dollars, and the Convertible Debenture Holder received 40.0 million Canadian dollars. The Company intends to use its portion of these funds for general corporate purposes, including working capital, capital expenditures, and investments, or to pay down debt borrowed to accomplish the foregoing.