A July 11, 2005 announcement of the $625 million offering lead by Deutsche Bank and Merrill Lynch to raise capital for Ilitch Holdings' subsidiary CCM Merger, Inc. (MotorCity Casino) states the purpose of the offering was:
"... to fund the April 2005 acquisition of 75% interest in MotorCity not controlled by CCM's principal shareholder, Marian Ilitch, co-owner of the Detroit Red Wings, the Detroit Tigers and Little Caesars Pizza.
(see complete announcement below)
Source: Loan Market Week
Publication Date: 07/11/2005
Deutsche Bank and Merrill Lynch are leading a $625 million credit facility for Detroit-based MotorCity Casino. The credit, launched at a bank meeting July 6, consists of a five-year, $75 million revolver and a seven-year, $550 million term loan. Pricing on both tranches is LIBOR plus 2 1/2%. Motor City is owned and operated by CCM Merger.
A portion of the funds will be used to fund part of CCM's acquisition of MotorCity, while other portions will be used for expansion plans at the Detroit gaming facility, according to Moody's Investors Service. Moody's assigned a B 1 rating to both tranches and a B3 to $200 million of senior notes due 2013 that the company is also issuing.
Proceeds from the senior notes will be used to refinance CCM's $200 million existing second-lien term loan. The second lien, along with $550 million of first-lien bank debt, were used to fund the April 2005 acquisition of 75% interest in MotorCity not controlled by CCM's principal shareholder, Marian Ilitch, co-owner of the Detroit Red Wings, the Detroit Tigers and Little Caesars Pizza.
The ratings consider CCM's high leverage and single asset profile, Moody's states in its report. Pro forma debt/EBITDA is about 5.2 times, but is expected to increase to almost 7 times over the next 18 months as a result of a $275 million expansion plan that is expected to be funded with $50 million from cash flow and $225 million of additional senior secured revolver borrowings made available under a greenshoe option contained in the credit agreement. Positive ratings consideration is given to the successful operating history of the casino and the size of Detroit's casino market, the report states.
The MotorCity sale has been months in the making after MGM Mirage agreed to buy Mandalay Resort in June 2004 for $4.8 billion and the two companies were required to sell either its MotorCity stake or the MGM Grand Casino in Detroit to comply with Michigan law on casino ownership. Mandalay subsidiary Circus Circus had owned about 53% of MotorCity.
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The Verifiable Truth: Detroit Tigers owner doubled his net worth gambling on casinos
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The Verifiable Truth: New York Times sports writer recognizes conflicts in Ilitch casino ownership
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