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LAW OFFICES
Glaser, Weil,
Fink, Jacobs, Howard & Shapiro, llp
10250
Constellation Boulevard
Nineteenth
Floor
Los Angeles,
California 90067
(310) 553-3000
Fax (310)
556-2920
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Direct Dial Number
(310) 282-6247
Email:
jmccloud@glaserweil.com
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April 12, 2010
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Ms. Jennifer
Gowetski
Division
of Corporation Finance
Securities
and Exchange Commission
100
F Street, N.E.
Mail
Stop 3010
Washington,
D.C. 20549
Re: Tropicana Las Vegas Hotel and
Casino, Inc.
Registration Statement on Form 10
File No. 000-53894
Dear
Ms. Gowetski:
On
behalf of Tropicana Las Vegas Hotel and Casino, Inc. (the “Company”),
we hereby submit for filing by direct electronic transmission Pre-Effective
Amendment No. 1 (“Amendment No. 1”) to the above referenced
Registration Statement (the “Registration Statement”). We are also sending via courier five marked
(without exhibits) and five clean (with exhibits) paper copies of Amendment No. 1
for the convenience of the staff (the “Staff”) of the Securities and
Exchange Commission.
In
addition, we are providing, on behalf of the Company, the following responses
to the comment letter dated March 16, 2010 from the Staff regarding the
Registration Statement. To assist your
review, we have included the text of the Staff’s comments below in italicized
type. Please note that all references to
page numbers in our responses are references to the page numbers in
Amendment No. 1.
General
1. Please
note that the Form 10 goes effective by lapse of time 60 days after the
date filed pursuant to Section 12(g)(1) of the Securities Exchange
Act of 1934. Please be aware that you
will be subject to the reporting requirements Under Section 13(a) of
the Exchange Act at such time, and that we will continue to review your filing
on Form 10 until all of our comments have been addressed. If the review process has not been completed
before that date you should consider withdrawing the registration statement to
prevent it from becoming effective and refiling it at such time as you are able
to respond to any remaining issues or comments.
The Company acknowledges the Staff’s comment.
2. Please
tell us the purpose of the registration of these securities.
The
Company is registering these securities in order for the Company to qualify as a
“publicly traded corporation” (a “PTC”) for purposes of the Nevada
Gaming Control Act (the “NGCA”).
The Company’s subsidiary, Tropicana Las Vegas, Inc., has applied
for a nonrestricted license to operate a casino. If the Company did not register these
securities and become a PTC, the NGCA would require that all of the Company’s
stockholders be licensed by the Nevada Gaming Commission (the “Gaming
Commission”) in order for Tropicana Las Vegas, Inc., to obtain a
gaming license. As a PTC, only the
holders of 10% or more of the Company’s voting capital stock must be licensed
by the Gaming Commission. The Company
has in excess of 50 stockholders, many of whom have relatively small holdings
in the Company and who have not been licensed by the Gaming Commission. The Company believes that it is not practical
for these stockholders to undertake the time and expense of being licensed by
Gaming Commission. By becoming a PTC
through the registration of these securities, the Company is enabling these
stockholders to continue to hold the Company’s securities without each of them
having to be licensed by the Gaming Commission while simultaneously enabling
the Company to own and operate its casino gaming facilities through Tropicana
Las Vegas, Inc.
The
above is explained on page 11 under “Item 1. Business — Nevada Gaming Regulations and
Licensing — Company Registration Requirements,” page 12 under “Item
1. Business — Nevada Gaming Regulations
and Licensing — Requirements for Voting Security Holders” and page 21
under Item 1A. Risk Factors — Unless we
are considered a ‘publicly traded corporation’ under the Nevada Gaming Control
Act, each of our stockholders must be found suitable by the Nevada Gaming
Authorities or we may be required to sever all relationships with such
stockholder.”
2
3. In
light of your disclosure regarding ongoing litigation concerning the usage of
the name, “Tropicana,” please revise your disclosure to fully describe the
material intellectual property that you acquired in connection with the
reorganization and that you will acquire from Armenco pursuant to the Lease
Agreement once you have obtained the requisite permits. In addition, please describe how your
business will be impacted if you are not able to use the “Tropicana” name.
The Company respectfully advises the Staff that there was no material
intellectual property, other than the “Tropicana” name, that it acquired in
connection with the reorganization or that it will acquire from Armenco
pursuant to the Lease Agreement once it has obtained the required permits. Due to the uncertainty associated with
litigation regarding the “Tropicana” name at the time of its acquisition, the
Company attributed no value to the name in its financial statements at the time
of acquisition.
With respect to the impact on the Company’s business if the Company is
unable to use the “Tropicana” name, the Company disclosed in the risk factor on
page 24 that it would be required to license the name or re-name or
rebrand its hotel and casino. The
Company respectfully advises the Staff that it is unable to predict the
specific financial or other impact to its business of a re-naming or rebranding
of its hotel and casino, other than to say that there would be costs to revise
marketing materials, websites, stationery and the like, and to make
modifications to the physical property such as removing signage. The Company has not prepared an estimate of
such costs. It is unclear to the Company
at this time whether a rebranding would have an effect on revenues.
Cautionary Statement for Purposes of the “Safe Harbor” Provisions....page 1
4. Since
you are not yet subject to the reporting requirements of 13(a) or 15(d) under
the Securities Exchange Act of 1934, you are ineligible to rely on the safe
harbor for forward-looking statements found in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Please remove these references on page 1. In addition, please revise your introductory
paragraph on page 34.
The Company has made the requested revisions on pages 1 and 33.
Item 1. Business
5. We note
that Onex Armenco Gaming Entities own 70.6% of your outstanding stock. Please revise your chart on page 3 to
disclose who owns the remaining 30% of your outstanding stock.
The Company has made the requested revisions on page 3.
3
6. We note
that, on June 22, 2009, you entered into a lease agreement with
Armenco. Please revise your disclosure
to clarify, if true, that the Onex Armenco Gaming Entities included in the
chart on page 3 are the same Armenco that is a party to the lease
agreement. In addition, please clarify,
if true, that the natural persons who control Armenco also control Trilliant
Gaming Nevada Inc. To that end, please
describe how your corporate structure will change once you are able to own and
operate your gaming facility directly and clarify if there will be any changes
in the fees you pay to manage your gaming facility.
The
Company advises the Staff that the Onex Armenco Gaming Entities included in the
chart on page 3 are not the same Armenco entity that is a party to the
lease agreement (“Armenco”).
The
Company also advises the Staff that the natural persons that control Armenco
are not the same natural persons who control Trilliant Gaming Nevada Inc. (“Trilliant
Gaming”). Armenco is controlled by Mr. Alex
Yemenidjian, the Company’s Chairman of the Board, Chief Executive Officer and
President, as explained in “Special Note Regarding Forward-Looking Statements”
on page 2 and in “Item 1. Business
— Background — Proceedings Under Chapter 11 of the Bankruptcy Code” on page 5. Trilliant Gaming is controlled by the
combination of Mr. Alex Yemenidjian, Mr. Timothy Duncanson, one of
the Company’s directors, and Mr. Gerald Schwartz, the chairman and
controlling stockholder of Onex Corporation.
Each of Messrs. Yemenidjian, Duncanson and Schwartz owns one-third
of the outstanding voting securities of Trilliant Gaming. This is described in “Item 1. Business — Corporate Structure” on page 3. While Mr. Yemenidjian has interests in
both Armenco and Trilliant Gaming, he does not have a controlling interest in
Trilliant Gaming due to the interests of Messrs. Duncanson and Schwartz in
Trilliant Gaming. As such, Armenco and
Trilliant Gaming are not under common control.
The Company further advises the Staff that it does not expect its
corporate structure to change once it is able to own and operate its gaming
facility directly. As the management
agreement with Trilliant Gaming is still being negotiated between the parties,
the Company is unable to say at this time what, if any, changes there will be
in the fees it pays for the management of its gaming facility.
4
Background, page 4
7. Please
revise your disclosure in this section to discuss with greater specificity all
material terms of the Bankruptcy Plan.
For instance, revise your second inflicted item to specify how many
shares of common stock were issued as partial satisfaction of the senior debt
facility. Please also revise to
delineate your other ongoing obligations, if any, to the LandCo lenders. Please also include the Bankruptcy Plan as an
exhibit to the registration statement.
The Company has made the requested revisions on page 4. The Company advises the Staff that all of its
ongoing obligations, and potential obligations, to the LandCo lenders are
described in the last bullet point and the paragraph following the last bullet
point on page 5. The Company
further advises the Staff that the First Amended Joint Plan of Reorganization
of Tropicana Las Vegas Holdings, LLC and Certain of its Debtor Affiliates under
Chapter 11 of the Bankruptcy Code (the “Bankrutpcy Plan”) was filed as Exhibit 2.1
to the Registration Statement.
8. We note
that your company was formed to own and operate the Tropicana Las Vegas, free
and clear of substantially all liens and claims against the LandCo
Entities. Please revise to clarify what
you mean by clear of “substantially” all liens and claims. To the extent you have existing or continuing
obligations, please describe.
The Company has revised the disclosure on pages 4 and 5 to clarify
this point.
9. We note
the warrant you issued to Tropicana Entertainment. Please revise to briefly discuss the business
purpose of this warrant.
The Company has made the requested revision on page 4.
The Tropicana Las Vegas Hotel and Casino
Entertainment, page 6
10. Please
expand your disclosure under this subheading to discuss in greater detail the
nature of your entertainment contracts.
For example, in this section or elsewhere as appropriate, please
describe whether you generate any revenue from such contracts and describe any
obligations associated with such contracts.
The Company has made the requested revision on pages 6 and 7.
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Operations
General, page 7
11. We note
your disclosure in this section that only a “small fraction” of your revenues
are credit-based. Please revise to
quantify what portion of casino play and group-related hotel activity is
derived from credit sources. Please also
discuss what other hotel amenities may be managed by third parties and explain
whether you have entered into any preliminary discussions for such services.
Based on the Staff’s comment, the Company has revised the disclosure on
pages 7 and 8 to quantify the amount of casino play and group-related
hotel activity that is derived from credit sources. In addition, the Company has added disclosure
on page 8 discussing other potential hotel amenities that may be managed
by third parties and any preliminary discussions for such services if
applicable.
The Slot Machine Industry in General, page 9
12. Please
quantify what percentage of your gaming revenues is comprised of slot machine
revenues. Please also supplement your
disclosure under the Business Strategy subheading to discuss you relationships
with the various slot machine manufacturers in greater detail.
We
respectfully advise the Staff that approximately 70% of the Company’s gaming
revenue is derived from slot machine revenue.
The Company has revised its disclosure on page 9 to include this
information and greater detail on its relationships with the various slot
machine manufacturers.
Business Strategy
13. Gaming
Mix Targeted to Customers (p. 9). Please revise your disclosure under this
subheading to fully describe the capital-improvements you intend to
undertake. For instance, your disclosure
that you plan both “refurbishment of the casino floor” and “expansion and
renovation of the showroom” provides little understanding to investors as to
how you are planning to carry out your improvement plans.
The Company has revised the disclosure on page 10 to more fully
describe the capital improvements it intends to undertake.
6
Nevada Gaming Regulation
and Licensing
General
14. Where
possible, please refer to specific existing regulations that may have a
significant impact on your business.
The Company respectfully advises the Staff that all of the gaming
regulations and statutes described in the Registration Statement are applicable
to the operation of its casino and it would be inappropriate to attempt to give
greater weight to any of them. A
violation of any one of them could result in a revocation of licenses by the
gaming regulators, and the Company believes that the gaming regulators view all
of their regulations as important regulations.
As such, the Company believes that its current disclosure in this regard
is appropriate and that it would not be appropriate to call out or highlight
specific regulations as being more significant than others.
The Company further respectfully advises the Staff that it believes
that its description in the Registration Statement of the gaming regulations
and statutes applicable to it and its subsidiaries, directors, officers,
employees and stockholders is comparable in scope and detail to the
descriptions provided by other large gaming companies that are reporting
persons under the Securities and Exchange Act of 1934, as amended, including,
for instance, MGM Mirage, Harrah’s
Entertainment Inc., and Wynn Resorts Limited.
Item 1A. Risk Factors
General
15. Please
revise your introductory language in this section to clarify that you have
disclosed all risks that you believe are material at this time.
The Company has made the requested revision on page 16.
16. Some of
your risk factor captions merely state facts and do not adequately describe the
risk in succinct terms. For example, the
second risk factor on page 25 beginning “The physical condition of, and
improvements to, our property...” does not adequately explain the magnitude of
the expenses you could incur due to potential environmental conditions. Please review your risk factor captions to
ensure that they clearly and concisely describe the relevant risks.
The Company has revised the risk factors section as requested.
7
We are entirely dependent
on one property for all of our cash flow....page 19
17. Refer
to the bulleted list under this risk factor subheading. To the extent these are material risks to
your business, please break out each one into a separate risk factor, each with
its own subheading, and specifically discuss the risk to your business posed by
each factor. If you have already
provided separate risk factors for these items, please remove them from the
bullet point list.
The Company has revised the risk factor to delete the bulleted list on page 19
as it believes these risks are adequately addressed in the other risk factors.
Our results of operations and financial condition could be materially
and adversely affected....page 27
18. You
should present as risk factors only those factors that represent a material
risk to investors in your business. This
risk factor could apply to any issuer or to any other offering. Please revise to cite a particular risk or
remove the risk factor.
The Company has revised the risk factor on page 27 to make it more
specific to the Company’s business.
Management’s Discussion
and Analysis of Financial Condition and Results of Operations, page 34
General
19. The
disclosure in the introductory narrative of this section should generally
provide insight into the material opportunities, challenges, and risks, such as
those presented by known material trends and uncertainties, which may impact
the company’s future operating performance.
Some of your disclosure merely restates what is already disclosed
elsewhere in your filing without providing investors with a meaningful overview
of your current operations or a discussion of many of the factors highlighted
as risks throughout your filing. Please
enhance the quality of your MD&A by expanding on the company’s strategy for
addressing opportunities, challenges and risks.
For example, please discuss how you specifically plan to improve upon
the business model employed by Tropicana Entertainment in managing your
operations.
The Company has revised the disclosure on pages 33 and 34 as
requested.
8
20. We note
your disclosure in the Risk Factors section on page 16 and elsewhere in
your filing regarding the impact that adverse economic market conditions have
had on your operating results. Please
tell us what specific impact, if any, current trends and recent events have had
on your financial condition and results of operations.
We respectfully advise the Staff that the current unprecedented and
challenging global and economic conditions have negatively impacted the Company’s
results of operations by affecting consumer discretionary spending and overall
visitor volume. Gaming and other leisure
activities we offer represent discretionary expenditures and participation in
such activities may decline during economic downturns, during which consumers
generally earn less disposable income.
Corporate spending on conventions and business development has also
decreased substantially as companies are cutting costs in response to the
current global and economic conditions.
These and other uncertainties have and could continue to adversely
affect our results of operations. In
addition, in recent months the Las Vegas market has also seen an influx of room
inventory as a result of the opening of City Center by MGM Mirage in December 2009,
which increased room inventory by approximately 4,400 rooms. The increase in room inventory coupled with
the decrease in visitor volume has resulted in a supply-demand imbalance that has
lead to a lower average daily rate which translates into lower room
revenues. These trends are evident in
the table on page 8. The Company
has revised the disclosure on page 33 to include a discussion in MD&A
of the impact that adverse economic market conditions have had on its operating
results.
Results of Operations, page 36
21. We note
your discussion of the impact of Nevada Gaming regulations on your business
prospects in the Risk Factors section and also your extensive discussion of
various regulations impacting your business beginning on page 10 in the
Business section. Please disclose how
these regulations will contribute to your ongoing cost of services, if
material.
The Company respectfully advises the Staff that costs related to Nevada
Gaming Regulations on its business are expensed as incurred and any material
costs would be discussed in results of operations in the respective year.
9
Liquidity and Capital
Resources
Overview, page 40
22. We note
your disclosure in this section regarding a “variety of factors” that impacted
your cash flows. Revise your disclosure
to discuss each of the factors, such as your regulatory issues and ongoing
litigation, separately. For instance,
expand your current disclosure to quantify the consequences to your business if
you fail to satisfy suitability requirements as set forth by the Nevada
Commission, which you discuss on page 12.
Please also discuss and quantify the potential impact that both assumed
liabilities and cost overruns with respect to your capital improvement program
could have on your liquidity on a going-forward basis. We may have further comment based on your
response.
The
Company has revised the disclosure on page 39 to qualitatively describe
the factors that impact its cash flows.
The Company respectfully advises the Staff that it is unable
to provide an accurate estimate of the consequences to its
business of a failure to satisfy the suitability requirements set forth by the
Nevada Commission or the impact that assumed liabilities or cost overruns with
respect to its capital improvement program could have on its liquidity on a
going-forward basis.
Item 4. Security Ownership of
Certain Beneficial Owners and Management, page 44
23. Please
revise to identify the natural persons that have investment control of any
stockholder that beneficially owns more than 5% of any class of your
securities.
The Company has made the requested revisions on pages 45 and 48.
Item 6. Executive Compensation
Compensation Discussion
and Analysis
Elements of Executive
Compensation, page 53
24. We note
your disclosure on page 54 that, following the substantial completion of
the renovation of the Tropicana Las Vegas, Mr. Yemenidjian’s compensation
will be increased to an amount commensurate with other individuals serving as
chief executive officer and chairman of the board of similar casino and gaming
companies, Please revise to quantify this increase and describe what you mean
by the “substantial completion of the renovation.”
The Company respectfully advises the Staff that the amount of such
increase and the point in time such increase is made in relation to the
completion of the renovation are terms that
10
have
not been determined by the Company’s board of directors at this time. These terms will be determined by the Company’s
board, including its compensation and governance committee, when it determines
to address this issue. The employment
agreement between Mr. Yemenidjian and the Company does not specify these
terms and contains only a general provision for there to be an increase as
described in the Registration Statement.
As a result, the Company is unable to quantify the possible increase or
provide additional detail as to what is meant by “substantial completion of the
renovation” beyond what is already disclosed.
Item 7. Certain Relationships and Related
Transactions, and Director Independence, page 55
General
25. We note
your disclosure in the Risk Factors section regarding potential conflicts that
may arise as a result of your relationship with Trilliant Gaming. Please supplement your current disclosure in
this section to concisely describe the potential conflicts of interest that are
present and clearly identify all transactions and relationships that give rise
to such conflicts.
The Company has revised the disclosure on page 55 as requested.
26. We note
the 2% of all revenues and the 5% of the amount of earnings before interest,
taxes and depreciation and amortization that is payable to Armenco and will be
payable to Trilliant. Please revise to
quantify these amounts and clarify, if true, that such payment amounts are in
addition to the compensation payable to any employees and directors who hold
interests in Armenco and Trilliant. In
addition, please more fully describe the services provided by Armenco and those
to be provided by Trilliant.
The Company has revised the disclosure on page 62 as requested to
include the amount payable to Armenco pursuant to the lease agreement for the
six months ended December 31, 2009.
We respectfully advise the Staff that as the fees are based on the
results of operations of the Tropicana Las Vegas, it is not possible to
determine in advance the amounts payable to Armenco or Trilliant LP for future
periods. The Company has also revised
the disclosure on pages 62 and 63 to state that such payments are in
addition to the compensation payable to any employees and directors who hold
interests in Armenco and Trilliant LP.
In addition, based on the Staff’s comment we have included on page 61
additional disclosure more fully describing the services to be provided by
Armenco. The Company respectfully
advises the Staff that it has described the services to be provided by
Trilliant LP to the extent they are currently known. The agreement with Trilliant LP is still
being negotiated and, as such, the terms are subject to change.
11
Trilliant Management
Agreement, page 61
27. Please
file the management agreement you intend to enter into with Trilliant LP for
the management of the hotel property.
Please also clarify if there are any limitations on your expense
reimbursement obligations under the agreement.
The Company respectfully advises the Staff that the terms of the
management agreement have not yet been agreed upon by the Company’s board and
Trilliant LP. The Company has included a
summary of the terms of the proposed agreement to provide an overview of the terms
as they are currently being contemplated to the best knowledge of the
Company. However, given that the parties
are in active negotiations, the Company is unable to provide any additional
detail at this time.
Item 10. Recent Sales of
Unregistered Securities, page 64
28. Please
provide us your analysis as to why you believe you do not need to register the
issuance of the securities described in this section under the Securities Act
of 1933. Please tell us if you believe
there is an applicable exemption from registration.
The
Company advises the Staff that Section 1145 (“Section 1145”)
under Chapter 11 of Title 11 of the United States Code (the “Bankrutpcy Code”)
provides in relevant part that “…section 5 of the Securities Act of 1933 and
any State or local laws requiring registration for offer or sale of a security
or registration or licensing of an issuer of…a security do not apply to — (1) the
offer or sale under a plan of a security of the debtor, of an affiliate
participating in a joint plan with the debtor, or of a successor to the debtor
under the plan — (A) in exchange for a claim against, or an interest in,
or a claim for an administrative expense in the case concerning, the debtor or
such affiliate; or (B) principally in such exchange and partly for cash or
property; (2) the offer of a security through any warrant, option, right
to subscribe, or conversion privilege that was sold in the manner specified in
paragraph (1) of this subsection, or the sale of a security upon the
exercise of such a warrant, option, right, or privilege;…” Under the Bankruptcy Plan, the Company
qualifies as a “successor to the debtor under the plan” as provided in Section 1145.
The
4,427,485 shares of Class A Common issued by the Company and described in
the first paragraph under “Item 9.
Recent Sales of Unregistered Securities” on page 66, were issued
pursuant to the terms of the Bankruptcy Plan to 64 holders in exchange for
claims those 64 holders (the “Claim Holders”) had against the debtor
and, in turn, the Company. As such,
these securities fall under subpart (1)(A) of Section 1145 as being “…in
exchange for a claim against…the debtor or such affiliate….”
The
750,000 shares of Class A Preferred and the 60,000 shares of Class A
Common issued by the Company and described in the second paragraph under “Item
9. Recent Sales of Unregistered
Securities” on page 66, were offered, issued and sold pursuant to the
terms of the
12
Bankruptcy
Plan only to the Claim Holders and in exchange for cash contributed by these
Claim Holders to the Company. As such,
these securities fall under subpart (1)(B) of Section 1145 as being “principally
in such exchange” (as the securities were offered only to the Claim Holders)
and “partly for cash” (as new money was provided by the Claim Holders to the
Company). In addition, this issuance
also qualifies as a private placement under Section 4(2) of the
Securities Act of 1933, as amended (the “1933 Act”). For the information of the Staff, each of the
Claim Holders was an “accredited investor” as defined in Rule 501 of
Regulation D (“Regulation D”), each of the Claim Holders was a
sophisticated investor with such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Company and there was no general solicitation for the
offering. The Company has revised
Amendment No. 1 to note the private placement exemption for this issuance.
The
warrants issued by the Company to Tropicana Entertainment, LLC and described in
the fourth paragraph under “Item 9.
Recent Sales of Unregistered Securities” on page 66, were issued in
a private placement under Section 4(2) of the 1933 Act.
The
545,585 shares of Class A Series 2 Preferred and 40,000 shares of Class A
Common issued by the Company and described in the fifth paragraph under “Item
9. Recent Sales of Unregistered
Securities” on page 66, are being offered, issued and sold in a private
placement under Section 4(2) of the 1933 Act. For the information of the Staff, each of the
purchasers in the offering is an “accredited investor” as defined in Rule 501
of Regulation D, each of the purchasers in the offering is a sophisticated
investor with such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in the
Company and there was no general solicitation for the offering. The Company has revised Amendment No. 1
on pages 66 and 67 to note the private placement exemption for this
issuance.
13
1. Organization
Organization, page F-6
29. You
disclose that Armenco is currently the third-party operator of all gaming
operations at the Tropicana Las Vegas and that you do not own any legal
interest in Armenco. You also note that
you determined in accordance with accounting guidance that you are ultimately
responsible for a majority of the operations’ losses and entitled to a majority
of the operations’ residual returns. As
a result, you have incorporated the gaming operations in your financial
statements. Please further explain how
you made this determination and discuss the accounting guidance that you relied
upon. Also, tell us how/if the
management fee to Armenco is reflected in your financial statements.
The Company respectfully advises the Staff that the accounting guidance
on which it relied to determine that the incorporation of the gaming operations
in its financial statements was the most appropriate presentation is Accounting
Standards Codification (“ASC”) 810-10.
More specifically, the Company relied on ASC 810-10-S99-2 which states, “the
registrant must consider what financial presentation is most meaningful in the
circumstances and should follow in the consolidated financial statements
principles of inclusion or exclusion which will clearly exhibit the financial
position and results of operations of the registrant.” Upon the effective date of the Bankruptcy
Plan, the Company had not obtained the necessary gaming licenses to operate the
gaming assets of the Tropicana Las Vegas.
As a result, the Bankruptcy Plan allowed for the transfer of the gaming
assets to Armenco whose principal, and our chief executive officer, has been issued
a non-restricted gaming license by the Nevada Gaming Commission and State
Gaming Control Board. At such time as
the Company is able to obtain all governmental registrations, findings of
suitability, licenses, qualification, permits and approvals pursuant to the
gaming laws and regulations of the State of Nevada and Clark County liquor and
gaming codes necessary for the Company to own and operate its gaming facility
directly, Armenco will transfer to the Company all of the gaming assets of the
Tropicana Las Vegas for nominal consideration. Thereby, the Company’s current
relationship with Armenco is temporary in nature and the Company determined
that the exclusion of the gaming operations for a temporary period of time
would not be the “most meaningful” presentation of the financial position and
results of operations of the registrant.
As a result, the Company concluded that based on the guidance provided
in ASC 810-10-S99-2, the gaming operations should be included in the Company’s
financial statements. In addition, the
Company respectfully advises the Staff that the only payment to Armenco is
related to the Armenco Lease and is reflected in general and administrative
expenses in the statements of operations as discussed on page F—21.
14
3. Voluntary Reorganization under Chapter 11 of
the Bankruptcy Code
Plan of Reorganization, page F-12
30. You
disclose that you issued a warrant to purchase shares of your class B common
stock to TEH. Please tell us where this
issuance is reflected in your financial statements and disclose your accounting
treatment for the warrant.
The Company respectfully advises the Staff that the Company utilized
various valuation models to determine the fair value of the warrants to
purchase shares of its Class B common stock issued to TEH. The Company determined the fair value
associated with the warrants to be zero as of July 1, 2009 (the date of grant)
taking into account the exercise price of $100.00, which accretes at a rate of
15% per annum compounded annually, the estimated enterprise value of the
Company, expected term of the warrants of 5 years, expected implied volatility
and other assumptions. The Company’s
financial statements now disclose on page F-25 that no value has been ascribed
to the warrants based on the valuation models used.
10. Fresh-Start Reporting, page F-20
31. Please
tell us why the total stockholder’s/member’s equity balance as of July 1,
2009, $230 million, does not equal the stockholder’s/member’s equity balance of
$303.3 million as of July 1, 2009 in the statement of changes in
stockholder’s/member’s equity on page F-4.
Please revise your statement of changes in stockholder’s/member’s equity
as applicable.
The Company respectfully advises the Staff that the stockholders’/member’s
equity balance of $303.3 million as of July 1, 2009 included preferred stock
issued for cash of approximately $73 million which in fact was not issued until
August 21, 2009. Accordingly, the
Company has revised its statement of changes in stockholders’/member’s equity.
32. We note
from your disclosure on page F-19 that you calculated the enterprise value
for fresh start reporting giving equal weight to the discounted cash flow
method of the income approach and the cost approach. Please describe the cost approach you used,
and how you determined it was an acceptable method. Please also tell us the results of your
calculations under the income method and the cost method, respectively.
The Company respectfully advises the Staff that the Company utilized
the depreciated replacement cost method.
This approach is based on the amount that currently would be required to
replace the service capacity of an asset (replacement cost), adjusted for
depreciation to date considering the age of the asset. The Company determined that the depreciable
replacement cost
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method was an acceptable method based on ASC 820-10
which details the cost approach as a valuation technique used for assets and
liabilities to be accounted for at fair value.
Based on the calculation completed under the income method and the cost
method, the enterprise value was determined to be $250 million and $210
million, respectively.
33. Please
expand your disclosure to discuss all sensitive assumptions (i.e. growth rates)
used in the determination of the enterprise value. See ASC 852-10-50-7 for reference.
Based in the Staff’s comment, the Company has revised the disclosure on
page F—16.
34. We note
the fair values that you assigned to the assets and liabilities upon
emergence. Please tell us and disclose
in detail how you determined the fair values for each kind of material asset
and liability.
The Company respectfully advises the Staff that it utilized various
valuation methods, as indicated below:
a. Real property.
i. Land was valued using market
comparable data.
ii. Other real property such as
building, building improvements were valued using a depreciated replacement
cost method.
b. Personal property.
i. Assets with active secondary
markets such as slot machines were valued using market prices of similar
assets.
ii. Other assets, such as
furniture and fixtures were valued using a depreciated replacement cost method.
c. Liabilities (other than
deferred taxes) were valued at the present value of amounts estimated to be
paid.
d. Deferred taxes were valued
in accordance with accounting literature related to accounting for income
taxes.
As requested by the Staff, the Company has revised the disclosure on page F—16
to include disclosure of the methods used to determine fair value estimates of
significant assets and liabilities.
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35. We note
your disclosure on page F-15 regarding the civil action related to the “Tropicana”
name. Please tell us what consideration
you gave to this contingency when determining the enterprise value as well as
the fair value of the property.
The Company respectfully advises the Staff that it assigned no value to
the “Tropicana” name in its valuation assessment and accordingly does not
believe the civil action, regardless of outcome, would impact the determination
of the enterprise value or the fair value of the property. Further, the Company determined that a
negative outcome in the action was remote and highly unlikely. As such, the Company assigned no contingent
liability other than the legal costs associated with the action.
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* * * &#
160; * *
We have attached as Annex
A to this letter a statement from the Company with the acknowledgements
that you requested.
If you should have any
questions or comments regarding this letter or Amendment No. 1, please
contact the undersigned at (310) 282 — 6247 or Harry Demas at (310) 282 — 6295.
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Very truly yours,
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/s/ Janet S. McCloud
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Janet S. McCloud
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of GLASER, WEIL, FINK, JACOBS,
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HOWARD & SHAPIRO, LLP
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cc:
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Jerard Gibson
Securities and Exchange
Commission
Joanne M. Beckett
Tropicana Las Vegas Hotel
and Casino, Inc.
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Annex A
Acknowledgement
The undersigned,
on behalf of Tropicana Las Vegas Hotel and Casino, Inc. (the “Company”),
acknowledges:
· the Company is responsible for the
adequacy and accuracy of the disclosures in its filings with the Securities and
Exchange Commission (the “Commission”);
· comments by the Commission staff (the “Staff”)
or changes to disclosure in response to Staff comments do not foreclose the
Commission from taking any action with respect to the Company’s filings; and
· the Company may not assert Staff comments
as a defense in any proceeding initiated by the Commission or any person under
the federal securities laws of the United States.
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/s/
Jerry L. Fox
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Jerry L. Fox
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Vice President and
Chief Financial Officer, Tropicana Las Vegas Hotel and Casino, Inc.
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