Item 1.01. Entry into a Material Definitive Agreement.
Issuance of Senior Subordinated Notes
On June 4, 2014, Scientific Games International, Inc. ("SGI"), a wholly owned
subsidiary of Scientific Games Corporation (the "Company"), issued $350 million
in aggregate principal amount of its 6.625% Senior Subordinated Notes due 2021
(the "Notes") at an issue price of 99.321% of the principal amount thereof in a
private offering to qualified institutional buyers in accordance with Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act"), and to
persons outside the United States under Regulation S under the Securities Act.
The Notes were issued pursuant to an indenture dated as of June 4, 2014 (the
"Indenture") among SGI, as issuer, the Company, as a guarantor, the subsidiary
guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee.
The Notes bear interest at the rate of 6.625% per annum, which accrues from
June 4, 2014 and is payable semiannually in arrears on May 15 and November 15 of
each year, commencing on November 15, 2014. The Notes mature on May 15, 2021,
unless earlier redeemed or repurchased, and are subject to the terms and
conditions set forth in the Indenture.
SGI may redeem some or all of the Notes at any time prior to May 15, 2017 at a
redemption price equal to 100% of the principal amount of the Notes plus accrued
and unpaid interest, if any, to the date of redemption plus a "make whole"
premium. SGI may redeem some or all of the Notes at any time on or after May 15,
2017 at the prices specified in the Indenture. In addition, at any time on or
prior to May 15, 2017, SGI may redeem up to 35% of the initially outstanding
aggregate principal amount of the Notes at a redemption price of 106.625% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of redemption, with the net cash proceeds from one or more equity offerings of
the Company. Additionally, if a holder of Notes is required to be licensed,
qualified or found suitable under any applicable gaming laws or regulations and
that holder does not become so licensed or qualified or is not found to be
suitable, then SGI will have the right to, subject to certain notice provisions
set forth in the Indenture, (1) require that holder to dispose of all or a
portion of those Notes or (2) redeem the Notes of that holder at a redemption
price calculated as set forth in the Indenture. If the Company or SGI
experiences specific kinds of changes in control (together, in certain
circumstances, with a decrease in the rating of the Notes, as specified in the
Indenture) or the Company or any of its restricted subsidiaries sells certain of
its assets, then SGI must offer to repurchase the Notes on the terms set forth
in the Indenture.
The Notes will be subordinated to all of the SGI's existing and future senior
debt, will rank equally with all of its existing and future senior subordinated
debt and will rank senior to all of its future debt that is expressly
subordinated to the Notes. The Notes will be guaranteed on a senior subordinated
unsecured basis by the Company and all of its wholly owned domestic subsidiaries
(other than SGI). The guarantees of the Notes will be subordinated to all of the
guarantors' existing and future senior debt, will rank equally with all of their
existing and future senior subordinated debt and will rank senior to all of
their future debt that is expressly subordinated to the guarantees of the Notes.
The Notes will be structurally subordinated to all of the liabilities of the
Company's non-guarantor subsidiaries.
The Indenture contains certain covenants that, among other things, limit the
Company's ability, and the ability of certain of its subsidiaries, to incur
additional indebtedness, pay dividends or make distributions or certain other
restricted payments, purchase or redeem capital stock, make investments or
extend credit, engage in certain transactions with affiliates, consummate
certain assets sales, effect a consolidation or merger, or sell, transfer, lease
or otherwise dispose of all or substantially all assets, or create certain liens
and other encumbrances on assets.
The Indenture contains events of default customary for agreements of its type
(with customary grace periods, as applicable) and provides that, upon the
occurrence of an event of default arising from certain events of bankruptcy or
insolvency with respect to the Company or SGI, all outstanding Notes will become
due and payable immediately without further action or notice. If any other type
of event of default occurs and is continuing, then the trustee or the holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately.
Registration Rights Agreement
In connection with the issuance of the Notes, SGI, the Company, the subsidiary
guarantors party thereto, and Merrill Lynch, Pierce, Fenner & Smith
, as representative for the initial purchasers listed therein,
entered into a registration rights agreement, dated June 4, 2014
"Registration Rights Agreement"). Under the Registration Rights Agreement, SGI
and the guarantors agreed, for the benefit of the holders of the Notes, that
they will file with the Securities and Exchange Commission
(the "SEC") and use
their commercially reasonable efforts to cause to become effective, a
registration statement relating to an offer to exchange the Notes for an issue
-registered notes (the "Exchange Notes") with terms identical to the Notes
(except that the Exchange Notes will not be subject to restrictions on transfer
or to any increase in annual interest rate as described below).
Under certain circumstances, including if applicable interpretations of the
staff of the SEC
do not permit SGI to effect the exchange offer, SGI and the
guarantors will use their commercially reasonable efforts to cause to become
effective a shelf registration statement relating to resales of the Notes and to
keep that shelf registration statement effective until the first anniversary of
the date such shelf registration statement becomes effective, or such shorter
period that will terminate when all Notes covered by the shelf registration
statement have been sold. The obligation to complete the exchange offer and/or
file a shelf registration statement will terminate on the second anniversary of
the date of the Registration Rights Agreement.
If the exchange offer is not completed (or, if required, the shelf registration
statement is not declared effective) on or before June 4, 2015
(subject to the
right of the Company to extend such date by up to 90 additional days under
customary "blackout" provisions if the Company determines in good faith that it
is in possession of material, non-public information), the annual interest rate
borne by the Notes will be increased by 0.25% per annum for the first 90-day
period immediately following such date and by an additional 0.25% per annum with
respect to each subsequent 90-day period, up to a maximum additional rate of
1.00% per annum thereafter until the exchange offer is completed, the shelf
. . .
Item 2.03 Creation of a Direct Financing Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The disclosure required by this item is included in Item 1.01 and is
incorporated herein by reference.
Item 8.01 Other Events.
On June 4, 2014
, the Company announced that, pursuant to SGI's previously
announced tender offer and consent solicitation, SGI received tenders and
consents from the holders of $140,602,000
, or approximately 40.2%, in aggregate
principal amount of SGI's outstanding 9.250% Senior Subordinated Notes due 2019
(the "2019 Notes") by the expiration of the early tender deadline, June 3, 2014
at 5:00 p.m.New York City
time. SGI purchased the tendered 2019 Notes at a
price of $1,021.25
for each $1,000
principal amount of Notes validly tendered
and not withdrawn. Holders who tendered their 2019 Notes and delivered consents
before the early tender deadline also received an early tender amount of $30.00
for each $1,000
principal amount of 2019 Notes validly tendered and not
On June 4, 2014
, a notice of redemption was distributed to holders of the
outstanding 2019 Notes. The outstanding 2019 Notes are scheduled to be redeemed
on July 4, 2014
and are expected to be settled in cash on July 7, 2014
accordance with the terms of the indenture governing the 2019 Notes. The
redemption price is equal to 104.625% of the principal amount of the 2019 Notes,
plus accrued and unpaid interest to the redemption date. On June 4, 2014
satisfied and discharged the indenture governing the 2019 Notes by depositing
funds with the trustee sufficient to pay the redemption price.
Attached hereto as Exhibit 99.1 and incorporated herein by reference is the
press release announcing, among other things, the receipt of tenders and
consents in connection with the tender offer and the distribution of the notice
Item 9.01. Financial Statements and Exhibits.
4.1 Indenture, dated as of June 4, 2014, among SGI, as issuer, the Company,
as a guarantor, the subsidiary guarantors party thereto and Deutsche
Bank Trust Company Americas, as trustee.
4.2 Registration Rights Agreement, dated as of June 4, 2014, among SGI, the
Company, the other guarantors party thereto, and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as representative for the initial
purchasers listed therein.
99.1 Press Release of the Company, dated June 4, 2014.