FX Real Estate and Entertainment, Las Vegas subsidiaries lack capital to cure loan default

By Caroline Salls

Pittsburgh, Oct. 8 - FX Real Estate and Entertainment Inc. said the subsidiaries that own its Las Vegas properties are not in compliance with debt-to-loan value ratio covenants in the credit agreements governing the $475 million mortgage loan on the properties, but neither the company nor the subsidiaries have enough capital to make a default cure payment, according to an 8-K filed with the Securities and Exchange Commission.

FX said the Las Vegas subsidiaries have until Nov. 14 to regain compliance with these ratios by voluntarily prepaying roughly $26 million of the loan's outstanding principal amount or by obtaining a waiver or modification of the loan's financial covenants.

The company said it intends to seek a waiver or modification of the covenants in question, which would keep the Las Vegas subsidiaries from defaulting on the loan.

Under the loan's financial covenants, the Las Vegas subsidiaries are required to have a ratio of total consolidated debt to the appraised value of the properties of less than 66.5% and a ratio of the total principal amount of the loan then outstanding to the appraised property value of less than 39%, both as of the last day of each fiscal quarter.

According to the 8-K, the Las Vegas subsidiaries were advised by the lender agent that, as of Sept. 30, the appraised value of the properties was $675 million, resulting in debt-to-loan value ratios of 70.4% and 41.5%, respectively.

FX said it does not guarantee the loan, and it has not pledged any assets to secure the loan. The loan is secured by first- and second-lien security interests in substantially all of the assets of Las Vegas subsidiaries, including the Las Vegas properties.

FX Real Estate and Entertainment is based in New York and is focused on the development of real estate and entertainment-based projects and attractions.

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