As
filed with the Securities and Exchange Commission on
June 21, 2007
Registration
No.
333-
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
S-4
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF
1933
AMERICAN
REAL ESTATE PARTNERS, L.P.
(Exact
name of co-registrant as specified in its charter)
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Delaware
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6512
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13-3398766
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(State
or Other Jurisdiction of
Incorporation or
Organization)
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(Primary
Standard Industrial
Classification Code
Number)
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(I.R.S.
Employer
Identification Number)
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______________
AMERICAN
REAL
ESTATE FINANCE CORP.
(Exact
name of co-registrant as specified in its charter)
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Delaware
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6512
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20-1059842
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(State
or Other Jurisdiction of
Incorporation or
Organization)
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(Primary
Standard Industrial
Classification Code
Number)
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(I.R.S.
Employer
Identification Number)
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______________
AMERICAN
REAL
ESTATE HOLDINGS LIMITED PARTNERSHIP
(Exact
name of registrant of guarantee as specified in its
charter)
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Delaware
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6512
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13-3398767
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(State
or Other Jurisdiction of
Incorporation or
Organization)
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(Primary
Standard Industrial
Classification Code
Number)
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(I.R.S.
Employer
Identification Number)
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767
Fifth Avenue, Suite 4700
New York, New York
10153
(212) 702-4300
(Address, Including Zip Code, and Telephone
Number,
Including Area Code, of Registrants’ Principal Executive
Offices)
Keith
A. Meister
Principal Executive Officer and Vice
Chairman of the Board
767 Fifth Avenue, Suite 4700
New York, New York
10153
(Name, Address, Including Zip Code, and Telephone
Number,
Including Area Code, of Agent For Service)
Copies
to:
Julie
M. Allen, Esq.
Proskauer Rose LLP
1585
Broadway
New York, New York 10036
Telephone: (212) 969-3000
Facsimile:
(212) 969-2900
Approximate
date of commencement of the proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If
the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. ¨
If
this form is filed to register additional securities for an offering pursuant
to
Rule 462(b) under the Securities Act of 1933, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under
the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ¨
CALCULATION
OF REGISTRATION FEE
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Title of Each
Class of
Securities to be Registered
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Amount to be
Registered(1)
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Proposed
Maximum
Offering Price
Per Note(1)
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Proposed
Maximum
Aggregate
Offering Price(1)
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Amount of
Registration
Fee(2)
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7
1/8% Senior Notes due 2013
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$500,000,000
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100%
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$500,000,000
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$15,113.43
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Guarantee(3)
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—
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—
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—
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—
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(1)
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule
457
under the Securities Act of 1933, as amended.
(2)
Pursuant
to Rule 457(f)(2) of the Securities Act of 1933, as amended, the registration
fee has been estimated based on the book value, as of March 31, 2007, of
$492,294,000 of the private notes to be received by the registrant in exchange
for the new notes to be issued hereunder in the exchange offer described
herein.
(3)
Pursuant
to Rule 457(n) under the Securities Act, no separate fee is payable with respect
to the guarantee.
The Registrants
hereby amend this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrants shall file a further
amendment that specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933, as amended, or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), determines.
The
information in this Preliminary
Prospectus is not complete and may be changed. We may not exchange these
securities until the Registration Statement filed with the Securities and
Exchange Commission is effective. This Preliminary Prospectus is not an offer
to
exchange these securities and is not soliciting offers to exchange these
securities in any State where the exchange is not permitted.
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SUBJECT
TO COMPLETION, DATED
JUNE 21, 2007
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$500,000,000
AMERICAN
REAL ESTATE PARTNERS, L.P.
AMERICAN
REAL ESTATE FINANCE CORP.
OFFER
TO EXCHANGE OUR 7 1/8% SENIOR NOTES DUE 2013, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY AND ALL OF OUR
OUTSTANDING 7 1/8% SENIOR NOTES DUE 2013
_________________
MATERIAL
TERMS OF THE EXCHANGE OFFER
We are
jointly and severally offering to exchange, upon the terms and subject to the
conditions set forth in this prospectus and the accompanying letter of
transmittal (which together constitute the exchange offer), $500,000,000 in
aggregate principal amount of our 7 1/8% senior exchange notes due 2013, or
the
new notes, for $500,000,000 in aggregate principal amount of our issued and
outstanding 7 1/8% senior notes due 2013, or the private notes, and,
collectively with the new notes, the notes.
·
The
terms of the new notes are
substantially identical to the private notes, except that the transfer
restrictions and registration rights relating to the private notes will not
apply to the new notes and the new notes will not provide for the payment of
liquidated damages under circumstances related to the timing and completion
of
the exchange offer.
·
Expires
5:00 p.m., New York City time, on
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2007, unless extended.
·
Subject
to the satisfaction or waiver of
specified conditions, we will exchange your validly tendered unregistered
private notes that have not been withdrawn prior to the expiration of the
exchange offer for an equal principal amount of new notes which have been
registered under the Securities Act of 1933, as amended, or the Securities
Act.
·
The
exchange offer is not subject to any
condition other than that the exchange offer not violate applicable law or
any
applicable interpretation of the staff of the Securities and Exchange
Commission, or the SEC, and other customary conditions.
·
You
may withdraw your tender of notes at
any time before the exchange offer expires.
·
The
exchange of notes should not be a
taxable exchange for U.S. federal income tax purposes.
·
We
will not receive any proceeds from the
exchange offer.
·
The
new notes will not be traded on any
national securities exchange and, therefore, we do not anticipate that an active
public market in the new notes will develop.
Please
refer to “Risk Factors” beginning on page 7 of this document for certain
important information.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of the notes to be issued in the exchange offer or
passed upon the adequacy or accuracy of this prospectus. Any representation
to
the contrary is a criminal offense.
The date
of
this prospectus
,
2007
i
This
prospectus is part of a registration statement that we have filed with the
SEC.
This prospectus does not contain all of the information included in the
registration statement. The registration statement filed with the SEC includes
exhibits that provide more details about the matters discussed in this
prospectus. You should carefully read this prospectus, the related exhibits
filed with the SEC and any prospectus supplement, together with the additional
information described below under the headings “Where You Can Find More
Information” and “Incorporation by Reference.” This prospectus incorporates
important business and financial information about us that is not included
in or
delivered with this prospectus. We will provide without charge to each person
to
whom a copy of this prospectus is delivered, upon written or oral request of
that person, a copy of any and all of this information. Requests for copies
should be directed to Investor Relations Department, American Real Estate
Partners, L.P., 769 Fifth Avenue, Suite 4700, New York, New York 10153;
(212) 702-4300. Our web site address is http://www.AREP.com. You should request
this information at least five business days in advance of the date on which
you
expect to make your decision with respect to the exchange offer.
In
any
event, in order to obtain timely delivery, you must request this information
prior to
,
2007, which is five business days before the expiration date of the exchange
offer.
You
should rely only on the information contained or incorporated by reference
in
this prospectus and in any accompanying prospectus supplement. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely
on
it. You should assume that the information appearing in this prospectus, any
prospectus supplement and any other document incorporated by reference is
accurate only as of the date on the front cover of those documents. We do not
imply that there has been no change in the information contained in this
prospectus or in our affairs since that date by delivering this
prospectus.
NOTICE
TO UNITED KINGDOM RESIDENTS
THE NOTES
WILL NOT BE OFFERED OR SOLD TO PERSONS IN THE UNITED KINGDOM, EXCEPT TO PERSONS
WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR
DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR
BUSINESSES OR OTHERWISE IN CIRCUMSTANCES WHICH HAVE NOT RESULTED AND WILL NOT
RESULT IN AN OFFER TO THE PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF
THE
PUBLIC OFFERS OF SECURITIES REGULATIONS 1995. THIS OFFERING MEMORANDUM MAY
ONLY
BE ISSUED OR PASSED ON, IN OR INTO THE UNITED KINGDOM TO A PERSON WHO IS OF
A
KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) ORDER 1996 OR IS A PERSON TO WHOM SUCH DOCUMENT
MAY
OTHERWISE LAWFULLY BE ISSUED OR PASSED ON.
NOTICE
TO NEW HAMPSHIRE RESIDENTS
NEITHER
THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS
BEEN
FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT
A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE
OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE
OF
NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND
NOT
MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION
IS
AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE
OF
THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY
OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
ii
This
prospectus and the information incorporated herein by reference contain
“forward-looking statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act; Section 27A of the
Securities Act; and pursuant to the Private Securities Litigation Reform Act.
These forward-looking statements are not historical facts, but rather our
beliefs and expectations based on our current expectations, estimates,
projections, beliefs and assumptions about our company and industry. Words
such
as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,”
“estimates” and similar expressions are intended to identify forward-looking
statements. There statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors, some of which are beyond
our
control, are difficult to predict and could cause actual results to differ
materially from those expressed or forecasted in the forward-looking statements.
These risks include those set forth in the section of this prospectus called
“Risk Factors.”
Those
risks are representative of factors that could affect the outcome of the
forward-looking statements. These and the other factors discussed elsewhere
in
this prospectus and the documents incorporated by reference herein are not
necessarily all of the important factors that cause our results to differ
materially from those expressed in our forward-looking statements. We caution
you not to place undue reliance on these forward-looking statements, which
reflect our view only as of the respective dates of this prospectus and the
documents incorporated herein by reference or other dates that are specified
in
those documents.
iii
This
summary highlights information contained in the documents incorporated herein
by
reference. This summary does not contain all of the information that you should
consider before deciding to make an investment decision. You should read this
entire prospectus carefully, including the “Risk Factors” section in this
prospectus; the financial statements and related notes contained in our Annual
Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31,
2006, filed with the SEC on March 6, 2007 and March 16, 2007,
respectively; our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2007 filed with the SEC on May 10, 2007; and the documents
incorporated herein by reference . As used in this prospectus, “we,” “our,”
“ours,” “us,” “company” and “AREP” mean American Real Estate Partners, L.P. and,
unless the context otherwise indicates, include our consolidated
subsidiaries.
Our
Company
American
Real Estate Partners, L.P., or AREP, is a master limited partnership formed
in
Delaware on February 17, 1987. We are a diversified holding company owning
subsidiaries engaged in the following operating businesses: gaming, real
estate and home fashion. On April 22, 2007, American Entertainment
Properties Corp., or AEP, a wholly owned indirect subsidiary of AREP, entered
into a Membership Interest Purchase Agreement with W2007/ACEP Holdings, LLC,
an
affiliate of Whitehall Street Real Estate Funds, a series of real estate
investment funds affiliated with Goldman, Sachs & Co., or Whitehall Street
Real Estate Funds, to sell all of the issued and outstanding membership
interests of American Casino & Entertainment Properties, LLC, or ACEP, which
comprises our gaming operations. The parties expect to close the transaction
in
approximately December 2007. On February 9, 2007, we entered into an
agreement and plan of merger, pursuant to which we would acquire Lear
Corporation, or Lear, a publicly traded company that provides automotive
interior systems worldwide, for an aggregate consideration of approximately
$5.2 billion, including the assumption by the surviving entity of certain
outstanding indebtedness of Lear and refinancing of Lear’s existing term loan
and credit facility. The consummation of the transaction is subject to
regulatory approvals and shareholder vote.
Our
primary business strategy is to continually evaluate our existing operating
businesses with a view to maximizing value to our unitholders. We may also
seek
to acquire additional businesses that are distressed or in out-of-favor
industries and will consider the divestiture of businesses. In addition, we
invest our available liquidity in debt and equity securities with a view to
enhancing returns as we continue to assess further acquisitions of operating
businesses.
Our
general partner is American Property Investors, Inc., the general partner,
or
API, a Delaware corporation, which is indirectly wholly owned by Carl C. Icahn.
We own our businesses and conduct our investment activities through a subsidiary
limited partnership, American Real Estate Holdings Limited Partnership, or
AREH,
in which we own a 99% limited partnership interest, and its subsidiaries. API
also acts as the general partner for AREH. API has a 1% general partnership
interest in each of us and AREH. As of March 31, 2007, affiliates of
Mr. Icahn beneficially owned 55,655,382 units representing AREP limited
partner interests, or the depositary units, representing approximately 90.0%
of
the outstanding depositary units, and 10,304,013 cumulative pay-in-kind
redeemable preferred units, representing AREP limited partner interests, or
the
preferred units, representing approximately 86.5% of the outstanding preferred
units.
Our
depositary units, representing limited partnership interests, trade on the
New
York Stock Exchange under the symbol “ACP.”
Our
principal executive offices are located at 767 Fifth Avenue, Suite 4700, New
York, New York 10153. Our phone number is (212) 702-4300. Our web site address
is http://www.AREP.com.
American
Real Estate Finance Corp., or AREP Finance, a Delaware corporation, is our
wholly owned subsidiary. AREP Finance was incorporated on April 19, 2004
and was formed solely for the purpose of serving as co-issuer of debt securities
of AREP. AREP Finance does not and will not have any operations or assets and
does not and will not have any revenues. AREP Finance’s principal business
address is 767 Fifth Avenue, Suite 4700, New York, New York 10153 and its
telephone number is (212) 702-4300.
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The
Offering of the Private Notes
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On
January 17, 2007, we issued $500 million in aggregate principal
amount of our private notes in an offering not registered under the
Securities Act. At the time we issued the private notes on
January 17, 2007, we entered into a registration rights agreement in
which we agreed to offer to exchange the private notes for new notes
which
have been registered under the Securities Act. This exchange offer
is
intended to satisfy that obligation. The private notes issued
January 17, 2007 were additional notes issued under an indenture
dated February 7, 2005 as described elsewhere in this prospectus. On
February 1, 2005, we issued and sold $480.0 million of 7 1/8%
senior notes due 2013, or the existing notes.
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The
Exchange Offer
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We
are
offering to exchange the new notes which have been registered under
the
Securities Act for the private notes. As of this date, there is
$500 million aggregate principal amount of private notes
outstanding.
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Required
Representations
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In
order to participate in this exchange offer, you will be required
to make
certain representations to us in a letter of transmittal, including
that:
·
any
new notes will be acquired by you
in the ordinary course of your business;
·
you
have not engaged in, do not
intend to engage in, and do not have an arrangement or understanding
with
any person to participate in a distribution of the new notes;
and
·
you
are not an affiliate of our
company.
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Resale
of New Notes
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We
believe that, subject to limited exceptions, the new notes may be
freely
traded by you without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that:
·
you
are acquiring new notes in the
ordinary course of your business;
·
you
are not participating, do not
intend to participate and have no arrangement or understanding with
any
person to participate in the distribution of the new notes;
and
·
you
are not an affiliate of our
company.
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If
our
belief is inaccurate and you transfer any new note issued to you
in the
exchange offer without delivering a prospectus meeting the requirements
of
the Securities Act or without an exemption from registration of your
new
notes from such requirements, you may incur liability under the Securities
Act. We do not assume, or indemnify you against, such
liability.
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Each
broker-dealer that is issued new notes for its own account in exchange
for
private notes which were acquired by such broker-dealer as a result
of
market-making or other trading activities also must acknowledge that
it
has not entered into any arrangement or understanding with us or
any of
our affiliates to distribute the new notes and will deliver a prospectus
meeting the requirements of the Securities Act in connection with
any
resale of the new notes issued in the exchange offer.
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We
have agreed in the registration rights agreement that a broker-dealer
may
use this prospectus for an offer to resell, resale or other retransfer
of
the new notes issued to it in the exchange offer.
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Expiration
Date
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The
exchange offer will expire at 5:00 p.m., New York City time, on
,
2007, unless extended, in which case the term “expiration date” shall mean
the latest date and time to which we extend the exchange
offer.
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Conditions
to the Exchange Offer
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The
exchange offer is subject to certain customary conditions, which
may be
waived by us. The exchange offer is not conditioned upon any minimum
principal amount of private notes being tendered.
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Procedures
for Tendering Private Notes
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If you wish to
tender
your private notes for exchange, you must transmit to Wilmington
Trust
Company, as exchange agent, at the address set forth in this prospectus
under the heading “The Exchange Offer — Exchange Agent,” and on the front
cover of the letter of transmittal, on or before the expiration date,
a
properly completed and duly executed letter of transmittal, which
accompanies this prospectus, or a facsimile of the letter of transmittal
and either:
·
the
private notes and any other
required documentation, to the exchange agent; or
·
a
computer generated message
transmitted by means of DTC’s Automated Tender Offer Program system and
received by the exchange agent and forming a part of a confirmation
of
book entry transfer in which you acknowledge and agree to be bound
by the
terms of the letter of transmittal.
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If
either of these procedures cannot be satisfied on a timely basis,
then you
should comply with the guaranteed delivery procedures described below.
By
executing the letter of transmittal, each holder of private notes
will
make certain representations to us described under “The Exchange Offer —
Procedures for Tendering.”
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Special
Procedures for Beneficial Owners
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If
you
are a beneficial owner whose private notes are registered in the
name of a
broker, dealer, commercial bank, trust company or other nominee and
you
wish to tender your private notes in the exchange offer, you should
contact such registered holder promptly and instruct such registered
holder to tender on your behalf. If you wish to tender on your own
behalf,
you must, prior to completing and executing the letter of transmittal
and
delivering your private notes, either make appropriate arrangements
to
register ownership of the private notes in your name or obtain a
properly
completed bond power from the registered holder. The transfer of
registered ownership may take considerable time and may not be able
to be
completed prior to the expiration date.
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Guaranteed
Delivery Procedures
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If
you
wish to tender private notes and time will not permit the documents
required by the letter of transmittal to reach the exchange agent
prior to
the expiration date, or the procedure for book-entry transfer cannot
be
completed on a timely basis, you must tender your private notes according
to the guaranteed delivery procedures described under “The Exchange Offer
— Guaranteed Delivery Procedures.”
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Acceptance
of Private Notes and Delivery of New Notes
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Subject
to
the conditions described under “The Exchange Offer — Conditions,” we will
accept for exchange any and all private notes which are validly tendered
in the exchange offer and not withdrawn, prior to 5:00 p.m., New York
City time, on the expiration date.
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Withdrawal
Rights
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You
may withdraw your tender of private notes at any time prior to
5:00 p.m., New York City time, on the expiration date, subject to
compliance with the procedures for withdrawal described in this prospectus
under the heading “The Exchange Offer — Withdrawal of
Tenders.”
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Federal
Income Tax Consequences
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For
a
discussion of the material federal income tax considerations relating
to
the exchange of private notes for the new notes as well as the ownership
of the new notes, see “Certain U.S. Federal Income Tax
Consequences.”
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Exchange
Agent
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The
Wilmington Trust Company is serving as the exchange agent. The address,
telephone number and facsimile number of the exchange agent are set
forth
in this prospectus under the heading “The Exchange Offer — Exchange
Agent.”
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Consequences
of Failure to Exchange Private Notes
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If
you
do not exchange private notes for new notes, you will continue to
be
subject to the restrictions on transfer provided in the private notes
and
in the indenture governing the private notes. In general, the unregistered
private notes may not be offered or sold, unless they are registered
under
the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state
securities laws.
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The terms
of the new notes we are issuing in this exchange offer and the private notes
that are outstanding are identical in all material respects except:
·
The
new notes will be registered under the
Securities Act;
·
The
new notes will not contain transfer
restrictions and registration rights that relate to the private
notes.
The new
notes will evidence the same debt as the private notes and will be governed
by
the same indenture. References to the notes include both private notes and
new
notes.
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Issuer
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AREP
is a holding company. Its operations are conducted through its
subsidiaries and substantially all of its assets consist of a 99%
limited
partnership interest in its subsidiary, AREH, which is a holding
company
for its operating subsidiaries and investments. The new notes will
be guaranteed by AREH.
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Co-Issuer
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AREP
Finance is a wholly owned subsidiary of AREP. It was formed solely
for the
purpose of serving as a co-issuer of debt securities of AREP in order
to
facilitate offerings of the debt securities. Other than as a co-issuer
of
the notes, AREP Finance does not and will not have any operations
or
assets and will not have any revenues. As a result, holders of the
notes
should not expect AREP Finance to participate in servicing any obligations
on the new notes.
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Notes
Offered
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$500 million
in aggregate principal amount of 7 1/8% senior notes due 2013.
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Maturity
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February 15,
2013.
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Interest
Payment Dates
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February 15
and August 15 of each year, commencing February 15,
2007.
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Guarantee
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If
we
cannot make payments on the new notes when they are due, AREH must
make
them instead. Other than AREH, none of our subsidiaries will guarantee
payments on the new notes.
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Ranking
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The
new notes and the guarantee will rank equally with all of our and
the
guarantor’s existing and future senior unsecured indebtedness, including
our existing notes, and will rank senior to all of our and the guarantor’s
existing and future subordinated indebtedness. The new notes and
the
guarantee will be effectively subordinated to all of our and the
guarantor’s existing and future secured indebtedness, to the extent of the
collateral securing such indebtedness. The new notes and the guarantee
also will be effectively subordinated to all indebtedness and other
liabilities, including trade payables, of all our subsidiaries other
than
AREH. As of March 31, 2007, the new notes and the guarantee would
have been effectively subordinated to an aggregate of $375.5 million
of AREH’s secured debt and our subsidiaries’ debt, excluding trade
payables.
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Optional
Redemption
|
|
We
may, at our option, redeem some or all of the new notes at any time
on or
after February 15, 2009, at the redemption prices listed under
“Description of Notes — Optional Redemption.”
|
| |
|
In
addition, prior to February 15, 2008, we may, at our option, redeem
up to 35% of the new notes with the proceeds of certain sales of
our
equity at the redemption price listed under “Description of Notes —
Optional Redemption.” We may make the redemption only if, after the
redemption, at least 65% of the aggregate principal amount of the
notes
issued remains outstanding.
|
5
|
|
|
|
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Redemption
Based on Gaming Laws
|
|
The
new notes are subject to mandatory disposition and redemption requirements
following certain determinations by applicable gaming authorities.
On
April 22, 2007, AEP entered into a Membership Interest Purchase
Agreement with W2007/ACEP Holdings, LLC, an affiliate of Whitehall
Street
Real Estate Funds, to sell all of the issued and outstanding membership
interests of ACEP which comprises our gaming operations. If the sale
is
consummated, the new notes will no longer be subject to redemption
based
on gaming laws.
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|
Certain
Covenants
|
|
We
will issue the new notes under the indenture with AREH and Wilmington
Trust Company, as trustee acting on your behalf, dated February 7,
2005, which was established in connection with our existing notes.
The
indenture, among other things, restricts our and AREH’s ability to:
·
incur
additional debt;
·
pay
dividends and make
distributions;
·
repurchase
equity
securities;
·
create
liens;
·
enter
into transactions with
affiliates; and
·
merge
or
consolidate.
|
| |
|
Our
subsidiaries other than AREH will not be restricted in their ability
to
incur debt, create liens or merge or consolidate.
|
|
Absence
of Established Market for Notes
|
|
The
new notes will be new securities for which there is currently no
market.
We cannot assure you that a liquid market for the new notes will
develop
or be maintained.
|
6
You
should consider carefully each of the following risks and all other information
contained in this prospectus before deciding to invest in the notes.
Risks
Relating to the Exchange Offer
Holders who fail
to
exchange their private notes will continue to be subject to restrictions on
transfer.
If you
do
not exchange your private notes for new notes in the exchange offer, you will
continue to be subject to the restrictions on transfer of your private notes
described in the legend on your private notes. The restrictions on transfer
of
your private notes arise because we issued the private notes under exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the private notes if they are registered under the Securities
Act
and applicable state securities laws, or are offered and sold under an exemption
from these requirements. We do not plan to register the private notes under
the
Securities Act.
Broker-dealers
or
holders of notes may become subject to the registration and prospectus delivery
requirements of the Securities Act.
Any
broker-dealer that:
·
exchanges
its private notes in the exchange
offer for the purpose of participating in a distribution of the new notes
or
·
resells
new notes that were received by it
for its own account in the exchange offer
may be deemed to have
received restricted securities and may be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction by that broker-dealer. Any profit on
the
resale of the new notes and any commission or concessions received by a
broker-dealer may be deemed to be underwriting compensation under the Securities
Act. In addition to broker-dealers, any holder of notes that exchanges its
private notes in the exchange offer for the purpose of participating in a
distribution of the new notes may be deemed to have received restricted
securities and may be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction by that holder.
We cannot guarantee
that there will be a trading market for the new notes.
The new
notes are a new issue of securities and currently there is no market for them.
We do not intend to apply to have the new notes listed or quoted on any exchange
or quotation system. Accordingly, we cannot assure you that a liquid market
will
develop for the new notes.
The
liquidity of any market for the new notes will depend on a variety of factors,
including:
·
the
number of holders of the new
notes;
·
our
performance; and
·
the
market for similar securities and the
interest of securities dealers in making a market in the new notes.
A liquid trading
market may not develop for the new notes.
Historically,
the market for non-investment grade debt has been subject to disruptions that
have caused substantial volatility in the prices of securities similar to the
new notes. The market, if any, for the new notes may experience similar
disruptions that may adversely affect the prices at which you may sell your
new
notes. If an active trading market does not develop or is not maintained, the
market price and liquidity of the new notes may be adversely affected.
To the
extent private notes are tendered and accepted in the exchange offer, the
trading market, if any, for the private notes that are not so tendered would
be
adversely affected.
7
Our general partner
and its control person could exercise their influence over us to your
detriment.
Mr. Icahn,
through affiliates, currently owns 100% of API, our general partner, and
approximately 86.5% of our outstanding preferred units and approximately 90%
of
our depositary units and, as a result, has the ability to influence many aspects
of our operations and affairs. API also is the general partner of AREH.
The
interests of Mr. Icahn, including his interests in entities in which he and
we have invested or may invest in the future, may differ from your interests
as
a noteholder and, as such, he may take actions that may not be in your interest.
For example, if we encounter financial difficulties or are unable to pay our
debts as they mature, Mr. Icahn’s interests might conflict with your
interests as a noteholder.
In
addition, if Mr. Icahn were to sell, or otherwise transfer, some or all of
his interests in us to an unrelated party or group, a change of control could
be
deemed to have occurred under the terms of the indenture governing the notes
which would require us to offer to repurchase all outstanding notes at 101%
of
their principal amount plus accrued and unpaid interest and liquidated damages,
if any, to the date of repurchase. However, it is possible that we will not
have
sufficient funds at the time of the change of control to make the required
repurchase of notes.
We have engaged,
and in the future may engage, in transactions with our
affiliates.
We have
invested and may in the future invest in entities in which Mr. Icahn also
invests. We also have purchased and may in the future purchase entities or
investments from him or his affiliates. Although API has never received fees
in
connection with our investments, our partnership agreement allows for the
payment of these fees. Mr. Icahn may pursue other business opportunities in
industries in which we compete and there is no requirement that any additional
business opportunities be presented to us.
We have
entered into an agreement and plan of merger pursuant to which we would acquire
all of the issued and outstanding common stock of Lear for an aggregate
consideration of approximately $5.2 billion, including the assumption by the
surviving entity of certain outstanding indebtedness of Lear and the refinancing
of Lear’s existing term loan and credit facility. Mr. Icahn beneficially
owns approximately 16.0% of Lear’s outstanding common stock. The consummation of
the transaction is subject to regulatory approvals and shareholder vote.
Mr. Icahn
previously proposed that we acquire his interest in American Railcar, Inc., or American Railcar, and Philip
Services Corporation, or Philip Services. American Railcar is a publicly traded company that is primarily engaged in the
business of manufacturing covered hoppers and tank railcars. Philip Services is an industrial services company that
provides industrial outsourcing, environmental services and metal services to major industry sectors throughout North
America. A committee of independent directors of the board was formed to consider those proposals. Currently, at Mr.
Icahn’s request, only the proposal regarding the potential acquisition of the metal services business of Philip Services
is being considered by the committee. Any acquisition would be subject to, among other things, the negotiation, execution
and closing of a definitive agreement and the receipt of a fairness opinion. We continuously identify, evaluate and
engage in discussions concerning potential investments and acquisitions, including potential investments in and
acquisitions of affiliates of Mr. Icahn. There cannot be any assurance that any potential transactions that we consider
will be completed.
Certain of our
management are committed to the management of other
businesses.
Certain
of the individuals who conduct the affairs of API, including the chairman of
our
board of directors, Mr. Icahn, our principal executive officer, Keith A.
Meister, and our president, Peter K. Shea, are, and will be, committed to the
management of other businesses owned or controlled by Mr. Icahn and his
affiliates. Accordingly, these individuals may focus significant amounts of
time
and attention on managing these other businesses. Conflicts may arise in the
future between our interests and other entities or business activities in which
such individuals are involved. Conflicts of interest may arise as we may compete
with such affiliates for the same assets, purchasers and sellers of assets
or
financings.
We and AREH are
holding companies and will depend on the businesses of our subsidiaries to
satisfy our obligations under the notes.
We and
AREH are holding companies. In addition to cash and cash equivalents, U.S.
government and agency obligations, marketable equity and debt securities and
other short-term investments, our assets consist primarily of investments in
our
subsidiaries. Moreover, if we make significant investments in operating
businesses, it is likely
8
Back to Table of Contents
that
we will reduce the liquid assets at AREP and AREH in order to fund those
investments and the ongoing operations of our subsidiaries. Consequently, our
cash flow and our ability to meet our debt service obligations likely will
depend on the cash flow of our subsidiaries and the payment of funds to us
by
our subsidiaries in the form of dividends, distributions, loans or
otherwise.
The
operating results of our subsidiaries may not be sufficient to make
distributions to us. In addition, our subsidiaries are not obligated to make
funds available to us for payment on the notes or otherwise, and distributions
and intercompany transfers from our subsidiaries to us may be restricted by
applicable law or covenants contained in debt agreements and other agreements
to
which these subsidiaries may be subject or enter into in the future. The terms
of any borrowings of our subsidiaries or other entities in which we own equity
may restrict dividends, distributions or loans to us. For example, the notes
issued by our indirect wholly owned subsidiary, ACEP, contain restrictions
on
dividends and distributions and loans to us, as well as on other transactions
with us. ACEP also has a credit agreement which contains financial covenants
that have the effect of restricting dividends or distributions. This agreement
precludes our receiving payments from the operations of our gaming properties
which account for a significant portion of our revenues and cash flows. We
have
credit facilities for WestPoint International, Inc., or WPI, our majority owned
subsidiary, and our real estate development properties that also restrict
dividends, distributions and other transactions with us. To the degree any
distributions and transfers are impaired or prohibited, our ability to make
payments on the notes and other debt will be limited.
We, AREH or our
subsidiaries may be able to incur substantially more debt.
We, AREH
or our subsidiaries may be able to incur substantial additional indebtedness
in
the future. The terms of the indenture governing the notes described herein,
as
well as the indentures governing our 8.125% senior notes due 2012 and our
Variable Rate Senior Convertible Notes due 2013, do not prohibit us or our
subsidiaries from doing so. We and AREH may incur additional indebtedness if
we
comply with certain financial tests contained in the indentures that govern
these notes, including the indenture governing the notes described herein.
As of
March 31, 2007, based upon these tests, we and AREH could have incurred up
to approximately $1.4 billion of additional indebtedness. If we complete
the acquisition of Lear, and fund the acquisition with borrowings, as we
currently contemplate, under the financial tests contained in the indentures
(including the indenture governing the notes described herein), AREP and AREH
will not be able to incur additional indebtedness. However, our subsidiaries,
other than AREH are not subject to any of the covenants contained in the
indentures (including the indenture governing the notes described herein),
including the covenant restricting debt incurrence. If new debt is added to
our,
AREH’s and our subsidiaries’ current debt levels, the related risks that we,
AREH and they now face could intensify.
The notes will
be
effectively subordinated to any secured indebtedness, and all the indebtedness
and liabilities of our subsidiaries other than AREH.
The notes
will be effectively subordinated to our and AREH’s existing and future secured
indebtedness to the extent of the collateral securing such indebtedness. We
and
AREH may be able to incur substantial additional secured indebtedness in the
future. The terms of the indenture permit us and AREH to do so. The notes will
also be effectively subordinated to all the indebtedness and liabilities,
including trade payables, of all of our subsidiaries, other than AREH. In the
event of a bankruptcy, liquidation or reorganization of any of our subsidiaries,
other than AREH, holders of their indebtedness and their trade creditors will
generally be entitled to payment of their claims from the assets of those
subsidiaries before any assets are made available for distribution to us.
Our subsidiaries,
other than AREH, will not be subject to any of the covenants in the indenture
for the notes and only AREH will guarantee the notes. We may not be able to
rely
on the cash flow or assets of our subsidiaries to pay our
indebtedness.
Our
subsidiaries, other than AREH, will not be subject to the covenants under the
indenture for the notes. We may form additional subsidiaries in the future
which
will not be subject to the covenants under the indenture for the notes. Of
our
existing and future subsidiaries, only AREH is required to guarantee the notes.
Our existing and future non-guarantor subsidiaries may enter into financing
arrangements that limit their ability to make dividends, distributions, loans
or
other payments to fund payments in respect of the notes. Accordingly, we may
not
be able to rely on the cash flow or assets of our subsidiaries to pay the
notes.
9
Our failure to
comply with the covenants contained under any of our debt instruments, including
the indenture governing the notes (including our failure as a result of events
beyond our control), could result in an event of default which would materially
and adversely affect our financial condition.
If there
were an event of default under one of our debt instruments, the holders of
the
defaulted debt could cause all amounts outstanding with respect to that debt
to
be due and payable immediately. In addition, any event of default or declaration
of acceleration under one debt instrument could result in an event of default
under one or more of our other debt instruments, including the notes. It is
possible that, if the defaulted debt is accelerated, our assets and cash flow
may not be sufficient to fully repay borrowings under our outstanding debt
instruments and we cannot assure you that we would be able to refinance or
restructure the payments on those debt securities.
To service our
indebtedness, we will require a significant amount of cash. Our ability to
maintain our current cash position or generate cash depends on many factors
beyond our control.
Our
ability to make payments on and to refinance our indebtedness, including the
notes, and to fund operations will depend on existing cash balances and our
ability to generate cash in the future. This, to a certain extent, is subject
to
general economic, financial, competitive, regulatory and other factors that
are
beyond our control.
Our
current businesses and businesses that we acquire may not generate sufficient
cash to service our debt, including the notes. In addition, we may not generate
sufficient cash flow from operations or investments and future borrowings may
not be available to us in an amount sufficient to enable us to service our
indebtedness, including the notes, or to fund our other liquidity needs. We
may
need to refinance all or a portion of our indebtedness, including the notes,
on
or before maturity. We cannot assure you that we will be able to refinance
any
of our indebtedness, including the notes, on commercially reasonable terms
or at
all.
The indenture
does
not restrict our ability to change our lines of business or invest the proceeds
of asset sales and allows for the sale of all or substantially all of our and
AREH’s assets without the notes being assumed by the
acquirers.
The
indenture does not restrict in any way the businesses in which we may engage
and
if we were to change our current lines of business, in whole or in part, you
would not be entitled to accelerated repayment of the notes. We also are not
required to offer to purchase notes with the proceeds from asset sales,
including in the event of the sale of all or substantially all of our assets
or
AREH’s assets, and we may reinvest the proceeds without the approval of
noteholders. In addition, we and AREH may sell all or substantially all of
our
and its assets without the notes being assumed by the acquirers.
We may not have
sufficient funds necessary to finance the change of control offer required
by
the indenture.
Upon
the
occurrence of certain specific kinds of change of control events, we will be
required to offer to repurchase all outstanding notes at 101% of their principal
amount plus accrued and unpaid interest and liquidated damages, if any, to
the
date of repurchase. Mr. Icahn, through affiliates, currently owns 100% of
API and approximately 90.0% of our outstanding depositary units and 86.5% of
our
outstanding preferred units. If he were to sell or otherwise transfer some
or
all of his interests in us to unrelated parties, a change of control could
be
deemed to have occurred under the terms of the indenture governing the notes.
However, it is possible that we will not have sufficient funds at the time
of
the change of control to make the required repurchase of notes.
Federal and state
statutes allow courts, under specific circumstances, to void guarantees and
require noteholders to return payments received from the
guarantor.
Under
the
federal bankruptcy law and comparable provisions of state fraudulent transfer
laws, a guarantee could be voided, or claims in respect of a guarantee could
be
subordinated to all other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by its
guarantee:
·
received
less than reasonably equivalent
value or fair consideration for the incurrence of such guarantee;
and
·
was
insolvent or rendered insolvent by
reason of such incurrence; or
10
·
was
engaged in a business or transaction
for which the guarantor’s remaining assets constituted unreasonably small
capital; or
·
intended
to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they
mature.
In
addition, any payment by that guarantor pursuant to its guarantee could be
voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The
measures of insolvency for purposes of these fraudulent transfer laws will
vary
depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
·
the
sum of its debts, including contingent
liabilities, was greater than the fair saleable value of all of its assets;
or
·
the
present fair saleable value of its
assets was less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they
become absolute and mature; or
·
it
could not pay its debts as they become
due.
On the
basis of historical financial information, recent operating history and other
factors, we believe that AREH, after giving effect to its guarantee of these
notes, will not be insolvent, will not have unreasonably small capital for
the
businesses in which it is engaged and will not have incurred debts beyond its
ability to pay such debts as they mature. We cannot assure you, however, as
to
what standard a court would apply in making these determinations or that a
court
would agree with our conclusions in this regard.
As a noteholder
you
may be required to comply with licensing, qualification or other requirements
under gaming laws and could be required to dispose of the
notes.
Currently,
ACEP’s casino assets are comprised of the Stratosphere Casino Hotel & Tower,
the Arizona Charlie’s Decatur, the Arizona Charlie’s Boulder and the Aquarius
Casino Resort. We may be required to disclose the identities of the holders
of
the notes to the Nevada gaming authorities upon request. The Nevada Gaming
Commission may, in its discretion, require a holder of the notes to file an
application, be investigated and be found suitable to hold the notes. In
addition, the Nevada Gaming Commission may, in its discretion, require the
holder of any debt security of a company registered by the Nevada Gaming
Commission as a publicly-traded corporation to file an application, be
investigated and be found suitable to own such debt security.
If
a record or beneficial holder of a note is required by the Nevada Gaming
Commission to be found suitable, such owner will be required to apply for a
finding of suitability within 30 days after request of such gaming authority
or
within such earlier time prescribed by such gaming authority. The applicant
for
a finding of suitability must pay all costs of the application and investigation
for such finding of suitability. If the Nevada Gaming Commission determines
that
a person is unsuitable to own such security, then, pursuant to the Nevada Gaming
Control Act, we can be sanctioned, including the loss of our approvals, if,
without the prior approval of the Nevada Gaming Commission, we:
·
pay
to the unsuitable person any dividend,
interest, or any distribution whatsoever;
·
recognize
any voting right of the
unsuitable person with respect to such securities;
·
pay
the unsuitable person remuneration in
any form; or
·
make
any payment to the unsuitable person
by way of principal, redemption, conversion, exchange, liquidation or similar
transaction.
Each
holder of the notes will be deemed to have agreed, to the extent permitted
by
law, that if the Nevada gaming authorities determine that a holder or beneficial
owner of the notes must be found suitable, and if that holder or beneficial
owner either refuses to file an application or is found unsuitable, that holder
shall, upon our request, dispose of its notes within 30 days after receipt
of
our request, or earlier as may be ordered by the Nevada gaming authorities.
We
will also have the right to call for the redemption of notes of any holder
at
any time to prevent the loss or material impairment of a gaming license or
an
application for a gaming license at a redemption price equal to:
11
·
the
lesser of the cost paid by the holder or
the fair market value of the notes, in each case, plus accrued and unpaid
interest and liquidated damages, if any, to the earlier of the date of
redemption, or earlier as may be required by the Nevada gaming authorities
or
the finding of unsuitability by the Nevada gaming authorities; or
·
such
other lesser amount as may be ordered
by the Nevada gaming authorities.
We will
notify the trustee under the indenture in writing of any redemption as soon
as
practicable. We will not be responsible for any costs or expenses you may incur
in connection with your application for a license, qualification or a finding
of
suitability, or your compliance with any other requirement of a gaming
authority. The indenture also provides that as soon as a gaming authority
requires you to sell your notes, you will, to the extent required by applicable
gaming laws, have no further right:
·
to
exercise, directly or indirectly, any
right conferred by the notes or the indenture; or
·
to
receive from us any interest, dividends
or any other distributions or payments, or any remuneration in any form,
relating to the notes, except the redemption price we refer to
above.
On
April 22, 2007, AEP entered into a Membership Interest Purchase Agreement
with W2007/ACEP Holdings, LLC, an affiliate of Whitehall Street Real Estate
Funds, to sell all of the issued and outstanding membership interests of ACEP
which comprises our gaming operations.
Since we are
a
limited partnership, you may not be able to pursue legal claims against us
in
U.S. federal courts.
We are
a
limited partnership organized under the laws of the state of Delaware. Under
the
rules of federal civil procedure, you may not be able to sue us in federal
court
on claims other than those based solely on federal law, because of lack of
complete diversity. Case law applying diversity jurisdiction deems us to have
the citizenship of each of our limited partners. Because we are a publicly
traded limited partnership, it may not be possible for you to sue us in a
federal court because we have citizenship in all 50 U.S. states and operations
in many states. Accordingly, you will be limited to bringing any claims in
state
court. Furthermore, AREP Finance, our corporate co-issuer for the notes, has
only nominal assets and no operations. While you may be able to sue the
corporate co-issuer in federal court, you are not likely to be able to realize
on any judgment rendered against it.
We may be subject
to the pension liabilities of our affiliates.
Mr. Icahn,
through certain affiliates, currently owns 100% of API and approximately 90%
of
our outstanding depositary units and 86.5% of our outstanding preferred units.
Applicable pension and tax laws make each member of a “controlled group” of
entities, generally defined as entities in which there are at least an 80%
common ownership interest, jointly and severally liable for certain pension
plan
obligations of any member of the controlled group. These pension obligations
include ongoing contributions to fund the plan, as well as liability for any
unfunded liabilities that may exist at the time the plan is terminated. In
addition, the failure to pay these pension obligations when due may result
in
the creation of liens in favor of the pension plan or the Pension Benefit
Guaranty Corporation, or the PBGC, against the assets of each member of the
controlled group.
As a
result of the more than 80% ownership interest in us by Mr. Icahn’s
affiliates, we and our subsidiaries are subject to the pension liabilities
of
all entities in which Mr. Icahn has a direct or indirect ownership interest
of at least 80%. One such entity, ACF Industries LLC, or ACF, is the sponsor
of
several pension plans which, as of December 31, 2006, were not underfunded
on an ongoing actuarial basis but would be underfunded by approximately
$87.2million if those plans were terminated, as most recently reported by the
plans’ actuaries. These liabilities could increase or decrease, depending on a
number of factors, including future changes in promised benefits, investment
returns, and the assumptions used to calculate the liability. As members of
the
controlled group, we would be liable for any failure of ACF to make ongoing
pension contributions or to pay the unfunded liabilities upon a termination
of
the ACF pension plans. In addition, other entities now or in the future within
the controlled group that includes us may have pension plan obligations that
are, or may become, underfunded and we would be liable for any failure of such
entities to make ongoing pension contributions or to pay the unfunded
liabilities upon a termination of such plans.
The
current underfunded status of the ACF pension plans requires ACF to notify
the
PBGC of certain “reportable events,” such as if we cease to be a member of the
ACF controlled group, or if we make certain extraordinary dividends or stock
redemptions. The obligation to report could cause us to seek to delay or
reconsider the occurrence of such reportable events.
12
Starfire
Holding Corporation, or Starfire, which is 100% owned by Mr. Icahn, has
undertaken to indemnify us and our subsidiaries from losses resulting from
any
imposition of certain pension funding or termination liabilities that may be
imposed on us and our subsidiaries or our assets as a result of being a member
of the Icahn controlled group. The Starfire indemnity (which does not extend
to
pension liabilities of our subsidiaries that would be imposed on us as a result
of our interest in these subsidiaries and not as a result of Mr. Icahn’s
and his affiliates’ more than 80% ownership interest in us) provides, among
other things, that so long as such contingent liabilities exist and could be
imposed on us, Starfire will not make any distributions to its stockholders
that
would reduce its net worth to below $250.0 million. Nonetheless, Starfire
may not be able to fund its indemnification obligations to us.
We are subject
to
the risk of possibly becoming an investment company.
Because
we are a holding company and a significant portion of our assets may, from
time
to time, consist of investments in companies in which we own less than a 50%
interest, we run the risk of inadvertently becoming an investment company that
is required to register under the Investment Company Act of 1940, as amended,
or
the Investment Company Act. Registered investment companies are subject to
extensive, restrictive and potentially adverse regulation relating to, among
other things, operating methods, management, capital structure, dividends and
transactions with affiliates. Registered investment companies are not permitted
to operate their business in the manner in which we operate our business, nor
are registered investment companies permitted to have many of the relationships
that we have with our affiliated companies.
In
order not to become an investment company required to register under the
Investment Company Act, we monitor the value of our investments and structure
transactions with an eye toward the Investment Company Act. As a result, we
may
structure transactions in a less advantageous manner than if we did not have
Investment Company Act concerns, or we may avoid otherwise economically
desirable transactions due to those concerns. In addition, events beyond our
control, including significant appreciation or depreciation in the market value
of certain of our publicly traded holdings, or adverse developments with respect
to our ownership of certain of our subsidiaries, such as our loss of control
of
WPI, could result in our inadvertently becoming an investment company.
If
it were established that we were an investment company, there would be a risk,
among other material adverse consequences, that we could become subject to
monetary penalties or injunctive relief, or both, in an action brought by the
SEC, that we would be unable to enforce contracts with third parties or that
third parties could seek to obtain rescission of transactions with us undertaken
during the period it was established that we were an unregistered investment
company.
We may become
taxable as a corporation.
We
believe that we have been and are properly treated as a partnership for federal
income tax purposes. This allows us to pass through our income and deductions
to
our partners. However, the Internal Revenue Service, or IRS, could challenge
our
partnership status and we could fail to qualify as a partnership for past years
as well as future years. Qualification as a partnership involves the application
of highly technical and complex provisions of the Internal Revenue Code of
1986,
as amended, or the Code. For example, a publicly traded partnership is generally
taxable as a corporation unless 90% or more of its gross income is “qualifying”
income, which includes interest, dividends, oil and gas revenues, real property
rents, gains from the sale or other disposition of real property, gain from
the
sale or other disposition of capital assets held for the production of interest
or dividends, and certain other items. We believe that in all prior years of
our
existence at least 90% of our gross income was qualifying income and we intend
to structure our business in a manner such that at least 90% of our gross income
will constitute qualifying income this year and in the future. However, there
can be no assurance that such structuring will be effective in all events to
avoid the receipt of more than 10% of non-qualifying income. If less than 90%
of
our gross income constitutes qualifying income, we may be subject to corporate
tax on our net income at a federal rate of up to 35% plus possible state taxes.
Further, if less than 90% of our gross income constituted qualifying income
for
past years, we may be subject to corporate level tax plus interest and possibly
penalties. In addition, if we register under the Investment Company Act, it
is
likely that we would be treated as a corporation for U.S. federal income tax
purposes. The cost of paying federal and possibly state income tax, either
for
past years or going forward, could be a significant liability and would reduce
our funds available to make interest and principal payments on our debt
securities, including the notes. To meet the qualifying income test, we may
structure transactions in a manner that is less advantageous than if this were
not a consideration, or we may avoid otherwise economically desirable
transactions. Recently proposed legislation may affect the status of publicly
traded partnerships such as AREP. Although as proposed the legislation would
not
impact AREP’s status as a partnership for tax purposes, it is unclear whether
such legislation would be enacted or, if enacted, what its final form and effect
would be.
13
General
In
addition to the following risk factors specific to each of our businesses,
all
of our businesses are subject to the effects of the following:
·
the
continued threat of
terrorism;
·
economic
downturn;
·
loss
of any of our or our subsidiaries’ key
personnel;
·
the
unavailability, as needed, of
additional financing; and
·
the
unavailability of insurance at
acceptable rates.
Our acquisition
of
Lear will require a significant investment or may not be successfully
completed.
On
February 9, 2007, we entered into an agreement and plan of merger, pursuant
to which we would acquire Lear, a publicly traded company that provides
automotive interior systems worldwide, for aggregate consideration of
approximately $5.2 billion, including the assumption by the surviving
entity of certain outstanding indebtedness of Lear and the refinancing of Lear’s
existing term loan and credit facility. The consummation of the transaction
is
subject to regulatory approvals and shareholders vote. If we complete the
acquisition of Lear, it would require a significant investment by us, including
approximately $1.3 billion in cash. Under the financial tests contained in
the indentures that govern our notes described herein and the notes due 2012,
AREP and AREH will not be able to incur additional indebtedness as a result
of
borrowings to finance the Lear acquisition, which may limit our flexibility
in
entering into future financing arrangements, including those to support our
existing businesses or to acquire new businesses. Lear also has significant
pension and related liabilities for which we could become liable as a member
of
a controlled group of entities.
Our
agreement with Lear permitted Lear to solicit proposals from other potential
purchasers for 45 days after the signing of the agreement and to respond to
offers after that date and until Lear’s stockholders approve the transaction
with us. No competing proposals were received as of the date of this prospectus.
We cannot assure you that we will be able to complete the transaction or that
the completion of the transaction will be for the consideration described
above.
Furthermore,
the proposed transaction is subject to additional risks and uncertainties,
including, but not limited to, the satisfaction of conditions to closing, which
requires Lear stockholder approval and U.S. and foreign antitrust approval.
If
we were to complete the acquisition, Lear’s business and operations would be
subject to various risks, including the uncertainty of its financial performance
following completion of the proposed transaction; general conditions affecting
the automotive industry, particularly in the United States; and general domestic
and international market conditions.
In addition, we have been named as defendants in various lawsuits challenging
the transaction. Specifically, a consolidated action is pending in the Court
of Chancery of the State of Delaware which alleges, among other things, that
the purchase price is unfair to Lear stockholders. A preliminary injunction
was issued requiring supplemental disclosure. The supplemental disclosure
requirement has been satisfied and, consequently, the injunction has been
dissolved. A consolidated action filed in Michigan state court making virtually
identical allegations was dismissed by the court because of the prior-filed
Delaware action. Plaintiffs in the Michigan state action have filed a motion
for reconsideration which is pending. Finally, a complaint is pending in the
United States District Court for the Eastern District of Michigan, which alleges
that the transaction would violate certain provisions of the Employment Retirement
Income Security Act (referred to as the Federal Action). Motions to dismiss
the Federal Action have been fully briefed and await disposition, as does
plaintiff’s application for preliminary injunction. Based upon the above
there is a risk that the transaction may be enjoined, or, if the transaction
is completed, liability may nevertheless be imposed thereafter.
14
Our sale of ACEP
may not be successfully completed.
On
April 22, 2007, AEP entered into a Membership Interest Purchase Agreement
with Whitehall Street Real Estate Funds to sell all of the issued and
outstanding membership interests of ACEP, which comprises our gaming operations.
The transaction is subject to the approval of the Nevada Gaming Commission
and
the Nevada State Gaming Control Board, as well as customary conditions. The
parties expect to close the transaction in approximately December 2007; however,
we cannot assure you that we will be able to consummate the transaction.
The
following risks relate to our current gaming operations.
The gaming industry
is highly regulated. The gaming authorities and state and municipal licensing
authorities have significant control over our operations.
Our
properties currently conduct licensed gaming operations in Nevada. Various
regulatory authorities, including the Nevada State Gaming Control Board and
the
Nevada Gaining Commission, require our properties to hold various licenses
and
registrations, findings of suitability, permits and approvals to engage in
gaming operations and to meet requirements of suitability. These gaming
authorities also control approval of ownership interests in gaming operations.
These gaming authorities may deny, limit, condition, suspend or revoke our
gaming licenses, registrations, findings of suitability or the approval of
any
of our ownership interests in any of our licensed gaming operations, any of
which could have a significant adverse effect on our business, financial
condition and results of operations, for any cause they may deem reasonable.
If
we violate gaming laws or regulations that are applicable to us, we may have
to
pay substantial fines or forfeit assets. If, in the future, we operate or have
an ownership interest in casino gaming facilities located outside of Nevada,
we
would also be subject to the gaming laws and regulations of those other
jurisdictions.
The sale
of alcoholic beverages at our gaming properties is subject to licensing and
regulation by local authorities. Any limitation, condition, suspension or
revocation of, or disciplinary action with respect to, any such license would
reduce the number of visitors to our casinos to the extent the availability
of
alcoholic beverages is important to them. Any reduction in our number of
visitors will reduce our revenue and cash flow.
Rising operating
costs for our gaming properties could have a negative impact on our
profitability.
The
operating expenses associated with our gaming properties could increase due
to
some of the following factors:
·
our
properties use significant amounts of
electricity, natural gas and other forms of energy, and energy price increases
may reduce our profitability;
·
our
properties use significant amounts of
water and a water shortage may adversely affect our operations;
·
some
of our employees are covered by
collective bargaining agreements and we may incur higher costs or work
slow-downs or stoppages due to union activities; and
·
our
reliance on slot machine revenues and
the concentration of manufacturing of slot machines in certain companies could
impose additional costs on us.
We face substantial
competition in the gaming industry.
The
gaming industry in general, and the markets in which we compete in particular,
are highly competitive:
·
we
compete with many world-class
destination resorts with greater name recognition and different attractions,
amenities and entertainment options;
·
we
compete with the continued growth of
gaming on Native American tribal lands;
·
the
existence of legalized gambling in
other jurisdictions may reduce the number of visitors to our
properties;
15
·
certain
states have legalized, and others
may legalize, casino gaming in specific venues, including race tracks and/or
in
specific areas, including metropolitan areas from which we traditionally attract
customers; and
·
our
properties also compete, and will in
the future compete, with all forms of legalized gambling.
Many
of
our competitors have greater financial, selling and marketing, technical and
other resources than we do. We may not be able to compete effectively with
our
competitors and we may lose market share, which could reduce our revenue and
cash flow.
We cannot guarantee
that we will be able to recover our investment made in connection with the
acquisition of the Aquarius.
On
May 19, 2006, our wholly owned subsidiary, AREP Laughlin Corporation,
acquired the Aquarius Casino Resort, or the Aquarius, from affiliates of
Harrah’s Operating Company, Inc., or Harrah’s, for approximately
$113.6 million, including working capital. Acquisitions generally involve
significant risks, including difficulties in the assimilation of the operations,
services and corporate culture of the acquired company.
Pursuant
to Membership Interest Purchase Agreement that AEP has entered into with
Whitehall Street Real Estate Funds to sell the issued and outstanding membership
interests of ACEP, we have agreed to make capital expenditures, including
$10.5 million through 2007 to refurbish rooms, upgrade amenities and
acquire new gaming equipment for the Aquarius.
There
can
be no assurance that this acquisition will be profitable or that we will be
able
to recover our investments either upon the sale of ACEP or, if the sale is
not
consummated, in our future gaming operations.
Real Estate
Operations
Our investment
in
property development may be more costly than anticipated.
We have
invested and expect to continue to invest in unentitled land, undeveloped land
and distressed development properties. These properties involve more risk than
properties on which development has been completed. Unentitled land may not
be
approved for development. These investments do not generate any operating
revenue, while costs are incurred to obtain government approvals and develop
the
properties. Construction may not be completed within budget or as scheduled
and
projected rental levels or sales prices may not be achieved and other
unpredictable contingencies beyond our control could occur. We will not be
able
to recoup any of such costs until such time as these properties, or parcels
thereof, are either disposed of or developed into income-producing assets.
We may be subject
to environmental liability as an owner or operator of development and rental
real estate.
Under
various federal, state and local laws, ordinances and regulations, an owner
or
operator of real property may become liable for the costs of removal or
remediation of certain hazardous substances, pollutants and contaminants
released on, under, in or from its property. These laws often impose liability
without regard to whether the owner or operator knew of, or was responsible
for,
the release of such substances. To the extent any such substances are found
in
or on any property invested in by us, we could be exposed to liability and
be
required to incur substantial remediation costs. The presence of such substances
or the failure to undertake proper remediation may adversely affect the ability
to finance, refinance or dispose of such property. We generally conduct a Phase
I environmental site assessment on properties in which we are considering
investing. A Phase I environmental site assessment involves record review,
visual site assessment and personnel interviews, but does not typically include
invasive testing procedures such as air, soil or groundwater sampling or other
tests performed as part of a Phase II environmental site assessment.
Accordingly, there can be no assurance that these assessments will disclose
all
potential liabilities or that future property uses or conditions or changes
in
applicable environmental laws and regulations or activities at nearby properties
will not result in the creation of environmental liabilities with respect to
a
property.
16
Pending legal
proceedings may result in our ownership of WPI’s common stock being reduced to
less than 50%. A legal action in Delaware challenges the issuance to of the
preferred stock of WPI. Uncertainties arising from these proceedings may
adversely affect WPI’s operations and prospects and the value of our investment
in it.
We
currently own approximately 67.7% of the outstanding shares of common stock
and
100% of the preferred stock of WPI. As a result of the decision of the U.S.
District Court for the Southern District of New York reversing certain
provisions of the Bankruptcy Court order pursuant to which we acquired our
ownership of a majority of the common stock of WPI, the proceedings in the
Bankruptcy Court on remand and the proceedings in the Delaware action, our
percentage of the outstanding shares of common stock of WPI could be reduced
to
less than 50% and perhaps substantially less and our ownership of the preferred
stock of WPI could also be affected. The Bankruptcy Court entered a stay of
its
order on remand. On May 9, 2007, the District Court issued an order conditioning
the continuation of the Bankrupcty Court’s stay on the posting of a bond. No
bond was posted. On May 22, 2007, WPI, its subsidiary WestPoint Home, Inc.,
and
we filed a Petition for a Writ of Mandamus in the U.S. Court of Appeals for
the
Second Circuit requesting, among other relief, the reinstatement of the Sale
Order. The Second Circuit scheduled oral argument on the Petition for Mandamus
for June 26, 2007 and reinstated the stay pending its decision.
If we
were to lose control of WPI, it could adversely affect the business and
prospects of WPI and the value of our investment in it. In addition, we
consolidated the balance sheet of WPI as of March 31, 2007 and WPI’s results of
operations for the period from the date of acquisition through March 31, 2007.
If we were to own less than 50% of the outstanding common stock or the challenge
to our preferred stock ownership is successful, we would have to evaluate
whether we should consolidate WPI and if so our financial statements could
be
materially different than as presented as of March 31, 2007, December 31, 2006
and December 31, 2005 and for the periods then ended.
WPI acquired
its
business from the former owners through bankruptcy proceedings. We cannot assure
you that it will be able to operate profitably.
WPI
acquired the assets of WestPoint Stevens Inc., or WestPoint Stevens, as part
of
its bankruptcy proceedings. Certain of the issues that contributed to WestPoint
Stevens’ filing for bankruptcy, such as intense industry competition, the
inability to produce goods at a cost competitive with overseas suppliers, the
increasing prevalence of direct sourcing by principal customers and continued
incurrence of overhead costs associated with an enterprise larger than the
current business can profitably support, continue to exist and may continue
to
affect WPI’s business operations and financial condition adversely. In addition,
during the protracted bankruptcy proceedings of WestPoint Stevens, several
of
its customers reduced the volume of business done with WestPoint Stevens. We
have installed new management to address these issues, but we cannot assure
you
that new management will be effective.
WPI
operated at a loss during fiscal year 2006 as well as for the three months
ended
March 31, 2007, and we expect that WPI will continue to operate at a loss
during fiscal year 2007. We cannot assure you that it will be able to operate
profitably in the future.
The loss of any
of
WPI’s large customers could have an adverse effect on WPI’s
business.
During
fiscal year 2006 and the three-month period ended March 31, 2007, WPI’s six
largest customers accounted for approximately 50% and 52%, respectively, of
its
net sales. Other retailers have indicated that they intend to significantly
increase their direct sourcing of home fashion products from foreign sources.
The loss of any of WPI’s largest accounts, or a material portion of sales to
those accounts, would have an adverse effect upon its business, which could
be
material.
A portion of
WPI’s
sales are derived from licensed designer brands. The loss of a significant
license could have an adverse effect on WPI’s business.
A portion
of WPI’s sales is derived from licensed designer brands. The license agreements
for WPI’s designer brands generally are for a term of two or three years. Some
of the licenses are automatically renewable for additional periods, provided
that sales thresholds set forth in the license agreements are met. The loss
of a
significant license could have an adverse effect upon WPI’s business, which
effect could be material. Under certain circumstances, these licenses can be
terminated without WPI’s consent due to circumstances beyond WPI’s
control.
17
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A
shortage of the principal raw materials WPI uses to manufacture its products
could force WPI to pay more for those materials and, possibly, cause WPI to
increase its prices, which could have an adverse effect on WPI’s
operations.
Any
shortage in the raw materials WPI uses to manufacture its products could
adversely affect its operations. The principal raw materials that WPI uses
in
the manufacture of its products are cotton of various grades and staple lengths
and polyester and nylon in staple and filament form. Since cotton is an
agricultural product, its supply and quality are subject to weather patterns,
disease and other factors. The price of cotton is also influenced by supply
and
demand considerations, both domestically and worldwide, and by the cost of
polyester. Although WPI has been able to acquire sufficient quantities of cotton
for its operations in the past, any shortage in the cotton supply by reason
of
weather patterns, disease or other factors, or a significant increase in the
price of cotton, could adversely affect its operations. The price of man-made
fibers, such as polyester and nylon, is influenced by demand, manufacturing
capacity and costs, petroleum prices, cotton prices and the cost of polymers
used in producing these fibers. In particular, the effect of increased energy
prices may have a direct impact upon the cost of dye and chemicals, polyester
and other synthetic fibers. Any significant prolonged petrochemical shortages
could significantly affect the availability of man-made fibers and could cause
a
substantial increase in demand for cotton. This could result in decreased
availability of cotton and possibly increased prices and could adversely affect
WPI’s operations.
The home fashion
industry is highly competitive and WPI’s success depends on WPI’s ability to
compete effectively in the market.
The home
fashion industry is highly competitive. WPI’s future success will, to a large
extent, depend on its ability to remain a low-cost producer and to remain
competitive. WPI competes with both foreign and domestic companies on, among
other factors, the basis of price, quality and customer service. In the home
fashion market, WPI competes with many companies. WPI’s future success depends
on its ability to remain competitive in the areas of marketing, product
development, price, quality, brand names, manufacturing capabilities,
distribution and order processing. We cannot assure you of WPI’s ability to
compete effectively in any of these areas. Any failure to compete effectively
could adversely affect WPI’s sales and, accordingly, its operations.
Additionally, the easing of trade restrictions over time has led to growing
competition from low priced products imported from Asia and Latin America.
The
lifting of import quotas in 2005 has accelerated the loss of WPI’s market share.
There can be no assurance that the foreign competition will not grow to a level
that could have an adverse effect upon WPI’s ability to compete
effectively.
WPI intends to
increase the percentage of its products that are made overseas. There is no
assurance that WPI will be successful in obtaining goods of sufficient quality
on a timely basis and on advantageous terms. WPI will be subject to additional
risks relating to doing business overseas.
WPI
intends to increase the percentage of its products that are made overseas and
may face additional risks associated with these efforts. Adverse factors that
WPI may encounter include:
·
logistical
challenges caused by
distance;
·
language
and cultural
differences;
·
legal
and regulatory
restrictions;
·
the
difficulty of enforcing agreements with
overseas suppliers;
·
currency
exchange rate
fluctuations;
·
political
and economic instability;
and
·
potential
adverse tax
consequences.
There has been
consolidation of retailers of WPI’s products that may reduce its
profitability.
Retailers
of consumer goods have become fewer and more powerful over time. As buying
power
has become more concentrated, pricing pressure on vendors has grown. With the
ability to buy imported products directly from foreign sources, retailers’
pricing leverage has increased and also allowed for growth in private label
brands that displace and compete with WPI proprietary brands. Retailers’ pricing
leverage has resulted in a decline in WPI’s
18
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unit
pricing and margins and resulted in a shift in product mix to more private
label
programs. If WPI is unable to diminish the decline in its pricing and margins,
it may not be able to achieve or maintain profitability.
WPI is subject
to
various federal, state and local environmental and health and safety laws and
regulations. If it does not comply with these regulations, it may incur
significant costs in the future to become compliant.
WPI is
subject to various federal, state and local laws and regulations governing,
among other things, the discharge, storage, handling, usage and disposal of
a
variety of hazardous and non-hazardous substances and wastes used in, or
resulting from, its operations, including potential remediation obligations
under those laws and regulations. WPI’s operations are also governed by federal,
state and local laws and regulations relating to employee safety and health
which, among other things, establish exposure limitations for cotton dust,
formaldehyde, asbestos and noise, and which regulate chemical, physical and
ergonomic hazards in the workplace. Consumer product safety laws, regulations
and standards at the federal and state level govern the manufacture and sale
of
products by WPI. Although WPI does not expect that compliance with any of these
laws and regulations will adversely affect its operations, we cannot assure
you
that regulatory requirements will not become more stringent in the future or
that WPI will not incur significant costs to comply with those
requirements.
Investments
We may not be
able
to identify suitable investments, and our investments may not result in
favorable returns or may result in losses.
Our
partnership agreement allows us to take advantage of investment opportunities
we
believe exist outside of our operating businesses. The equity securities in
which we may invest may include common stock, preferred stock and securities
convertible into common stock, as well as warrants to purchase these securities.
The debt securities in which we may invest may include bonds, debentures, notes,
or non-rated mortgage-related securities, municipal obligations, bank debt
and
mezzanine loans. Certain of these securities may include lower rated or
non-rated securities which may provide the potential for higher yields and
therefore may entail higher risk and may include the securities of bankrupt
or
distressed companies. In addition, we may engage in various investment
techniques, including derivatives, options and futures transactions, foreign
currency transactions, “short” sales and leveraging for either hedging or other
purposes. We may concentrate our activities by owning significant or controlling
interest in certain investments. We may not be successful in finding suitable
opportunities to invest our cash and our strategy of investing in undervalued
assets may expose us to numerous risks.
Our investments
may
be subject to significant uncertainties.
Our
investments may not be successful for many reasons including, but not limited
to:
·
fluctuation
of interest rates;
·
lack
of control in minority
investments;
·
worsening
of general economic and market
conditions;
·
lack
of diversification;
·
fluctuation
of U.S. dollar exchange rates;
and
·
adverse
legal and regulatory developments
that may affect particular businesses.
19
We will
not receive any proceeds from the exchange of the new notes for the private
notes pursuant to the exchange offer. On January 17, 2007, we issued and
sold the private notes in a private offering, receiving net proceeds of
approximately $492.1 million, after deducting selling and offering
expenses.
We intend
to use the net proceeds of the private offering for general business purposes,
including to pursue our primary business strategy of acquiring undervalued
assets in either our existing lines of business or other businesses and to
provide additional capital to grow our existing business.
We will
use the net proceeds of the private offering and conduct our activities in
a
manner so as not to be deemed an investment company under the Investment Company
Act. Generally, this means that we do not intend to enter the business of
investing in securities and that no more than 40% of our total assets will
be
invested in securities. The portion of our assets invested in each type of
security or any single issuer or industry will not be limited.
20
Purpose of the
Exchange Offer
In
connection with the sale of the private notes, we and the initial purchaser
entered into a registration rights agreement in which we and AREH agreed
to:
·
file
a registration statement with the SEC
with respect to the exchange of the private notes for new notes, or the exchange
offer registration statement, no later than July 16, 2007;
·
use
all commercially reasonable efforts to
have the exchange offer registration statement declared effective by the SEC
on
or prior to November 13, 2007; and
·
commence
the offer to exchange new notes
for the private notes and use all commercially reasonable efforts to issue
on or
prior to 30 business days, or longer if required by the federal securities
laws,
after the date on which the exchange offer registration statement was declared
effective by the SEC, new notes in exchange for all private notes tendered
prior
to that date in the exchange offer.
We are
making the exchange offer to satisfy certain of our obligations under the
registration rights agreement. We filed a copy of the registration rights
agreement as an exhibit to the exchange offer registration statement that
includes this prospectus.
Resale of Exchange
Notes
Under
existing interpretations of the Securities Act by the staff of the SEC contained
in several no-action letters to third parties, we believe that the new notes
will generally be freely transferable by holders who have validly participated
in the exchange offer without further registration under the Securities Act
(assuming the truth of certain representations required to be made by each
holder of notes, as set forth below). For additional information on the staff’s
position, we refer you to the following no-action letters: Exxon Capital
Holdings Corporation, available April 13, 1988; Morgan Stanley & Co.
Incorporated, available June 5, 1991; and Shearman & Sterling,
available July 2, 1993. However, any purchaser of private notes who is one
of our “affiliates” or who intends to participate in the exchange offer for the
purpose of distributing the new notes or who is a broker-dealer who purchased
private notes from us to resell pursuant to Rule 144A or any other available
exemption under the Securities Act:
·
will
not be able to tender its private
notes in the exchange offer;
·
will
not be able to rely on the
interpretations of the staff of the SEC; and
·
must
comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the private notes unless such sale or transfer is made
pursuant to an exemption from these requirements.
If you
wish to exchange private notes for new notes in the exchange offer, you will
be
required to make representations in a letter of transmittal which accompanies
this prospectus, including that:
·
you
are not our “affiliate” (as defined in
Rule 405 promulgated under the Securities Act);
·
any
new notes to be received by you will be
acquired in the ordinary course of your business;
·
you
have no arrangement or understanding
with any person to participate in the distribution of the new notes in violation
of the provisions of the Securities Act;
·
if
you are not a broker-dealer, you are not
engaged in, and do not intend to engage in, a distribution of new notes;
and
·
if
you are a broker-dealer, you acquired
the private notes for your own account as a result of market-making or other
trading activities (and as such, you are a “participating broker-dealer”), you
have not entered into any arrangement or understanding with AREP or an affiliate
of AREP to distribute the new notes and you will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of the
new
notes.
21
Rule
405 promulgated under the Securities Act provides that an “affiliate” of, or
person “affiliated” with, a specified person, is a person that directly, or
indirectly through one or more intermediaries, controls or is controlled by,
or
is under common control with, the person specified.
The SEC
has taken the position that participating broker-dealers may be deemed to be
“underwriters” within the meaning of the Securities Act, and accordingly may
fulfill their prospectus delivery requirements with respect to the new notes,
other than a resale of an unsold allotment from the original sale of the notes,
with the prospectus contained in the exchange offer registration statement.
Under the registration rights agreement, we have agreed to use commercially
reasonable efforts to allow participating broker-dealers and other persons,
if
any, subject to similar prospectus delivery requirements, to use the prospectus
contained in the exchange offer registration statement in connection with the
resale of the new notes for a period of 270 days from the issuance of the new
notes.
Terms of the Exchange
Offer
This
prospectus and the accompanying letter of transmittal contain the terms and
conditions of the exchange offer. Upon the terms and subject to the conditions
set forth in this prospectus and in the accompanying letter of transmittal,
we
will accept for exchange all private notes which are properly tendered and
not
withdrawn on or prior to 5:00 p.m., New York City time, on the expiration date.
After authentication of the new notes by the trustee or an authentication agent,
we will issue and deliver $1,000 principal amount of new notes in exchange
for
each $1,000 principal amount of outstanding private notes accepted in the
exchange offer. Holders may tender some or all of their private notes in the
exchange offer in denominations of $1,000 and integral multiples thereof.
The form
and terms of the new notes are identical in all material respects to the form
and terms of the private notes, except that:
1.
the offering of the new notes has
been registered under the Securities Act;
2.
the new notes generally will not
be
subject to transfer restrictions or have registration rights; and
3.
certain provisions relating to
liquidated damages on the private notes provided for under certain circumstances
will be eliminated.
The new
notes will evidence the same debt as the private notes. The new notes will
be
issued under and entitled to the benefits of the indenture.
As of
the
date of this prospectus, $500 million in aggregate principal amount of the
additional private notes issued on January 17, 2007 is outstanding. In
connection with the issuance of the private notes, we made arrangements for
the
private notes to be issued and transferable in book-entry form through the
facilities of DTC, acting as a depositary. The new notes will also be issuable
and transferable in book-entry form through the DTC.
The
exchange offer is not conditioned upon any minimum aggregate principal amount
of
private notes being tendered. However, our obligation to accept private notes
for exchange pursuant to the exchange offer is subject to certain customary
conditions that we describe under “— Conditions” below.
Holders
who tender private notes in the exchange offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the letter
of
transmittal, transfer taxes with respect to the exchange of private notes
pursuant to the exchange offer. We will pay all charges and expenses, other
than
certain applicable taxes, in connection with the exchange offer. See “—
Solicitation of Tenders; Fees and Expenses” for more detailed information
regarding the expenses of the exchange offer.
By
executing or otherwise becoming bound by the letter of transmittal, you will
be
making the representations described under “— Procedures for Tendering”
below.
Expiration Date;
Extensions; Amendments
The
term “expiration date” will mean 5:00 p.m., New York City time, on
, 2007, unless we, in our sole
discretion, extend the exchange offer, in which case the term “expiration date”
will mean the latest date and time to which we extend the exchange offer.
To extend
the exchange offer, we will:
22
·
notify
the exchange agent of any extension
orally or in writing; and
·
notify
the registered holders of the
private notes by means of a press release or other public announcement, each
before 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We
reserve the right, in our reasonable discretion:
·
to
delay accepting any private
notes;
·
to
extend the exchange offer;
or
·
if
any conditions listed below under “—
Conditions” are not satisfied, to terminate the exchange offer by giving oral or
written notice of the delay, extension or termination to the exchange
agent.
We will
follow any delay in acceptance, extension or termination as promptly as
practicable by oral or written notice to the registered holders. If we amend
the
exchange offer in a manner we determine constitutes a material change, we will
promptly disclose the amendment in a prospectus supplement that we will
distribute to the registered holders.
Interest on the New
Notes
Interest
on the new notes will accrue from the last interest payment date on which
interest was paid on the private notes surrendered in exchange for new notes
or,
if no interest has been paid on the private notes, from the issue date of the
private notes, January 17, 2007. Interest on the new notes will be payable
semi-annually on February 15 and August 15 of each year, commencing on
February 15, 2007.
Procedures for
Tendering
You may
tender your private notes in the exchange offer only if you are a registered
holder of private notes. To tender in the exchange offer, you must:
·
complete,
sign and date the letter of
transmittal or a facsimile of the letter of transmittal;
·
have
the signatures thereof guaranteed if
required by the letter of transmittal; and
·
mail
or otherwise deliver the letter of
transmittal or such facsimile to the exchange agent, at the address listed
below
under “— Exchange Agent” for receipt prior to the expiration date.
In
addition, either:
·
the
exchange agent must receive
certificates for the private notes along with the letter of transmittal into
its
account at DTC pursuant to the procedure described under “— Book-Entry Transfer”
before the expiration date;
·
the
exchange agent must receive a timely
confirmation of a book-entry transfer, if the procedure is available, into
its
account at DTC pursuant to the procedure described under “— Book-Entry Transfer”
before the expiration date; or
·
you
must comply with the procedures
described under “Guaranteed Delivery Procedures.”
Your
tender, if not withdrawn before the expiration date, will constitute an
agreement between you and us in accordance with the terms and subject to the
conditions described in this prospectus and in the letter of transmittal.
The
method of delivery of private notes and the letter of transmittal and all other
required documents to the exchange agent is at your election and risk. We
recommend that, instead of delivery by mail, you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to ensure
delivery to the exchange agent prior to the expiration date. You should not
send
letters of transmittal or private notes to us. You may request that your
respective brokers, dealers, commercial banks, trust companies or nominees
effect the transactions described above for you.
If you
are a beneficial owner whose private notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and you wish
to
tender your private notes, you should contact such registered
23
Back to Table of Contents
holder
promptly and instruct such registered holder to tender on your behalf. If you
wish to tender on your own behalf, prior to completing and executing the letter
of transmittal and delivering your private notes, you must either:
·
make
appropriate arrangements to register
ownership of your private notes in your name; or
·
obtain
a properly completed bond power from
the registered holder.
The
transfer of record ownership may take considerable time unless private notes
are
tendered:
·
by
a registered holder who has not
completed the box entitled “Special Registration Instructions” or “Special
Delivery Instruction” on the letter of transmittal; or
·
for
the account of an “Eligible
Institution” which is either:
·
a
member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc.;
·
a
commercial bank or trust company located
or having an office or correspondent in the United States; or
·
otherwise
an “eligible guarantor
institution” within meaning of Rule 17Ad-15 under the Exchange Act.
An
Eligible Institution must guarantee the signatures on a letter of transmittal
or
a notice of withdrawal described below under “— Withdrawal of Tenders.”
If the
letter of transmittal is signed by a person other than the registered holder,
such private notes must be endorsed or accompanied by appropriate bond powers
which authorize such person to tender the private notes on behalf of the
registered holder, in either case signed as the name of the registered holder
or
holders appears on the private notes.
If the
letter of transmittal or any private notes or bond powers are signed or endorsed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such
persons should so indicate when signing, and unless waived by us, they must
submit evidence satisfactory to us of their authority to so act with the letter
of transmittal.
The
letter of transmittal will include representations to us as set forth under
“Resale of Exchange Notes.”
You
should note that:
·
all
questions as to the validity, form,
eligibility, including time of receipt, acceptance and withdrawal of the
tendered private notes will be determined by us in our sole discretion, which
determination will be final and binding;
·
we
reserve the absolute right to reject any
and all private notes not properly tendered or any private notes the acceptance
of which would, in our judgment or the judgment of our counsel, be
unlawful;
·
we
also reserve the absolute right to waive
any irregularities or conditions of tender as to particular private notes.
Our
interpretation of the terms and conditions of the exchange offer, including
the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of private notes must be cured within such time as we shall
determine;
·
although
we intend to notify holders of
defects or irregularities with respect to any tender of private notes, neither
we, the exchange agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to tenders of private
notes, nor shall any of them incur any liability for failure to give such
notification; and
·
tenders
of private notes will not be deemed
to have been made until such irregularities have been cured or waived. Any
private notes received by the exchange agent that we determine are not properly
tendered or the tender of which is otherwise rejected by us and as to which
the
defects or irregularities have not been cured or waived by us will be returned
by the exchange agent to the tendering holder unless otherwise provided in
the
letter of transmittal, as soon as practicable following the expiration
date.
24
The
exchange agent will make a request promptly after the date of this prospectus
to
establish accounts with respect to the private notes at DTC for the purpose
of
facilitating the exchange offer. Any financial institution that is a participant
in DTC’s system may make book-entry delivery of private notes by causing DTC to
transfer such private notes into the exchange agent’s account with respect to
the private notes in accordance with DTC’s Automated Tender Offer Program
procedures for such transfer. However, the exchange for the private notes so
tendered will only be made after timely confirmation of such book-entry transfer
of private notes into the exchange agent’s account, and timely receipt by the
exchange agent of an agent’s message and any other documents required by the
letter of transmittal. The term “agent’s message” means a message, transmitted
by DTC and received by the exchange agent and forming a part of the confirmation
of a book-entry transfer, which states that DTC has received an express
acknowledgment from a participant that is tendering private notes that such
participant has received the letter of transmittal and agrees to be bound by
the
terms of the letter of transmittal, and that we may enforce such agreement
against the participant.
Although
delivery of private notes may be effected through book-entry transfer into
the
exchange agent’s account at DTC, you must transmit and the exchange agent must
receive, the letter of transmittal (or facsimile thereof) properly completed
and
duly executed with any required signature guarantee and all other required
documents prior to the expiration date, or you must comply with the guaranteed
delivery procedures described below. Delivery of documents to DTC does not
constitute delivery to the exchange agent.
Guaranteed Delivery
Procedures
If you
wish to tender your private notes but your private notes are not immediately
available, or time will not permit your private notes or other required
documents to reach the exchange agent before the expiration date, or the
procedure for book-entry transfer cannot be completed on a timely basis, you
may
affect a tender if:
1.
the tender is made through an
Eligible Institution;
2.
prior to the expiration date, the
exchange agent receives from such Eligible Institution a properly completed
and
duly executed notice of guaranteed delivery, by facsimile transmittal, mail
or
hand delivery:
·
stating
the name and address of the holder,
the certificate number or numbers of such holder’s private notes and the
principal amount of such private notes tendered;
·
stating
that the tender is being made
thereby; and
·
guaranteeing
that, within three New York
Stock Exchange trading days after the expiration date, the letter of
transmittal, or a facsimile thereof, together with the certificate(s)
representing the private notes to be tendered in proper form for transfer,
or
confirmation of a book-entry transfer into the exchange agent’s account at DTC
of private notes delivered electronically, and any other documents required
by
the letter of transmittal, will be deposited by the Eligible Institution with
the exchange agent; and
3.
such properly completed and
executed letter of transmittal, or a facsimile thereof, together with the
certificate(s) representing all tendered private notes in proper form for
transfer, or confirmation of a book-entry transfer into the exchange agent’s
account at DTC of private notes delivered electronically and all other documents
required by the letter of transmittal are received by the exchange agent within
three New York Stock Exchange trading days after the expiration date.
Upon
request, the exchange agent will send to you a notice of guaranteed delivery
if
you wish to tender your private notes according to the guaranteed delivery
procedures described above.
Withdrawal of
Tenders
Except
as
otherwise provided in this prospectus, you may withdraw tenders of private
notes
at any time prior to the expiration date.
For a
withdrawal to be effective, the exchange agent must receive a written or
facsimile transmission notice of withdrawal at its address set forth this
prospectus prior to the expiration date. Any such notice of withdrawal
must:
·
specify
the name of the person who
deposited the private notes to be withdrawn;
25
·
identify
the private notes to be withdrawn,
including the certificate number or number and principal amount of such private
notes or, in the case of private notes transferred by book-entry transfer,
the
name and number of the account at DTC to be credited; and
·
be
signed in the same manner as the
original signature on the letter of transmittal by which such private notes
were
tendered, including any required signature guarantee.
We will
determine in our sole discretion all questions as to the validity, form and
eligibility, including time of receipt, of such withdrawal notices, and our
determination shall be final and binding on all parties. We will not deem any
properly withdrawn private notes to have been validly tendered for purposes
of
the exchange offer, and we will not issue new notes with respect those private
notes unless you validly retender the withdrawn private notes. You may retender
properly withdrawn private notes following one of the procedures described
above
under
“— Procedures for Tendering” at any time prior to the expiration
date.
Conditions
Notwithstanding
any other term of the exchange offer, we will not be required to accept for
exchange, or exchange the new notes for, any private notes, and may terminate
the exchange offer as provided in this prospectus before the acceptance of
the
private notes, if:
·
the
exchange offer violates applicable law,
rules or regulations or an applicable interpretation of the staff of the
SEC;
·
an
action or proceeding has been instituted
or threatened in any court or by any governmental agency which might materially
impair our ability to proceed with the exchange offer;
·
there
has been proposed, adopted or enacted
any law, rule or regulation that, in our reasonable judgment would impair
materially our ability to consummate the exchange offer; or
·
all
governmental approvals which we deem
necessary for the completion of the exchange offer have not been
obtained.
If we
determine in our reasonable discretion that any of these conditions are not
satisfied, we may:
·
refuse
to accept any private notes and
return all tendered private notes to you;
·
extend
the exchange offer and retain all
private notes tendered before the exchange offer expires, subject, however,
to
your rights to withdraw the private notes; or
·
waive
the unsatisfied conditions with
respect to the exchange offer and accept all properly tendered private notes
that have not been withdrawn.
If the
waiver constitutes a material change to the exchange offer, we will promptly
disclose the waiver by means of a prospectus supplement that we will distribute
to the registered holders of the private notes.
Exchange
Agent
We have
appointed Wilmington Trust Company, the trustee under the indenture, as exchange
agent for the exchange offer. You should send all executed letters of
transmittal to the exchange agent at one of the addresses set forth below.
In
such capacity, the exchange agent has no fiduciary duties and will be acting
solely on the basis of directions of our company. You should direct questions,
requests for assistance and requests for additional copies of this prospectus
or
of the letter of transmittal and requests for a notice of guaranteed delivery
to
the exchange agent addressed as follows:
By
Certified or Registered Mail:
Wilmington Trust Company
Rodney
Square North
1100 North Market Street
Wilmington, DE
19890-1626
Attention: Alisha Clendaniel
26
Back to Table of Contents
By
Overnight Courier or Hand Delivery:
Wilmington Trust
Company
Rodney Square North
1100 North Market Street
Wilmington, DE
19890-1626
Attention: Alisha Clendaniel
By
Facsimile:
(302) 636-4139
Attention: Exchanges
Confirm
By Telephone:
(302)
636-6470
For Information Call
(302) 636-6470
Delivery
to an address or facsimile number other than those listed above will not
constitute a valid delivery.
The
trustee does not assume any responsibility for and makes no representation
as to
the validity or adequacy of this prospectus or the notes.
Solicitation of
Tenders; Fees and Expenses
We
will pay all expenses of soliciting tenders pursuant to the exchange offer.
We
are making the principal solicitation by mail. Our officers and regular
employees may make additional solicitations in person or by telephone or
telecopier.
We
have not retained any dealer-manager in connection with the exchange offer
and
will not make any payments to brokers, dealers or other persons soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse the exchange
agent for its reasonable out-of-pocket costs and expenses in connection
therewith.
We
also may pay brokerage houses and other custodians, nominees and fiduciaries
the
reasonable out-of-pocket expenses incurred by them in forwarding copies of
this
prospectus, letters of transmittal and related documents to the beneficial
owners of the private notes and in handling or forwarding tenders for
exchange.
We
will pay the expenses to be incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting
and
legal fees and printing costs.
We
will pay all transfer taxes, if any, applicable to the exchange of private
notes
for new notes pursuant to the exchange offer. If, however, certificates
representing new notes or private notes for principal amounts not tendered
or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the private
notes
tendered, or if tendered private notes are registered in the name of any person
other than the person signing the letter of transmittal, or if a transfer tax
is
imposed for any reason other than the exchange of private notes pursuant to
the
exchange offer, then the amount of any such transfer taxes, whether imposed
on
the registered holder or any other persons, will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the letter of transmittal, the amount of such transfer
taxes will be billed by us directly to such tendering holder.
Consequences of
Failure to Exchange
Participation
in the exchange offer is voluntary. We urge you to consult your financial and
tax advisors in making your decisions on what action to take. Private notes
that
are not exchanged for new notes pursuant to the exchange offer will remain
restricted securities. Accordingly, those private notes may be resold
only:
·
to
a person whom the seller reasonably
believes is a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A promulgated under the Securities Act;
·
in
a transaction meeting the requirements
of Rule 144 promulgated under the Securities Act;
·
outside
the United States to a foreign
person in a transaction meeting the requirements of Rule 903 or 904 of
Regulation S promulgated under the Securities Act;
27
·
in
accordance with another exemption from
the registration requirements of the Securities Act and based upon an opinion
of
counsel if we so request;
·
to
us; or
·
pursuant
to an effective registration
statement.
In
each case, the private notes may be resold only in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction.
28
The
following table contains (1) our selected consolidated statement of operations
and other financial data for the fiscal years ended December 31, 2006,
2005, 2004, 2003 and 2002 and our selected consolidated balance sheet data
at December 31, 2006, 2005, 2004, 2003 and 2002, which have been
derived from our audited consolidated financial statements not included in
this
prospectus and which are incorporated by reference herein and (2) our selected
consolidated statement of operations and other financial data for the three
months ended March 31, 2007 and 2006 and our selected consolidated balance
sheet data at March 31, 2007, which have been derived from our unaudited
consolidated financial statements not included in this prospectus and which
are
incorporated by reference herein. You should read the selected consolidated
financial data of AREP in conjunction with its financial statements and the
related notes and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” incorporated by reference herein from our (i) Annual
Reports on Form 10-K for the years ended December 31, 2006, 2005, 2004,
2003 and 2002 and (ii) Quarterly Report on Form 10-Q for the three months ended
March 31, 2007 (referred to herein as the 2007 three-month period). The
selected consolidated financial data as of March 31, 2007 and for the three
months ended March 31, 2007 and 2006 are unaudited. For the three months
ended March 31, 2007 and 2006, all adjustments, consisting only of normal
and recurring adjustments, except for the adoption of SFAS No. 159 as described
in Note 1 to our consolidated financial statements included in our Quarterly
Report on Form 10-Q for the 2007 three-month period, which are, in our opinion,
necessary for a fair presentation of the interim consolidated financial
statements, have been included. Results for the 2007 three-month period
are not necessarily indicative of the results for the full year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three
Months
Ended
March 31,
|
|
Year
Ended December 31,
|
|
| |
|
2007
|
|
2006
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
| |
|
(in
000s, except per unit amounts and ratio)
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$
|
351,379
|
|
$
|
350,147
|
|
$
|
1,477,930
|
|
$
|
900,962
|
|
$
|
361,538
|
|
$
|
309,213
|
|
$
|
358,109
|
|
|
Income
(loss) from continuing operations
|
|
$
|
68,717
|
|
$
|
(9,416
|
)
|
$
|
23,069
|
|
$
|
(22,656
|
)
|
$
|
65,176
|
|
$
|
42,415
|
|
$
|
53,046
|
|
|
Total
income (loss) from discontinued operations
|
|
$
|
27,861
|
|
$
|
59,146
|
|
$
|
775,764
|
|
$
|
(3,013
|
)
|
$
|
88,578
|
|
$
|
26,005
|
|
$
|
(4,320
|
)
|
|
Earnings
(loss) before cumulative effect of
accounting change
|
|
$
|
96,578
|
|
$
|
49,730
|
|
$
|
798,833
|
|
$
|
(25,669
|
)
|
$
|
153,754
|
|
$
|
68,420
|
|
$
|
48,726
|
|
|
Cumulative
effect of accounting change
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,912
|
|
|
—
|
|
|
Net
earnings (loss)
|
|
$
|
96,578
|
|
$
|
49,730
|
|
$
|
798,833
|
|
$
|
(25,669
|
)
|
$
|
153,754
|
|
$
|
70,332
|
|
$
|
48,726
|
|
|
Net
earnings (loss) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
partners
|
|
$
|
94,656
|
|
$
|
48,741
|
|
$
|
782,936
|
|
$
|
(20,292
|
)
|
$
|
130,850
|
|
$
|
51,074
|
|
$
|
63,168
|
|
|
General
partner
|
|
|
1,922
|
|
|
989
|
|
|
15,897
|
|
|
(5,377
|
)
|
|
22,904
|
|
|
19,258
|
|
|
(14,442
|
)
|
|
Net
earnings (loss)
|
|
$
|
96,578
|
|
$
|
49,730
|
|
$
|
798,833
|
|
$
|
(25,669
|
)
|
$
|
153,754
|
|
$
|
70,332
|
|
$
|
48,726
|
|
|
Basic
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations per
LP Unit
|
|
$
|
1.09
|
|
$
|
(0.15
|
)
|
$
|
0.40
|
|
$
|
(0.31
|
)
|
$
|
0.96
|
|
$
|
0.50
|
|
$
|
1.37
|
|
|
Income
from (loss) discontinued operations
per LP Unit
|
|
|
0.44
|
|
|
0.94
|
|
|
12.29
|
|
|
(0.05
|
)
|
|
1.88
|
|
|
0.55
|
|
|
(0.10
|
)
|
|
Basic
earnings (loss) per LP Unit
|
|
$
|
1.53
|
|
$
|
0.79
|
|
$
|
12.69
|
|
$
|
(0.36
|
)
|
$
|
2.84
|
|
$
|
1.05
|
|
$
|
1.27
|
|
|
Weighted
average limited partnership units outstanding
|
|
|
61,857
|
|
|
61,857
|
|
|
61,857
|
|
|
54,085
|
|
|
46,098
|
|
|
46,098
|
|
|
46,098
|
|
|
Diluted
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
1.09
|
|
$
|
(0.15
|
)
|
$
|
0.40
|
|
$
|
(0.31
|
)
|
$
|
0.95
|
|
$
|
0.50
|
|
$
|
1.20
|
|
|
Income
(loss) from discontinued operations
per LP Unit
|
|
|
0.44
|
|
|
0.94
|
|
|
12.29
|
|
|
(0.05
|
)
|
|
1.69
|
|
|
0.55
|
|
|
(0.08
|
)
|
|
Diluted
earnings (loss) per LP Unit
|
|
$
|
1.53
|
|
$
|
0.79
|
|
$
|
12,69
|
|
$
|
(0.36
|
)
|
$
|
2.64
|
|
$
|
1.05
|
|
$
|
1.12
|
|
|
Weighted
average limited partnership units and equivalent partnership units
outstanding
|
|
|
61,857
|
|
|
61,857
|
|
|
61,857
|
|
|
54,085
|
|
|
51,542
|
|
|
46,098
|
|
|
56,467
|
|
|
Other
financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared (per LP Unit)
|
|
$
|
0.15
|
|
$
|
0.10
|
|
$
|
0.40
|
|
$
|
0.20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Ratio
of earnings to fixed charges(1)
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|
2.0
|
|
|
2.2
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As
of
March 31,
|
|
As
of December 31,
|
| |
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003(1)
|
|
2002
|
| |
|
(in
$000s)
|
|
Balance
sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,331,521
|
|
$
|
1,912,235
|
|
$
|
460,091
|
|
$
|
762,708
|
|
$
|
487,498
|
|
$
|
79,540
|
|
Investments
|
|
|
765,495
|
|
|
719,047
|
|
|
820,817
|
|
|
350,527
|
|
|
167,727
|
|
|
395,495
|
|
Property,
plant and equipment, net
|
|
|
898,594
|
|
|
907,071
|
|
|
749,712
|
|
|
580,428
|
|
|
597,487
|
|
|
735,236
|
|
Total
assets
|
|
|
4,622,667
|
|
|
4,244,747
|
|
|
3,963,545
|
|
|
2,861,153
|
|
|
2,156,892
|
|
|
2,002,493
|
|
Long
term debt (including current portion
and debt related to assets held
for sale)
|
|
|
1,699,118
|
|
|
1,208,960
|
|
|
1,435,821
|
|
|
759,807
|
|
|
374,421
|
|
|
435,675
|
|
Liability
for preferred limited partnership
units(2)
|
|
|
119,073
|
|
|
117,656
|
|
|
112,067
|
|
|
106,731
|
|
|
101,649
|
|
|
—
|
|
Partners’
equity
|
|
|
2,347,478
|
|
|
2,310,655
|
|
|
1,495,532
|
|
|
1,641,755
|
|
|
1,527,396
|
|
|
1,387,253
|
——————
(1)
Represents
our ratio of earnings to fixed charges for the periods indicated. For purposes
of computing the ratio of earnings to fixed charges, earnings represent earnings
from continuing operations before income taxes, equity in earnings (loss) of
investees and minority interest plus fixed charges. Fixed charges include
(a) interest on indebtedness (whether expensed or capitalized),
(b) amortization premiums, discounts and capitalized expenses related to
indebtedness and (c) the portion of rent expense we believe to be
representative of interest. For fiscal years 2006 and 2005, fixed charges
exceeded earnings by $44.4 million and $15.9 million, respectively. For the
three months ended March 31, 2006, fixed charges exceeded earnings by $19.3
million.
(2)
On
July 1, 2003, we adopted Statement of Financial Accounting Standards No. 150
(SFAS 150), Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity. SFAS 150 requires that a financial
instrument, which is an unconditional obligation, be classified as a liability.
Previous guidance required an entity to include in equity financial instruments
that the entity could redeem in either cash or stock. Pursuant, to SFAS 150,
our
preferred units, which are an unconditional obligation, have been reclassified
from “Partners equity” to a liability account in the consolidated balance
sheets.
30
Back to Table of Contents
AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The
following unaudited pro forma condensed combined financial statements that
follow are presented to give effect to:
·
the
pending acquisition of Lear for an
aggregate cash purchase price of approximately $2.9 billion, funded in part
by approximately $1.3 billion from our cash and cash equivalents and
investments;
·
the
issuance of $2.6 billion of notes
to be issued to finance a portion of the Lear acquisition and finance and
replace a portion of Lear’s existing credit facilities; and
·
the
pending sale of American Casino &
Entertainment Properties LLC, or ACEP, our indirect wholly owned
subsidiary.
The
unaudited pro forma condensed combined financial statements are based on the
historical financial statements of AREP, ACEP and Lear, as well as the
assumptions and adjustments described below and in the accompanying notes to
the
unaudited pro forma condensed combined financial statements.
The
unaudited pro forma condensed combined balance sheet as of March 31, 2007
is presented as if the pending acquisition of Lear and the notes to be issued
to
finance the Lear acquisition occurred on March 31, 2007. The unaudited pro
forma condensed combined statements of operations for the three months ended
March 31, 2007 and the fiscal year ended December 31, 2006 has been
prepared to give effect to the unaudited pro forma adjustments necessary as
if
the pending acquisition of Lear and the notes to be issued to finance the Lear
acquisition had taken place on January 1, 2006.
As
described in Note 3 to the pro forma condensed combined financial statements,
on
October 16, 2006 and March 31, 2007, Lear completed the divestiture of
substantially all of its European and North American interior businesses,
respectively. Accordingly, the unaudited pro forma condensed combined statement
of operations for the three months ended March 31, 2007 gives effect to the
IAC
North America Transaction (as defined below) as if it had occurred as of January
1, 2007. The unaudited pro forma condensed combined statement of operations
for
the year ended December 31, 2006 gives effect to the IAC Europe Transaction
(as
defined below) and North America Transaction as if they had occurred as of
January 1, 2006.
The
unaudited pro forma condensed combined balance sheet as of March 31, 2007
is presented as if the pending sale of ACEP occurred on March 31, 2007. The
unaudited pro forma condensed combined statements of operations for the three
months ended March 31, 2007 and the years ended December 31, 2006,
2005 and 2004 has been prepared to give effect to the unaudited pro forma
adjustments necessary as if the pending sale of ACEP had taken place on
January 1, 2004. In accordance with SEC guidelines, such historical pro
forma statements of operations are presented for discontinued operations that
are not yet required to be reflected in historical statements.
The
preliminary allocation of the purchase price of Lear used in the unaudited
pro
forma condensed combined financial statements is based upon preliminary
estimates. The estimates and assumptions, some of which cannot be made prior
to
completion of the Lear acquisition, are subject to change upon the acquisition
date and finalization of the valuation of Lear’s assets and liabilities. Upon
completion of the acquisition, AREP expects to make additional adjustments,
and
these valuations could change significantly from those used in the pro forma
condensed combined financial data presented below. The final determination
of
the allocation of the purchase price will be based on the actual tangible and
intangible assets of Lear that exist as of the acquisition date.
The
unaudited pro forma condensed combined results do not purport to be indicative
of the financial position and results of operations that we will obtain in
the
future, or that we would have obtained if the pending sale of ACEP and
acquisition of Lear were effective as of the dates indicated above. The pro
forma adjustments are based upon currently available information and upon
certain assumptions that we believe are reasonable. The unaudited pro forma
condensed combined financial statements should be read in conjunction with
the
historical consolidated financial statements of AREP and Lear included in their
respective annual reports on Form 10-K and quarterly reports on Form 10-Q,
and
related amendments.
31
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE
SHEETS
(amounts in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
March
31, 2007
|
| |
|
Historical
|
|
Pro
Forma Adjustments
|
|
AREP
|
|
LEAR
|
Acquisition
of
Lear
|
|
|
|
Sale
of
ACEP
|
|
|
|
|
Pro
Forma
Results
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,331,521
|
|
$
|
330,400
|
|
$
|
(1,456,491
|
)
|
(4a)
|
|
$
|
1,004,450
|
|
(5a)
|
|
|
$
|
2,209,880
|
|
Investments
|
|
|
563,552
|
|
|
—
|
|
|
—
|
|
|
|
|
(3,159
|
)
|
(5b)
|
|
|
|
560,393
|
|
Inventories,
net
|
|
|
235,358
|
|
|
599,000
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
834,358
|
|
Trade,
notes and other receivables, net
|
|
|
169,841
|
|
|
2,412,700
|
|
|
—
|
|
|
|
|
(6,348
|
)
|
(5b)
|
|
|
|
2,576,193
|
|
Other
current assets
|
|
|
124,594
|
|
|
355,900
|
|
|
—
|
|
|
|
|
(18,535
|
)
|
(5b)
|
|
|
|
461,959
|
|
Total
current assets
|
|
|
3,424,866
|
|
|
3,698,000
|
|
|
(1,456,491
|
)
|
|
|
|
976,408
|
|
|
|
|
|
6,642,783
|
|
Property,
plant and equipment, net
|
|
|
898,594
|
|
|
1,425,900
|
|
|
—
|
|
|
|
|
(417,978
|
)
|
(5b)
|
|
|
|
1,906,516
|
|
Investments
|
|
|
201,943
|
|
|
183,200
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
385,143
|
|
Goodwill
|
|
|
—
|
|
|
2,006,600
|
|
|
2,182,900
|
|
(4b)
|
|
|
—
|
|
|
|
|
|
4,189,500
|
|
Intangible
assets
|
|
|
25,772
|
|
|
40,900
|
|
|
—
|
|
|
|
|
(2,370
|
)
|
(5b)
|
|
|
|
64,302
|
|
Other
assets
|
|
|
71,492
|
|
|
306,400
|
|
|
—
|
|
|
|
|
(41,631
|
)
|
(5b)
|
|
|
|
336,261
|
|
Total
assets
|
|
$
|
4,622,667
|
|
$
|
7,661,000
|
|
$
|
726,409
|
|
|
|
$
|
514,429
|
|
|
|
|
$
|
13,524,505
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND
PARTNERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
66,497
|
|
$
|
2,480,300
|
|
$
|
—
|
|
|
|
$
|
(6,749
|
)
|
(5b)
|
|
|
$
|
2,540,048
|
|
Accrued
expenses and other
current liabilities
|
|
|
168,744
|
|
|
1,181,000
|
|
|
—
|
|
|
|
|
210,981
|
|
(5b)
|
|
|
|
1,560,725
|
|
Current
portion of long-term debt
|
|
|
23,620
|
|
|
26,400
|
|
|
—
|
|
|
|
|
(502
|
)
|
(5b)
|
|
|
|
49,518
|
|
Total
current liabilities
|
|
|
258,861
|
|
|
3,687,700
|
|
|
—
|
|
|
|
|
203,730
|
|
|
|
|
|
4,150,291
|
|
Long-term
debt
|
|
|
1,675,498
|
|
|
2,431,800
|
|
|
1,481,600
|
|
(4c)
|
|
|
(257,202
|
)
|
(5b)
|
(5c)
|
|
|
5,331,696
|
|
Other
non-current liabilities
|
|
|
23,738
|
|
|
820,100
|
|
|
—
|
|
|
|
|
(6,144
|
)
|
(5b)
|
|
|
|
837,694
|
|
Preferred
limited partnership units
|
|
|
119,073
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
119,073
|
|
Total
long-term liabilities
|
|
|
1,818,309
|
|
|
3,251,900
|
|
|
1,481,600
|
|
|
|
|
(263,346
|
)
|
|
|
|
|
6,288,463
|
|
Total
Liabilities
|
|
|
2,077,170
|
|
|
6,939,600
|
|
|
1,481,600
|
|
|
|
|
(59,616
|
)
|
|
|
|
|
10,438,754
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
198,019
|
|
|
28,900
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
226,919
|
|
Partners’
equity
|
|
|
2,347,478
|
|
|
692,500
|
|
|
(755,191
|
)
|
(4d)
|
|
|
574,045
|
|
(5d)
|
|
|
|
2,858,832
|
|
Total
liabilities and partners’ equity
|
|
$
|
4,622,667
|
|
$
|
7,661,000
|
|
$
|
726,409
|
|
|
|
$
|
514,429
|
|
|
|
|
$
|
13,524,505
|
32
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
(amounts in 000s except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three
Months Ended March 31, 2007
|
|
| |
|
Historical
|
|
Pro
Forma Adjustments
|
|
| |
|
AREP
|
|
LEAR
|
|
Acquisition
of
Lear
|
|
|
|
Lear
IAC
Transaction
(4f)
|
|
|
Sale
of
ACEP
(5e)
|
|
Pro
Forma
Results
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lear
Automotive
|
|
$
|
—
|
|
$
|
4,406,100
|
|
$
|
—
|
|
|
|
$
|
(580,500
|
)
|
|
$
|
—
|
|
$
|
3,825,600
|
|
|
Gaming
|
|
|
112,888
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(112,888
|
)
|
|
—
|
|
|
Real
Estate
|
|
|
27,887
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
27,887
|
|
|
Home
Furnishings
|
|
|
210,604
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
210,604
|
|
| |
|
|
351,379
|
|
|
4,406,100
|
|
|
—
|
|
|
|
|
(580,500
|
)
|
|
|
(112,888
|
)
|
|
4,064,091
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lear
Automotive
|
|
|
—
|
|
|
4,220,700
|
|
|
—
|
|
|
|
|
(579,600
|
)
|
|
|
—
|
|
|
3,641,100
|
|
|
Loss
on divestiture of Lear’s Interior business
|
|
|
—
|
|
|
25,600
|
|
|
—
|
|
|
|
|
(25,600
|
)
|
|
|
—
|
|
|
—
|
|
|
Gaming
|
|
|
89,661
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(89,661
|
)
|
|
—
|
|
|
Real
Estate
|
|
|
23,606
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
23,606
|
|
|
Home
Furnishings
|
|
|
249,619
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
249,619
|
|
|
Holding
Company Expenses
|
|
|
7,679
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
7,679
|
|
| |
|
|
370,565
|
|
|
4,246,300
|
|
|
—
|
|
|
|
|
(605,200
|
)
|
|
|
(89,661
|
)
|
|
3,922,004
|
|
|
Operating
income (loss)
|
|
|
(19,186
|
)
|
|
159,800
|
|
|
—
|
|
|
|
|
24,700
|
|
|
|
(23,227
|
)
|
|
142,087
|
|
|
Other
income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(32,977
|
)
|
|
(51,500
|
)
|
|
(27,743
|
)
|
(4e)
|
|
|
200
|
|
|
|
5,436
|
|
|
(106,584
|
)
|
|
Interest
and other income
|
|
|
31,458
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(419
|
)
|
|
31,039
|
|
|
Other
income (expense), net
|
|
|
84,781
|
|
|
(17,200
|
)
|
|
—
|
|
|
|
|
3,100
|
|
|
|
—
|
|
|
70,681
|
|
|
Equity
on earnings of affiliate
|
|
|
—
|
|
|
1,300
|
|
|
—
|
|
|
|
|
(400
|
)
|
(4g)
|
|
—
|
|
|
900
|
|
|
Income
(loss) from continuing operations before
income taxes and minority
interests
|
|
|
64,076
|
|
|
92,400
|
|
|
(27,743
|
)
|
|
|
|
27,600
|
|
|
|
(18,210
|
)
|
|
138,123
|
|
|
Income
tax expense
|
|
|
(6,949
|
)
|
|
(32,400
|
)
|
|
—
|
|
|
|
|
1,600
|
|
(4h)
|
|
6,192
|
|
|
(31,557
|
)
|
|
Minority
interests
|
|
|
11,590
|
|
|
(10,100
|
)
|
|
—
|
|
|
|
|
(300
|
)
|
|
|
—
|
|
|
1,190
|
|
|
Income
(loss) from continuing operations
|
|
|
68,717
|
|
|
49,900
|
|
|
(27,743
|
)
|
|
|
|
28,900
|
|
|
|
(12,018
|
)
|
|
107,756
|
|
|
Income
(loss) from discontinued operations
|
|
|
27,861
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
12,018
|
|
|
39,879
|
|
|
Net
earnings
|
|
$
|
96,578
|
|
$
|
49,900
|
|
$
|
(27,743
|
)
|
|
|
$
|
28,900
|
|
|
$
|
—
|
|
$
|
147,635
|
|
|
Net
earnings (loss) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
partner
|
|
$
|
94,656
|
|
$
|
48,907
|
|
$
|
(27,191
|
)
|
|
|
$
|
28,325
|
|
|
$
|
—
|
|
$
|
144,697
|
|
|
General
partner
|
|
|
1,922
|
|
|
993
|
|
|
(552
|
)
|
|
|
|
575
|
|
|
|
—
|
|
|
2,938
|
|
| |
|
$
|
96,578
|
|
$
|
49,900
|
|
$
|
(27,743
|
)
|
|
|
$
|
28,900
|
|
|
$
|
—
|
|
$
|
147,635
|
|
|
Net earnings
per limited partnership unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.71
|
|
|
Income from discontinued operations
|
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.63
|
|
|
Basic
earnings per LP unit
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.34
|
|
|
Weighted average limited
partnership units outstanding:
|
|
|
61,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,857
|
|
|
Diluted earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.70
|
|
|
Income from discontinued operations
|
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.62
|
|
|
Diluted earnings per LP unit
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.32
|
|
|
Weighted average LP units
and equivalent partnership units outstanding
|
|
|
61,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,920
|
|
See accompanying notes
33
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
(amounts in 000s except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended December 31, 2006
|
|
| |
Historical
|
|
Pro
Forma Adjustments
|
|
| |
AREP
|
|
LEAR
|
|
Acquisition
of
Lear
|
|
|
Lear
IAC
Transactions
(4f)
|
|
Sale
of
ACEP
(5e)
|
|
Pro
Forma
Results
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lear
Automotive
|
|
$
|
—
|
|
$
|
17,838,900
|
|
$
|
—
|
|
|
$
|
(3,067,200
|
)
|
$
|
—
|
|
$
|
14,771,700
|
|
|
Gaming
|
|
|
385,699
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(385,699
|
)
|
|
—
|
|
|
Real
Estate
|
|
|
134,575
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
134,575
|
|
|
Home
Furnishings
|
|
|
957,656
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
957,656
|
|
| |
|
|
1,477,930
|
|
|
17,838,900
|
|
|
—
|
|
|
$
|
(3,067,200
|
)
|
|
(385,699
|
)
|
|
15,863,931
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lear
Automotive
|
|
|
—
|
|
|
17,545,500
|
|
|
—
|
|
|
|
(3,247,300
|
)
|
|
—
|
|
|
14,298,200
|
|
|
Loss
on divestiture of Lear’s Interior business
|
|
|
—
|
|
|
636,000
|
|
|
—
|
|
|
|
(636,000
|
)
|
|
—
|
|
|
—
|
|
|
Gaming
|
|
|
326,984
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(326,984
|
)
|
|
—
|
|
|
Real
Estate
|
|
|
106,621
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
106,621
|
|
|
Home
Furnishings
|
|
|
1,108,293
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,108,293
|
|
|
Holding
Company Expenses
|
|
|
25,822
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
25,822
|
|
| |
|
|
1,567,720
|
|
|
18,181,500
|
|
|
—
|
|
|
|
(3,883,300
|
)
|
|
(326,984
|
)
|
|
15,538,936
|
|
|
Operating
income (loss)
|
|
|
(89,790
|
)
|
|
(342,600
|
)
|
|
—
|
|
|
|
816,100
|
|
|
(58,715
|
)
|
|
324,995
|
|
|
Other
income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(106,612
|
)
|
|
(209,800
|
)
|
|
(110,972
|
)
|
(4e)
|
|
400
|
|
|
21,314
|
|
|
(405,670
|
)
|
|
Interest
and other income
|
|
|
52,672
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(2,239
|
)
|
|
50,433
|
|
|
Other
income (expense), net
|
|
|
99,277
|
|
|
(101,000
|
)
|
|
—
|
|
|
|
6,000
|
|
|
239
|
|
|
4,516
|
|
|
Equity
on earnings of affiliate
|
|
|
12,620
|
|
|
16,200
|
|
|
—
|
|
|
|
(43,400
|
)(4g)
|
|
—
|
|
|
(14,580
|
)
|
|
Loss
from continuing operations before income taxes and minority
interests
|
|
|
(31,833
|
)
|
|
(637,200
|
)
|
|
(110,972
|
)
|
|
|
779,100
|
|
|
(39,401
|
)
|
|
(40,306
|
)
|
|
Income
tax expense
|
|
|
(13,271
|
)
|
|
(54,900
|
)
|
|
—
|
|
|
|
(13,700
|
)(4h)
|
|
12,758
|
|
|
(69,113
|
)
|
|
Minority
interests
|
|
|
68,173
|
|
|
(18,300
|
)
|
|
—
|
|
|
|
(1,100
|
)
|
|
—
|
|
|
48,773
|
|
|
Income
(loss) from continuing operations
|
|
|
23,069
|
|
|
(710,400
|
)
|
|
(110,972
|
)
|
|
|
764,300
|
|
|
(26,643
|
)
|
|
(60,646
|
)
|
|
Income
(loss) from discontinued operations
|
|
|
775,764
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
26,643
|
|
|
802,407
|
|
|
Income
(loss) before cumulative effect of a change in accounting
principle
|
|
|
798,833
|
|
|
(710,400
|
)
|
|
(110,972
|
)
|
|
|
764,300
|
|
|
—
|
|
|
741,761
|
|
|
Cumulative
effect of a change in accounting principle
|
|
|
—
|
|
|
2,900
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
2,900
|
|
|
Net
earnings (loss)
|
|
$
|
798,833
|
|
$
|
(707,500
|
)
|
$
|
(110,972
|
)
|
|
$
|
764,300
|
|
$
|
—
|
|
$
|
744,661
|
|
|
Net
earnings (loss) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
partner
|
|
$
|
782,936
|
|
$
|
(693,420
|
)
|
$
|
(108,764
|
)
|
|
|
749,090
|
|
$
|
—
|
|
$
|
729,842
|
|
|
General
partner
|
|
|
15,897
|
|
|
(14,080
|
)
|
|
(2,208
|
)
|
|
|
15,210
|
|
|
—
|
|
|
14,819
|
|
| |
|
$
|
798,833
|
|
$
|
(707,500
|
)
|
$
|
(110,972
|
)
|
|
$
|
764,300
|
|
$
|
—
|
|
$
|
744,661
|
|
|
Net
earnings per limited partnership unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.93
|
)
|
|
Income
from discontinued operations
|
|
|
12.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.71
|
|
|
Cumulative
effect of a change in accounting principle
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.05
|
|
|
Basic
earnings (loss) per LP unit
|
|
$
|
12.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11.83
|
|
|
Weighted
average limited partnership units outstanding:
|
|
|
61,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,857
|
|
|
Diluted
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.93
|
)
|
|
Income
from discontinued operations
|
|
|
12.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.71
|
|
|
Cumulative
effect of a change in accounting principle
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.05
|
|
|
Diluted
earnings per LP unit
|
|
$
|
12.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11.83
|
|
|
Weighted
average LP units and equivalent partnership units outstanding:
|
|
|
61,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,857
|
|
See accompanying notes
34
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
(amounts in 000s except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended December 31, 2005
|
|
| |
|
Historical
|
|
Pro
Forma
Adjustments
|
|
|
|
| |
|
AREP
|
|
Sale
of
ACEP (5e)
|
|
Pro
Forma
Results
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
$
|
327,982
|
|
$
|
(327,982
|
)
|
$
|
—
|
|
|
Real
Estate
|
|
|
100,299
|
|
|
—
|
|
|
100,299
|
|
|
Home
Furnishings
|
|
|
472,681
|
|
|
—
|
|
|
472,681
|
|
| |
|
|
900,962
|
|
|
(327,982
|
)
|
|
572,980
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
|
260,955
|
|
|
(260,955
|
)
|
|
—
|
|
|
Real
Estate
|
|
|
82,512
|
|
|
—
|
|
|
82,512
|
|
|
Home
Furnishings
|
|
|
495,110
|
|
|
—
|
|
|
495,110
|
|
|
Holding
Company Expenses
|
|
|
12,478
|
|
|
—
|
|
|
12,478
|
|
|
Acquisition
costs
|
|
|
4,664
|
|
|
—
|
|
|
4,664
|
|
| |
|
|
855,719
|
|
|
(260,955
|
)
|
|
594,764
|
|
|
Operating
income (loss)
|
|
|
45,243
|
|
|
(67,027
|
)
|
|
(21,784
|
)
|
|
Other
income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(91,174
|
)
|
|
18,846
|
|
|
(72,328
|
)
|
|
Interest
and other income
|
|
|
42,791
|
|
|
(1,617
|
)
|
|
41,174
|
|
|
Other
income (expense), net
|
|
|
(12,861
|
)
|
|
(25
|
)
|
|
(12,886
|
)
|
|
Equity
on earnings of affiliate
|
|
|
1,375
|
|
|
—
|
|
|
1,375
|
|
|
Loss
from continuing operations before income taxes and minority
interests
|
|
|
(14,626
|
)
|
|
(49,823
|
)
|
|
(64,449
|
)
|
|
Income
tax expense
|
|
|
(18,170
|
)
|
|
16,789
|
|
|
(1,381
|
)
|
|
Minority
interests
|
|
|
10,140
|
|
|
—
|
|
|
10,140
|
|
|
Loss
from continuing operations
|
|
|
(22,656
|
)
|
|
(33,034
|
)
|
|
(55,690
|
)
|
|
Income
(loss) from discontinued operations
|
|
|
(3,013
|
)
|
|
33,034
|
|
|
30,021
|
|
|
Net
loss
|
|
$
|
(25,669
|
)
|
$
|
—
|
|
$
|
(25,669)
|
|
|
Net
loss attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
Limited
partner
|
|
$
|
(20,292
|
)
|
$
|
—
|
|
$
|
(20,292
|
)
|
|
General
partner
|
|
|
(5,377
|
)
|
|
—
|
|
|
(5,377
|
)
|
| |
|
$
|
(25,669
|
)
|
$
|
—
|
|
$
|
(25,669
|
)
|
|
Net loss
per limited partnership unit:
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$
|
(0.31
|
)
|
|
|
|
$
|
(0.90
|
)
|
|
Income from discontinued operations
|
|
|
(0.05
|
)
|
|
|
|
|
0.54
|
|
|
Basic
loss per LP unit
|
|
$
|
(0.36
|
)
|
|
|
|
$
|
(0.36
|
)
|
|
Weighted average limited
partnership units outstanding:
|
|
|
54,085
|
|
|
|
|
|
54,085
|
|
|
Diluted earnings:
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$
|
(0.31
|
)
|
|
|
|
$
|
(0.90
|
)
|
|
Income (loss) from discontinued operations
|
|
|
(0.05
|
)
|
|
|
|
|
0.54
|
|
|
Diluted loss per LP unit
|
|
$
|
(0.36
|
)
|
|
|
|
$
|
(0.36
|
)
|
|
Weighted average LP units
and equivalent partnership units outstanding
|
|
|
54,085
|
|
|
|
|
|
54,085
|
|
See accompanying notes
35
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
(amounts in 000s except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended December 31, 2004
|
|
| |
|
Historical
|
|
Pro
Forma
Adjustments
|
|
|
|
| |
|
AREP
|
|
Sale
of
ACEP (5e)
|
|
Pro
Forma
Results
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
$
|
299,981
|
|
$
|
(299,981
|
)
|
$
|
—
|
|
|
Real
Estate
|
|
|
61,557
|
|
|
—
|
|
|
61,557
|
|
| |
|
|
361,538
|
|
|
(299,981
|
)
|
|
61,557
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
|
251,119
|
|
|
(251,119
|
)
|
|
—
|
|
|
Real
Estate
|
|
|
49,681
|
|
|
—
|
|
|
49,681
|
|
|
Holding
Company Expenses
|
|
|
4,327
|
|
|
—
|
|
|
4,327
|
|
|
Acquisition
costs
|
|
|
414
|
|
|
—
|
|
|
414
|
|
| |
|
|
305,541
|
|
|
(251,119
|
)
|
|
54,422
|
|
|
Operating
income (loss)
|
|
|
55,997
|
|
|
(48,862
|
)
|
|
7,135
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(47,320
|
)
|
|
18,939
|
|
|
(28,381
|
)
|
|
Interest
and other income
|
|
|
42,145
|
|
|
(1,049
|
)
|
|
41,096
|
|
|
Other
income (expense), net
|
|
|
24,453
|
|
|
—
|
|
|
24,453
|
|
|
Income
(Loss) from continuing operations before income taxes
|
|
|
75,275
|
|
|
(30,972
|
)
|
|
44,303
|
|
|
Income tax expense
|
|
|
(10,099
|
)
|
|
10,099
|
|
|
—
|
|
|
Income
(loss) from continuing operations
|
|
|
65,176
|
|
|
(20,873
|
)
|
|
44,303
|
|
|
Income
from discontinued operations
|
|
|
88,578
|
|
|
20,873
|
|
|
109,451
|
|
|
Net
earnings
|
|
$
|
153,754
|
|
$
|
—
|
|
$
|
153,754
|
|
|
Net
earnings attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
Limited
partner
|
|
$
|
130,850
|
|
$
|
—
|
|
$
|
130,850
|
|
|
General
partner
|
|
|
22,904
|
|
|
—
|
|
|
22,904
|
|
| |
|
$
|
153,754
|
|
$
|
—
|
|
$
|
153,754
|
|
|
Net earnings
per limited partnership unit:
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.96
|
|
|
|
|
$
|
0.51
|
|
|
Income from discontinued operations
|
|
|
1.88
|
|
|
|
|
|
2.33
|
|
|
Basic
earnings per LP unit
|
|
$
|
2.84
|
|
|
|
|
$
|
2.84
|
|
|
Weighted average limited
partnership units outstanding:
|
|
|
46,098
|
|
|
|
|
|
46,098
|
|
|
Diluted earnings:
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.95
|
|
|
|
|
$
|
0.51
|
|
|
Income from discontinued operations
|
|
|
1.69
|
|
|
|
|
|
2.33
|
|
|
Diluted earnings per LP unit
|
|
$
|
2.64
|
|
|
|
|
$
|
2.84
|
|
|
Weighted average LP units
and equivalent partnership units outstanding
|
|
|
51,542
|
|
|
|
|
|
46,098
|
|
See accompanying notes
36
1. DESCRIPTION OF
TRANSACTIONS
Potential
Acquisition
On
February 9, 2007, we entered into an agreement and plan of merger pursuant
to
which we would acquire Lear for an aggregate consideration of approximately
$5.2
billion, including the assumption by the surviving entity of certain outstanding
indebtedness of Lear and the refinancing of Lear’s existing term loan and credit
facility. In connection with the planned merger, our subsidiary, AREP Car
Holdings Corp., entered into a commitment letter with Bank of America, N.A.,
and
Banc of America Securities LLC on February 8, 2007, pursuant to which Bank
of
America would act as the initial lender under two senior secured credit
facilities in an aggregate principal amount of $3.6 billion, consisting of
a
$1.0 billion senior secured revolving facility and a $2.6 billion senior secured
term loan B facility. The credit facilities, along with cash on hand, are
intended to refinance and replace Lear’s existing credit facilities and to fund
the transactions contemplated by the merger. We intend to fund approximately
$1.3 billion of the purchase price from our cash and cash equivalents and
investments. The transaction is conditioned upon (i) clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the applicable foreign
antitrust laws of certain other jurisdictions, (ii) approval of the merger
and
adoption of the merger agreement by Lear stockholders and (iii) other customary
closing conditions. AREP expects that the transaction will close on or about
July 1, 2007, or shortly thereafter, provided the foregoing conditions which
have not yet been satisfied or waived are satisfied or waived. There can be
no
assurance that we will be able to consummate the transaction.
Pending Sale
of
American Casino & Entertainment Properties LLC
On April
22, 2007, American Entertainment Properties Corp, or AEP, a wholly owned
indirect subsidiary of AREP, entered into a Membership Interest Purchase
Agreement with W2007/ACEP Holdings, LLC, an affiliate of Whitehall Street Real
Estate Funds, a series of real estate investment funds affiliated with Goldman,
Sachs & Co., to sell all of the issued and outstanding membership interests
of ACEP, which comprises our gaming operations, for $1.3 billion, plus or minus
certain adjustments such as working capital, more fully described in the
agreement. Pursuant to the terms of the agreement, AEP is required to cause
ACEP
to repay, from funds provided by AEP, the principal, interest, prepayment
penalty or premium due on ACEP’s 7.85% senior secured notes due 2012 and ACEP’s
senior secured credit facility. With this transaction, we anticipate realizing
a
gain of approximately $0.57 billion on our investments in ACEP, after income
taxes. ACEP’s casino assets are comprised of the Stratosphere Casino Hotel &
Tower, the Arizona Charlie’s Decatur, the Arizona Charlie’s Boulder and the
Aquarius Casino Resort. The transaction is subject to the approval of the Nevada
Gaming Commission and the Nevada State Gaming Control Board, as well as
customary conditions. The parties expect to close the transaction in
approximately December 2007; however, there can be no assurance that we will
be
able to consummate the transaction.
2. BASIS OF
PRESENTATION
AREP
accounts for acquisitions under Financial Accounting Standards Board Statement
No. 141, Business Combinations. In accordance with business combination
accounting, AREP will allocate the purchase price of Lear to the tangible and
intangible assets acquired and liabilities assumed based on their estimated
fair
values. AREP’s management has not yet determined the fair value of the assets
and liabilities to be acquired as the acquisition has not yet been consummated.
The final determination of such assumptions and estimates cannot be made until
AREP completes the acquisition of Lear. Therefore, for purposes of the pro
forma
financial statements, the excess of the purchase price over the book value
of
Lear’s assets and liabilities has been allocated to goodwill.
3. LEAR
ACQUISITION
The
purchase price and purchase price allocation below are preliminary estimates
as
the acquisition has not been completed and the date for which the assets to
be
acquired and liabilities to be assumed has not been determined.
37
3. LEAR ACQUISITION
–
(continued)
Preliminary
Purchase Price
The
total preliminary purchase price to be allocated is comprised of:
|
|
|
|
|
|
| |
|
(in
000s)
|
|
|
Purchase
of outstanding common stock of Lear at $36.00 per
share
|
|
$
|
2,857,991
|
|
|
Less:
amount to be allocated to the general partner(1)
|
|
|
(62,691
|
)
|
|
Total
preliminary purchase price to be allocated
|
|
$
|
2,795,300
|
|
——————
(1)
As
of
March 31, 2007, Icahn Partners LP, Icahn Partners Master Fund LP, Koala Holding
Limited Partnership and High River Limited Partnership, which are affiliates
of
Mr. Icahn, beneficially owned approximately 16% of Lear’s outstanding common
stock. In accordance with generally accepted accounting principles, in
connection with the acquisition of Lear stock, the excess of cash disbursed
over
the historical cost of the shares beneficially owned by Mr. Icahn, which amounts
to approximately $62.7 million, will be charged to AREP’s general partner’s
equity.
Preliminary
Purchase Price Allocation
For
purposes of the pro forma financial statements, AREP has used Lear’s assets and
liabilities as of March 31, 2007 as the basis for developing AREP’s fair value
estimates.
The
total preliminary purchase price will be allocated to Lear’s tangible and
intangible assets acquired, and liabilities assumed based on their estimated
fair values as of the acquisition date. The excess of the purchase price over
the net tangible and identifiable intangible assets will be recorded as
goodwill. For purposes of the accompanying pro forma financial statements,
the
total preliminary purchase price was allocated as follows:
|
|
|
|
|
|
| |
|
(in
000s)
|
|
|
Current
assets
|
|
$
|
3,579,600
|
|
|
Property,
plant & equipment, net
|
|
|
1,425,900
|
|
|
Investments
|
|
|
183,200
|
|
|
Other
non current assets
|
|
|
347,300
|
|
|
Goodwill,
net
|
|
|
4,189,500
|
|
|
Current
liabilities
|
|
|
(3,671,000
|
)
|
|
Long-term
debt
|
|
|
(2,431,800
|
)
|
|
Other
non current liabilities and minority interests
|
|
|
(827,400
|
)
|
|
Total
preliminary purchase price
allocation
|
|
$
|
2,795,300
|
|
Lear IAC
Transaction
On
October 16, 2006, Lear completed the contribution of substantially all of its
European interior business to International Automotive Components Group, LLC
(“IAC Europe”), its joint venture with WL Ross & Co. LLC and Franklin Mutual
Advisers, LLC, in exchange for a one-third equity interest in IAC Europe (the
“IAC Europe Transaction”). On March 31, 2007, Lear completed the transfer
of substantially all of the assets of its North American interior business
(as
well as its interests in two China joint ventures) to International Automotive
Components Group North America, Inc. (“IAC North America Transaction”). In
addition, a wholly owned subsidiary of Lear contributed approximately $27
million in cash to International Automotive Components Group North America,
LLC
(“IACNA”) in exchange for a 25% equity interest in IACNA and warrants for an
additional 7% of the current outstanding common equity of IACNA. In connection
with the IAC North America Transaction, International Automotive Components
Group North America, Inc. assumed the ordinary course liabilities of Lear’s
North American interior business, and Lear retained certain pre-closing
liabilities, including pension and postretirement liabilities incurred through
the closing date of the transaction.
For
accounting purposes, Lear’s interests in IACNA and IAC Europe will be accounted
for under the equity method of accounting. The pro forma adjustments related
to
Lear’s accounting for these equity investments do not
38
3. LEAR ACQUISITION
–
(continued)
reflect purchase accounting
adjustments to be recorded by IACNA and IAC Europe and do not reflect the
operations of other businesses acquired by IAC Europe. Consequently, the amounts
reflected in Lear’s unaudited pro forma condensed consolidated financial
statements are subject to change.
4. PRO FORMA
ADJUSTMENTS – LEAR ACQUISITION
The
following pro forma adjustments are included in the unaudited pro forma
condensed combined balance sheet:
4a
To
record the following adjustments to cash:
|
|
|
|
|
|
| |
|
(in
000s)
|
|
|
Estimated
proceeds from borrowings
|
|
$
|
2,600,000
|
|
|
Estimated
cash paid for Lear common
stock
|
|
|
(2,857,991
|
)
|
|
Estimated
transaction costs – Lear
|
|
|
(80,100
|
)
|
|
Estimated
repayment of Lear debt
|
|
|
(1,118,400
|
)
|
|
Total
adjustments to cash
|
|
$
|
(1,456,491
|
)
|
4b
To
record the following adjustments to goodwill:
|
|
|
|
|
| |
|
(in
000s)
|
|
Preliminary
fair
value
|
|
$
|
4,189,500
|
|
Historical
amount
|
|
|
2,006,600
|
|
Increase
|
|
$
|
2,182,900
|
4c
To
record the following adjustments to long-term debt:
|
|
|
|
|
|
| |
|
(in
000s)
|
|
|
Estimated
proceeds from
borrowings
|
|
$
|
2,600,000
|
|
|
Estimated
repayment of Lear debt
|
|
|
(1,118,400
|
)
|
|
Increase
|
|
$
|
1,481,600
|
|
4d
To eliminate Lear’s historical
stockholders’ equity and to record $62.7 million of the purchase price of Lear
stock allocated to the General Partner.
4e
To record additional interest
expense associated with the net increase in debt as per Note 4c above.
4f
To eliminate the results of
operations arising from the IAC North America Transaction and the IAC Europe
Transaction.
4g
To reflect Lear’s estimated equity
loss of $0.4 million and $42.1 million for the three months ended March 31,
2007
and the year ended December 31, 2006, respectively, related to its 25% ownership
interest in IACNA and Lear’s estimated equity loss of $1.3 million for the year
ended December 31, 2006 related to its one-third equity interest in IAC Europe.
These adjustments do not reflect purchase accounting adjustments to be made
by
IACNA and IAC Europe and do not reflect the operations of other businesses
acquired by IAC Europe.
4h
Primarily reflects the elimination
of tax expense relating to the IAC North America Transaction for the three
months ended March 31, 2007, and the elimination of tax benefits relating to
the
IAC North America Transaction and the IAC Europe transaction for the year ended
December 31, 2006.
39
5. PRO FORMA
ADJUSTMENTS – DISPOSITION OF ACEP
5a
To
record the following adjustments to cash:
|
|
|
|
|
|
| |
|
(in
000s)
|
|
|
Estimated
gross proceeds from sale of ACEP
|
|
$
|
1,300,000
|
|
|
Add:
net working capital
|
|
|
50,335
|
|
|
Total
proceeds
|
|
|
1,350,335
|
|
|
Repayment
of long-term debt (including redemption
fees)
|
|
|
(263,600
|
)
|
|
Net
proceeds
|
|
|
1,086,735
|
|
|
Estimated
transaction costs
|
|
|
(6,757
|
)
|
|
Stay
bonuses
|
|
|
(5,000
|
)
|
|
ACEP’s
cash balance included in net working capital
|
|
|
(70,528
|
)
|
|
Total
adjustments to cash
|
|
$
|
1,004,450
|
|
5b
Reflects the elimination of the
March 31, 2007 carrying value of the assets and liabilities of ACEP.
5c
Reflects the payment of ACEP’s
long-term debt by AREP of $255 million.
5d
Reflects the amount of the
estimated net gain on the transaction, net of income taxes.
5e
Reflects the reversal of revenues
and expenses included in income from continuing operations attributable to
the
sale of ACEP, net of income taxes.
40
General
You
can find the definitions of certain terms used in this description under the
subheading “Certain Definitions.” In this description, the word “AREP” refers
only to American Real Estate Partners, L.P., the words “AREP Finance” refer only
to AREP Finance, the word “AREH” refers only to American Real Estate Holdings
Limited Partnership, and the word “API” refers only to American Property
Investors, Inc., and, in each case, not to any of their respective Subsidiaries.
In addition, the word “notes” refers to the notes issued on January 17,
2007 together with the Existing Notes. For the avoidance of doubt, AREH will
be
deemed to be a Subsidiary of AREP for so long as AREH remains a Guarantor.
The
term “Issuers” refers to AREP and AREP Finance, collectively.
The
Issuers issued the private notes, and will issue the new notes, under the
indenture dated February 7, 2005 among the Issuers, AREH, as guarantor, and
Wilmington Trust Company, as trustee. The terms of the notes include those
stated in the indenture and those made part of the indenture by reference to
the
Trust Indenture Act of 1939. The notes issued on January 17, 2007 were
additional notes issued under the indenture described above. On February 1,
2005, the Issuers issued and sold $480.0 million of the Existing Notes. The
notes issued on January 17, 2007 are pari passu with, of the same series
as, and vote on any matter submitted to the noteholders with, the Existing
Notes. Subsequent to the consummation of the exchange offer, the publicly
registered exchange notes will be identical to, and will trade as a single
class
with, the Existing Notes.
The
following description is a summary of the material provisions of the indenture.
It does not restate the indenture in entirety. We urge you to read the indenture
because it and not this description, defines your rights as holders of the
notes. Copies of the indenture are available as set forth below under “—
Additional Information.” Certain defined terms used in this description but not
defined below under “— Certain Definitions” have the meanings assigned to them
in the indenture and the registration rights agreement.
For the
avoidance of doubt, the inclusion of exceptions to the provisions (including
covenants and definitions) set forth herein will not be interpreted to imply
that the matters permitted by the exception would be limited by the terms of
such provisions but for such exceptions.
The
registered holder of a note will be treated as the owner of it for all purposes.
Only registered holders will have rights under the indenture.
Brief Description
of
the Notes and the Note Guarantee
The
Notes
The notes
are:
·
the
general unsecured obligation of each of
the Issuers;
·
pari
passu in right of payment to all
existing and future senior Indebtedness of each of the Issuers;
·
senior
in right of payment to any future
subordinated Indebtedness of each of the Issuers; and
·
effectively
subordinated to the secured
Indebtedness of the Issuers to the extent of the value of the collateral
securing such Indebtedness. As of March 31, 2007, the Issuers did not have
any secured Indebtedness.
The Note
Guarantee
The
Guarantee of the notes is:
·
the
general unsecured obligation of
AREH;
·
pari
passu in right of payment to all
existing and future senior Indebtedness of AREH;
·
senior
in right of payment to any future
subordinated Indebtedness of AREH; and
·
effectively
subordinated to the secured
Indebtedness of AREH to the extent of the value of the collateral securing
such
Indebtedness. As of March 31, 2007, AREH had $108.0 million of secured
Indebtedness.
41
The
operations of AREP are conducted through its Subsidiaries (including AREH)
and,
therefore, AREP depends on the cash flow of AREP’s Subsidiaries and AREH to meet
its obligations, including its obligations under the notes. The notes will
not
be guaranteed by any of AREP’s Subsidiaries other than AREH. The notes and the
guarantee will be effectively subordinated in right of payment to all
Indebtedness and other liabilities and commitments (including trade payables
and
lease obligations) of AREP’s Subsidiaries (other than AREH). Any right of the
Issuers or AREH to receive assets of any of their Subsidiaries (other than
AREH)
upon that Subsidiary’s liquidation or reorganization (and the consequent right
of the holders of the notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary’s creditors, except to the extent
that any of the Issuers or AREH is itself recognized as a creditor of that
Subsidiary, in which case the claims of the Issuers and AREH would still be
subordinate in right of payment to any security in the assets of the Subsidiary
and any Indebtedness of the Subsidiary senior to that held by the Issuers or
AREH. The covenants of the notes do not restrict the ability of AREP’s
Subsidiaries, other than AREH, from incurring additional Indebtedness or
creating liens, nor do the covenants of the notes restrict the ability of AREH,
AREP or its Subsidiaries from making investments or entering into sale and
leaseback transactions. See “Risk Factors The notes will be effectively
subordinated to any secured indebtedness, and the indebtedness and liabilities
of our subsidiaries other than AREH” and “Risk Factors Our subsidiaries, other
than AREH, will not be subject to any of the covenants in the indenture for
the
notes and only AREH will guarantee the notes. We may not be able to rely on
the
cash flow or assets of our subsidiaries to pay our indebtedness.”
Principal, Maturity
and Interest
The
Issuers issued $500.0 million in aggregate principal amount of private
notes and will issue $500.0 million in aggregate principal amount of new
notes. The Issuers may issue additional notes (“Additional Notes”) from time to
time. Any offering of Additional Notes is subject to the covenant “— Certain
Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock.” In the
case of each series, the notes and any Additional Notes subsequently issued
under the indenture will be treated as a single class for all purposes under
the
indenture, including, without limitation, waivers, amendments, redemption and
offers to purchase. The Issuers will issue notes in denominations of $1,000
and
integral multiples of $1,000. The notes will mature on February 15,
2013.
Interest
on the notes will accrue at the rate of 7 1/8% per annum and is payable
semi-annually in arrears on February 15 and August 15, commencing on
February 15, 2007. Interest on overdue principal and interest and
Liquidated Damages, if any, will accrue at a rate that is 1% higher than the
then applicable interest rate on the notes. The Issuers will make each interest
payment to the holders of record on the immediately preceding February 1
and August 1.
Interest
on the notes will accrue from the date of original issuance or, if interest
has
already been paid, from the date it was most recently paid. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Methods of Receiving
Payments on the Notes
If a
noteholder holds at least $2.0 million aggregate principal amount of notes,
such holder may give wire transfer instructions to AREP and the Issuers will
instruct the trustee to pay all principal, interest and premium and Liquidated
Damages, if any, on that holder’s notes in accordance with those instructions.
All other payments on the notes will be made at the office or agency of the
paying agent and registrar within the City and State of New York unless the
Issuers elect to make interest payments by check mailed to the noteholders
at
their address set forth in the register of holders. In addition, all payments
will be subject to the applicable rules and procedures of the settlement systems
(including, if applicable, those of Euroclear and Clearstream), which may change
from time to time.
Paying Agent and
Registrar for the Notes
The
trustee will initially act as paying agent and registrar. The Issuers may change
the paying agent or registrar without prior notice to the holders of the notes,
and the Issuers or any of their Subsidiaries (including AREH) may act as paying
agent or registrar.
42
A holder
may transfer or exchange notes in accordance with the provisions of the
indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents in connection
with a transfer of notes. Holders will be required to pay all taxes due on
transfer. The Issuers will not be required to transfer or exchange any note
selected for redemption. Also, the Issuers will not be required to transfer
or
exchange any note for a period of 15 days before a selection of notes to be
redeemed.
Note
Guarantee
The notes
will be guaranteed by AREH. AREP may, at its option, add subsidiary Guarantors
to the notes. Each Guarantor’s obligations under its Note Guarantee will be
limited as necessary to prevent the Note Guarantee from constituting a
fraudulent conveyance under applicable law. See “Risk Factors — Federal and
state statutes allow courts, under specific circumstances, to void guarantees
and require noteholders to return payments received from the guarantor.”
Any
Guarantor’s Note Guarantee will be released:
(1)
upon the substitution of a successor to AREH or other release as described
under
the heading “Certain Covenants — Merger, Consolidation or Sale of Assets”;
and
(2)
upon legal defeasance or satisfaction and discharge of the indenture as provided
below under the captions “— Covenant Defeasance” and “— Satisfaction and
Discharge.”
Optional
Redemption
At any
time prior to February 15, 2008, the Issuers may on one or more occasions
redeem up to 35% of the aggregate principal amount of notes (including
Additional Notes) issued under the indenture at a redemption price of 107 1/8%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, with the net cash proceeds of one
or
more Equity Offerings; provided, however, that:
(1)
at least 65% of the aggregate principal amount of notes issued under the
indenture remains outstanding immediately after the occurrence of such
redemption (excluding notes held by AREP and its Subsidiaries (including any
Guarantor)); and
(2)
the redemption occurs within 60 days of the date of the closing of such Equity
Offering.
Except
pursuant to the preceding paragraph, the notes will not be redeemable at the
Issuers’ option prior to February 15, 2009.
On
or
after February 15, 2009, the Issuers may redeem all or a part of the notes
upon not less than 15 nor more than 60 days’ notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued
and
unpaid interest and Liquidated Damages, if any, on the notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on one of the years indicated below:
|
|
|
|
|
|
Year
|
|
Percentage
|
|
| |
|
|
|
|
2009
|
|
103.563
|
%
|
|
2010
|
|
101.781
|
%
|
|
2011
and thereafter
|
|
100.000
|
%
|
Mandatory Disposition
Pursuant to Gaming Laws
If any
Gaming Authority requires that a holder or Beneficial Owner of notes be
licensed, qualified or found suitable under any applicable Gaming Law and such
holder or Beneficial Owner:
(1)
fails to apply for a license, qualification or a finding of suitability within
30 days (or such shorter period as may be required by the applicable Gaming
Authority) after being requested to do so by the Gaming Authority; or
43
(2)
is denied such license or qualification or not found suitable; AREP shall then
have the right, at its option:
(a)
to require each such holder or Beneficial Owner to dispose of its notes within
30 days (or such earlier date as may be required by the applicable Gaming
Authority) of the occurrence of the event described in clause (1) or (2) above,
or
(b)
to redeem the notes of each such holder or Beneficial Owner, in accordance
with
Rule 14e-1 of the Exchange Act, if applicable, at a redemption price equal
to
the lowest of:
(i)
the principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to the earlier of the date of redemption, the date
30 days after such holder or Beneficial Owner is required to apply for a
license, qualification or finding of suitability (or such shorter period that
may be required by any applicable Gaming Authority) if such holder or Beneficial
Owner fails to do so (“Application Date”) or of the date of denial of license or
qualification or of the finding of unsuitability by such Gaming Authority;
(ii)
the price at which such holder or Beneficial Owner acquired the notes, together
with accrued and unpaid interest and Liquidated Damages, if any, to the earlier
of the date of redemption, the Application Date or the date of the denial of
license or qualification or of the finding of unsuitability by such Gaming
Authority; and
(iii)
such other lesser amount as may be required by any Gaming Authority.
Immediately
upon a determination by a Gaming Authority that a holder or Beneficial Owner
of
the notes will not be licensed, qualified or found suitable and must dispose
of
the notes, the holder or Beneficial Owner will, to the extent required by
applicable Gaming Laws, have no further right:
(1)
to exercise, directly or indirectly, through any trustee or nominee or any
other
person or entity, any right conferred by the notes, the Note Guarantee or the
indenture; or
(2)
to receive any interest, Liquidated Damages, dividend, economic interests or
any
other distributions or payments with respect to the notes and the Note Guarantee
or any remuneration in any form with respect to the notes and the Note Guarantee
from the Issuers, any Note Guarantor or the trustee, except the redemption
price
referred to above.
AREP
shall notify the trustee in writing of any such redemption as soon as
practicable. Any holder or Beneficial Owner that is required to apply for a
license, qualification or a finding of suitability will be responsible for
all
fees and costs of applying for and obtaining the license, qualification or
finding of suitability and of any investigation by the applicable Gaming
Authorities and the Issuers and any Note Guarantor will not reimburse any holder
or Beneficial Owner for such expense.
Mandatory
Redemption
The
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the notes.
Repurchase at the
Option of Holders
Change of
Control
If a
Change of Control occurs, each holder of notes will have the right to require
the Issuers to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that holder’s notes pursuant to a Change of Control offer
on the terms set forth in the indenture. In the Change of Control offer, the
Issuers will offer a Change of Control payment in cash equal to 101% of the
aggregate principal amount of notes repurchased plus accrued and unpaid interest
and Liquidated Damages, if any, on the notes repurchased, to the date of
purchase. Within 30 days following any Change of Control, the Issuers will
mail
a notice to each holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase notes on the Change
of Control payment date specified in the notice, which date will be no earlier
than 30 days and no later than 60 days from the date such notice is mailed,
pursuant to the procedures required by the indenture and described in such
notice.
44
On
the Change of Control payment date, the Issuers will, to the extent
lawful:
(1)
accept for payment all notes or portions of notes properly tendered and not
withdrawn pursuant to the Change of Control offer;
(2)
deposit with the paying agent an amount equal to the Change of Control payment
in respect of all notes or portions of notes properly tendered; and
(3)
deliver or cause to be delivered to the trustee the notes properly accepted
together with an Officers’ Certificate stating the aggregate principal amount of
notes or portions of notes being purchased by the Issuers.
The
paying agent will promptly mail to each holder of notes properly tendered the
Change of Control payment for such notes, and the trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each new note will be in a principal amount
of $1,000 or an integral multiple of $1,000. The Issuers will publicly announce
the results of the Change of Control offer on or as soon as practicable after
the Change of Control payment date.
The
provisions described above that require the Issuers to make a Change of Control
offer following a Change of Control will be applicable whether or not any other
provisions of the indenture are applicable. Except as described above with
respect to a Change of Control, the indenture does not contain provisions that
permit the holders of the notes to require that the Issuers repurchase or redeem
the notes in the event of a takeover, recapitalization or similar
transaction.
The
Issuers will not be required to make a Change of Control offer upon a Change
of
Control if a third party makes the Change of Control offer in the manner, at
the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control offer made by the Issuers and
purchases all notes properly tendered and not withdrawn under the Change of
Control offer.
The
definition of Change of Control includes a phrase relating to the sale, lease,
transfer, conveyance or other disposition by AREP or AREH of “all or
substantially all” of its properties or assets. Although there is a limited body
of case law interpreting the phrase “substantially all,” there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a holder of notes to require the Issuers to repurchase its notes
as a
result of a sale, lease, transfer, conveyance or other disposition of less
than
all of the assets of AREP or AREH to another Person or group may be uncertain.
In addition, under certain circumstances the definition of Change of Control
excludes certain sales, leases transfers, conveyances or other dispositions
even
if they constitute “all or substantially all” of the properties or assets of
AREP or AREH.
Certain
Covenants
Restricted
Payments
AREP
will
not, and will not permit any of its Subsidiaries (including any Guarantor)
to:
(1)
declare or pay any dividend or make any other distribution on account of AREP’s
or any of its Subsidiaries’ (including any Guarantor’s) Equity Interests or to
the holders of AREP’s or any of its Subsidiaries’ (including AREH’s) Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of AREP or to AREP
or a Subsidiary of AREP (including AREH));
(2)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving AREP)
any
Equity Interests of AREP; or
(3)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of AREP or any Guarantor
that is contractually subordinated to the notes or to any Note Guarantee
(excluding any intercompany Indebtedness between or among AREP and any of its
Subsidiaries (including any Guarantor)), except a payment of interest, Other
Liquidated Damages or principal at the Stated Maturity on such subordinated
Indebtedness (all such payments and other actions set forth in these clauses
(1) through (3) (except as excluded therein) above being collectively
referred to as “Restricted Payments”),
45
unless,
at the time of and after giving effect to such Restricted Payment:
(1)
no Default or Event of Default has occurred and is continuing or would occur
as
a consequence of such Restricted Payment;
(2)
AREP or any Guarantor would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at
the beginning of the most recently ended four-quarter period for which financial
statements are available, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of the covenant
described below under the caption
“— Incurrence of Indebtedness and Issuance
of Preferred Stock”; and
(3)
such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by AREP and its Subsidiaries (including any
Guarantor) after May 12, 2004 (excluding Restricted Payments permitted by
clauses (2), (3), (4), (6) and (8) of the next succeeding paragraph) is less
than the sum, without duplication, of:
(a)
50% of the Consolidated Net Income of AREP for the period (taken as one
accounting period) from July 1, 2006 to the end of AREP’s most recently
ended fiscal quarter for which financial statements are available at the time
of
such Restricted Payment (or, if such Consolidated Net Income for such period
is
a deficit, less 100% of such deficit); provided, however, that to the
extent any payments of Tax Amounts were not deducted in the calculation of
Consolidated Net Income during the applicable period, for purposes of this
clause (a), such payments of Tax Amounts will be deducted from Consolidated
Net
Income, plus
(b)
100% of the aggregate net cash proceeds received by AREP since May 12, 2004
as a contribution to its equity capital or from the issue or sale of Equity
Interests of AREP (excluding Disqualified Stock) or from the issue or sale
of convertible or exchangeable Disqualified Stock or convertible or exchangeable
debt securities of AREP that have been converted into or exchanged for such
Equity Interests (other than Equity Interests or Disqualified Stock or debt
securities sold to a Subsidiary of AREP (including AREH)).
So long
as no Default or Event of Default has occurred and is continuing or would be
caused thereby (except with respect to clauses (6) and (8), which payments
will
be permitted notwithstanding an Event of Default), the preceding provisions
will
not prohibit:
(1)
the payment of any dividend or the consummation of any irrevocable redemption
or
payment within 60 days after the date of declaration of the dividend or
giving of the redemption notice or becoming irrevocably obligated to make such
payment, as the case may be, if at the date of declaration or notice or becoming
irrevocably obligated to make such payment, the dividend or payment would have
complied with the provisions of the indenture;
(2)
the making of any Restricted Payment in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary of
AREP (including any Guarantor)) of, Equity Interests (other than Disqualified
Stock) or from the substantially concurrent contribution of equity capital
to AREP; provided, however, that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance
or
other acquisition will be excluded from clause (3)(b) of the preceding
paragraph;
(3)
the repurchase, redemption, defeasance or other acquisition or retirement for
value of Indebtedness of AREP or any Guarantor that is contractually
subordinated to the notes with the net cash proceeds from a substantially
concurrent incurrence of Permitted Refinancing Indebtedness;
(4)
the declaration or payment of any dividend or distribution by a Subsidiary
of
AREP (including any Guarantor) to the holders of its Equity Interests; provided,
that if any such dividend or distribution is paid to an Affiliate of the
Principal (other than AREP or any of its Subsidiaries (including any
Guarantor)), that any such dividend or distribution is paid on a pro rata basis
to all holders (including AREP or any of its Subsidiaries (including any
Guarantor)) that hold securities whose terms (either contractually or by law)
entitle them to the same distribution upon which such dividend or distribution
is paid;
(5)
the repurchase, redemption or other acquisition or retirement for value of
any
Equity Interests of AREP or any Subsidiary of AREP (including any Guarantor)
held by any member of AREP’s (or any of its Subsidiaries’ (including any
Guarantors)) management pursuant to any management equity subscription
46
agreement,
stock option agreement or similar agreement; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $2.0 million;
(6)
for so long as AREP is a partnership or otherwise a pass-through entity for
federal income tax purposes for any period, AREP may make cash distributions
to
its equity holders or partners in an amount not to exceed the Tax Amount for
such period; provided that a distribution of the Tax Amount shall be made no
earlier than 20 days prior to the due date for such tax (or the date that
quarterly estimated taxes are required to be paid) that would be payable by
AREP
if it were a Delaware corporation;
(7)
the purchase, redemption or retirement for value of Capital Stock of AREP not
owned by the Principal or any Affiliate of the Principal, provided that (a)
AREP
would, at the time of such Restricted Payment and after giving pro forma effect
thereto as if such Restricted Payment had been made at the beginning of the
most
recently ended four-quarter period for which financial statements are available,
have been permitted to incur at least $1.00 of additional Indebtedness pursuant
to the first paragraph of the covenant described below under the caption “—
Incurrence of Indebtedness and Issuance of Preferred Stock” and (b) after giving
effect to such purchase, redemption or retirement, the Partners’ Equity is at
least $1.0 billion;
(8)
the payment of dividends on the Preferred Units in the form of additional
Preferred Units or other Capital Stock of AREP (that is not Disqualified Stock)
or the payment of cash dividends on the Preferred Units in lieu of fractional
Preferred Units; provided that the aggregate amount of cash under this clause
(8) does not exceed $100,000 in any calendar year;
(9)
the purchase, redemption or retirement for value of the Preferred Units on
or
before March 31, 2010, provided that (a) AREP would, at the time of such
Restricted Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the most recently ended
four-quarter period for which financial statements are available, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described below under the caption “— Incurrence
of Indebtedness and Issuance of Preferred Stock” and (b) after giving effect to
such purchase, redemption or retirement, the Partners’ Equity is at least
$1.0 billion; and
(10)
other Restricted Payments in an aggregate amount not to exceed
$50.0 million since the date of the indenture.
For
purposes of determining compliance with this covenant, in the event that a
proposed Restricted Payment meets the criteria of more than one of the
categories of Restricted Payments described in clauses (1) through (10) above,
or is permitted to be made pursuant to the first paragraph of this covenant,
AREP shall, in its sole discretion, classify (or later reclassify, in whole
or
in part, in its sole discretion) such Restricted Payment in any manner that
complies with this covenant.
The
amount of all Restricted Payments (other than cash) will be the Fair Market
Value on the date of the Restricted Payment of the assets, property or
securities proposed to be transferred or issued by AREP or such Subsidiary
(including AREH), as the case may be, pursuant to the Restricted Payment.
Incurrence of
Indebtedness and Issuance of Preferred Stock
Neither
AREP nor any Guarantor will create, incur, issue, assume, guarantee or otherwise
become liable, contingently or otherwise, with respect to (collectively,
“incur”) any Indebtedness (including Acquired Debt), and neither AREP nor any
Guarantor will issue any Disqualified Stock; provided, however, that AREP or
any
Guarantor may incur Indebtedness (including Acquired Debt) or issue Disqualified
Stock, if immediately after giving effect to the incurrence of additional
Indebtedness (including Acquired Debt) or issuance of Disqualified Stock
(including a pro forma application of the net proceeds therefrom), the ratio
of
the aggregate principal amount of all outstanding Indebtedness (excluding
Indebtedness incurred pursuant to clauses (4), (7) and (8) of the following
paragraph and any Hedging Obligations of AREP’s Subsidiaries that are not
Guarantors) of AREP and its Subsidiaries (including any Guarantor) on a
consolidated basis determined in accordance with GAAP (including an amount
of
Indebtedness equal to the principal amount of any Guarantees by AREP or its
Subsidiaries (including any Guarantor) of any Indebtedness of a Person (that
is
not AREP or a Subsidiary) to the extent such Guarantees were not included in
computing AREP’s or its Subsidiaries’ (including any Guarantor’s) outstanding
Indebtedness) to the Tangible Net Worth of AREP and its Subsidiaries (including
any Guarantor) on a consolidated basis, would have been less than 1.75 to
1.
47
The
preceding paragraph of this covenant will not prohibit the incurrence of any
of
the following items of Indebtedness (collectively, “Permitted Debt”):
(1)
the incurrence by AREP or any Guarantor of Indebtedness represented by the
notes
to be issued on the date of the indenture and the exchange notes to be issued
pursuant to the registration rights agreement;
(2)
the incurrence by AREP or any Guarantor of Permitted Refinancing Indebtedness
in
exchange for, or the net proceeds of which are used to refund, refinance or
replace Indebtedness (other than intercompany Indebtedness) that was incurred
under the first paragraph of this covenant or clauses (1), (2) or (9) of this
paragraph or any Existing Indebtedness;
(3)
the incurrence by AREP or any Guarantor of intercompany Indebtedness between
or
among AREP and any of its Subsidiaries (including AREH) or the issuance of
Disqualified Stock by any Guarantor to AREP;
(4)
the incurrence by AREP or any Guarantor of Hedging Obligations that are incurred
in the normal course of business;
(5)
the incurrence by AREP or any Guarantor of Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds, so long as such
Indebtedness is covered within five business days;
(6)
the incurrence by AREP or any Guarantor of the Existing Indebtedness;
(7)
Indebtedness arising from any agreement entered into by AREP or AREH providing
for indemnification, purchase price adjustment or similar obligations, in each
case, incurred or assumed in connection with an asset sale;
(8)
Indebtedness of AREP or any Guarantor attributable to Bad Boy Guarantees;
and
(9)
the incurrence by AREP or any Guarantor of additional Indebtedness in an
aggregate principal amount at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (9), not to exceed
$10.0 million at any one time outstanding.
Neither
AREP nor any Guarantor will incur any Indebtedness (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of AREP or any Guarantor unless such Indebtedness is also contractually
subordinated in right of payment to the notes and the Note Guarantee, as
applicable, on substantially identical terms; provided, however, that no
Indebtedness of AREP or any Guarantor shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of AREP or any
Guarantor for purposes of this paragraph solely by virtue of being unsecured
or
secured to a lesser extent or on a junior Lien basis.
To the
extent AREP or any Guarantor incurs any intercompany Indebtedness, (a) if AREP
or any Guarantor is the obligor on such Indebtedness, such Indebtedness (other
than intercompany Indebtedness of any Guarantor to or from AREP or another
Guarantor) must be expressly subordinated to the prior payment in full in cash
of all Obligations with respect to the notes and (b)(i) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being
held
by a Person other than AREP or a Subsidiary of AREP (including any Guarantor)
and (ii) any sale or other transfer of any such Indebtedness to a Person that
is
not either AREP or a Subsidiary of AREP (including any Guarantor) shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by AREP
or any Guarantor, that is not intercompany Indebtedness; provided that in the
case of clause (a), that no restriction on the payment of principal, interest
or
other obligations in connection with such intercompany Indebtedness shall be
required by such subordinated terms except during the occurrence and
continuation of a Default or Event of Default.
For
purposes of determining compliance with this covenant, in the event that an
item
of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through (9) above or is entitled to
be
incurred pursuant to the first paragraph of this covenant, in each case, as
of
the date of incurrence thereof, AREP shall, in its sole discretion, classify
(or
later reclassify in whole or in part, in its sole discretion) such item of
Indebtedness in any manner that complies with this covenant and such
Indebtedness will be treated as having been incurred pursuant to such clauses
or
the first paragraph hereof, as the case may be, designated by AREP.
48
The
accrual of interest, the accretion or amortization of original issue discount,
the payment of interest or Other Liquidated Damages on any Indebtedness in
the
form of additional Indebtedness with the same terms, the reclassification of
preferred stock as Indebtedness due to a change in accounting principles, and
the payment of dividends on Disqualified Stock in the form of additional shares
of the same class of Disqualified Stock will not be deemed to be an incurrence
of Indebtedness or an issuance of Disqualified Stock for purposes of this
covenant. Notwithstanding any other provision of this covenant, the maximum
amount of Indebtedness that AREP or any Guarantor may incur pursuant to this
covenant shall not be deemed to be exceeded solely as a result of fluctuations
in exchange rates or currency values.
The
amount of any Indebtedness outstanding as of any date will be:
(1)
the accreted value of the Indebtedness, in the case of any Indebtedness issued
with original issue discount;
(2)
the principal amount of the Indebtedness, in the case of any other Indebtedness;
and
(3)
in respect of Indebtedness of another Person secured by a Lien on the assets
of
the specified Person, the lesser of:
(a)
the Fair Market Value of such assets at the date of determination; and
(b)
the amount of the Indebtedness of the other Person.
Limitation on
Liens
Neither
AREP nor any Guarantor will, (a) issue, assume or guarantee any Indebtedness
if
such Indebtedness is secured by a Lien upon, or (b) secure any then outstanding
Indebtedness by granting a Lien upon, any Principal Property of AREP or any
Guarantor, now owned or hereafter acquired by AREP or any Guarantor, without
effectively providing that the notes and the Note Guarantee shall be secured
equally and ratably with such Indebtedness, except that the foregoing
restrictions shall not apply to:
(1)
Liens on any Principal Property acquired after the Issuance Date to secure
or
provide for the payment of the purchase price or acquisition cost thereof;
(2)
Liens on Principal Property acquired after the Issuance Date existing at the
time such Principal Property is acquired;
(3)
Liens on any Principal Property acquired from a corporation merged with or
into
AREP or any Guarantor;
(4)
Liens in favor of AREP or any Guarantor;
(5)
Liens in existence on any Principal Property on the Issuance Date;
(6)
Liens on any Principal Property constituting unimproved real property
constructed or improved after the Issuance Date to secure or provide for the
payment or cost of such construction or improvement;
(7)
Liens in favor of, or required by, governmental authorities;
(8)
pledges or deposits in connection with workers’ compensation, unemployment
insurance and other social security legislation and deposits securing liability
to insure carriers under insurance arrangements;
(9)
Liens for taxes, assessments or governmental charges or statutory liens of
landlords, carriers, warehousemen, mechanics, suppliers, materialmen, repairmen
or other similar Liens arising in the ordinary course of business or in the
improvement or repair of any Principal Property not yet due or which are being
contested in good faith by appropriate proceedings;
(10)
any judgment attachment or judgment Lien not constituting an Event of
Default;
(11)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in
the
ordinary course of business and in the improvement or repair of any Principal
Property and which obligations are not expressly prohibited by the
indenture;
49
(12)
Liens to secure Indebtedness of AREP or any Guarantor attributable to Bad Boy
Guarantees;
(13)
Liens in favor of the trustee and required by the covenant “Maintenance of
Interest Coverage”;
(14)
Liens to secure margin Indebtedness; provided that such Liens are secured solely
by the applicable margin securities; or
(15)
any extension, renewal, substitution or replacement (or successive extensions,
renewals, substitutions or replacements), in whole or in part, of any Lien
referred to in the foregoing clauses (i) through (xiv), inclusive;
provided that in the case
of
clauses (1), (2) and (3) such Liens shall only extend to the Principal Property
so acquired (including through any merger or consolidation) and not to any
other
Principal Property of AREP or any Guarantor.
Maintenance of
Interest Coverage
On each
Quarterly Determination Date, the Fixed Charge Coverage Ratio of AREP and the
Guarantors will be at least 1.5 to 1.0 for the four consecutive fiscal quarters
most recently completed prior to such Quarterly Determination Date; provided
that, in the event that the Fixed Charge Coverage Ratio of AREP and the
Guarantors is less than 1.5 to 1.0 for such four consecutive fiscal quarters,
the Issuers shall be deemed to have satisfied this maintenance test if there
is
deposited, within 2 Business Days of such Quarterly Determination Date, an
amount in cash such that the deposited funds, together with any funds previously
deposited pursuant to this covenant (and that have not been paid out or
otherwise released) are in an amount equal to the Issuers’ obligations to pay
interest on the notes for one year; provided further, that the Issuers shall
grant to the trustee, on behalf of the holders of the notes, a first priority
security interest in such deposited funds. At any subsequent Quarterly
Determination Date, if the Fixed Charge Coverage Ratio of AREP and the
Guarantors is at least 1.5 to 1.0 for the four consecutive fiscal quarters
most
recently completed prior to such Quarterly Determination Date, such deposited
funds will be released from the security interest granted to the trustee and
paid to or at the direction of AREP.
Maintenance of
Total Unencumbered Assets
On each
Quarterly Determination Date, the ratio of Total Unencumbered Assets to the
then
outstanding principal amount of the Unsecured Indebtedness will be greater
than
1.5 to 1.0 as of the last day of the fiscal quarter most recently
completed.
Compliance with
Law
AREP
will, and will cause its Subsidiaries (including any Guarantor) to, comply
in
all material respects with all applicable laws, rules and regulations.
No Investment
Company
Neither
AREP nor any Guarantor will register as an “investment company” as such term is
defined in the Investment Company Act.
Merger,
Consolidation or Sale of Assets
AREP
will
not: (1) consolidate or merge with or into another Person (whether or not AREP,
is the surviving entity) or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of AREP in
one
or more related transactions, to another Person; unless:
(1)
either: (a) AREP is the surviving entity, or (b) the Person formed by or
surviving any such consolidation or merger (if other than AREP) or to which
such
sale, assignment, transfer, conveyance or other disposition has been made is
a
corporation, limited liability company or limited partnership entity organized
or existing under the laws of the United States, any state of the United States
or the District of Columbia;
(2)
the Person formed by or surviving any such consolidation or merger (if other
than AREP) or the Person to which such sale, assignment, transfer, conveyance
or
other disposition has been made assumes all the obligations of AREP under the
notes, the indenture and the registration rights agreement and upon such
assumption such Person will become the successor to, and be substituted for,
AREP thereunder and all
50
references
to AREP in each thereof shall then become references to such Person and such
Person shall thereafter be able to exercise every right and power of AREP
thereunder;
(3)
immediately after such transaction no Default or Event of Default exists;
(4)
AREP or the Person formed by or surviving any such consolidation or merger
(if
other than AREP), or to which such sale, assignment, transfer, conveyance or
other disposition has been made would, on the date of such transaction after
giving pro forma effect thereto and any related financing transactions as if
the
same had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described above under the caption “— Incurrence
of Indebtedness and Issuance of Preferred Stock; and
(5)
AREP has delivered to the trustee an Officers’ Certificate and opinion of
counsel, which may be an opinion of in-house counsel of AREP or an Affiliate,
each stating that such transaction complies with the terms of the
indenture.
Clauses
(1), (2) or (4) above will not apply to or be required to be complied with
in
connection with any merger or consolidation or the sale, assignment, transfer,
conveyance or other disposition of all or substantially all of AREP’s properties
or assets to:
(1)
an Affiliate that has no material assets or liabilities where the primary
purpose of such transaction is to change AREP into a corporation or other form
of business entity or to change the jurisdiction of formation of AREP and such
transaction does not cause the realization of any material federal or state
tax
liability that will be paid by AREP or any of its Subsidiaries (including AREH).
For purposes of this paragraph, the term material refers to any assets,
liabilities or tax liabilities that are greater than 5.0% of the Tangible Net
Worth of AREP and its Subsidiaries (including AREH) on a consolidated basis;
or
(2)
any Person; provided that AREP receives consideration in Cash Equivalents and
marketable securities with an aggregate Fair Market Value determined at the
time
of the execution of such relevant agreement of at least $1.0 billion for
such merger or consolidation or the sale, assignment, transfer, conveyance
or
other disposition of all or substantially all of AREP’s properties or assets. In
any transaction referred to in this clause (2), and subject to the terms and
conditions thereof, the trustee shall, without the need of any action by the
noteholders, (x) confirm that such Person shall not be liable for and release
such Person from, any obligation of AREP’s under the indenture and the notes and
(y) release any Guarantor from all obligations under its Note Guarantee if
such
Guarantor was directly or indirectly sold, assigned, transferred, conveyed
or
otherwise disposed of to such Person in such transaction.
AREP
or
the Person formed by or surviving any merger or consolidation will not have
to
comply with clause (4) above in connection with any merger or consolidation
if
the effect of the merger or consolidation is to cause the Capital Stock of
AREP
not owned by the Principal or any Affiliate of the Principal to be retired
or
extinguished for consideration that was provided by the Principal or an
Affiliate of the Principal (other than AREP or its Subsidiaries (including
AREH)
or the Person formed by or surviving any merger or consolidation) and the
Partners’ Equity immediately after giving effect to the merger or consolidation
is not less than the Partners’ Equity immediately prior to such merger or
consolidation.
In
addition, AREP may not lease all or substantially all of its properties or
assets, in one or more related transactions, to any other Person. In the case
of
a lease of all or substantially all of the assets of AREP, AREP will not be
released from its obligations under the notes or the indenture, as
applicable.
AREH
will
not: (1) consolidate or merge with or into another Person (whether or not AREH,
is the surviving entity) or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of AREH in
one
or more related transactions, to another Person; unless:
(1)
either: (a) AREH is the surviving entity, or (b) the Person formed by or
surviving any such consolidation or merger (if other than AREH) or to which
such
sale, assignment, transfer, conveyance or other disposition has been made is
a
corporation, limited liability company or limited partnership entity organized
or existing under the laws of the United States, any state of the United States
or the District of Columbia;
(2)
the Person formed by or surviving any such consolidation or merger (if other
than AREH) or the Person to which such sale, assignment, transfer, conveyance
or
other disposition has been made assumes all the
51
obligations
of AREH under the Note Guarantee (and becomes a Guarantor), the notes, the
indenture and the registration rights agreement, and upon such assumption such
Person will become the successor to, and be substituted for, AREH thereunder,
and all references to AREH in each thereof shall than become references to
such
Person and such Person shall thereafter be able to exercise every right and
power of AREH thereunder;
(3)
immediately after such transaction no Default or Event of Default exists;
(4)
AREH or the Person formed by or surviving any such consolidation or merger
(if
other than AREP), or to which such sale, assignment, transfer, conveyance or
other disposition has been made would, on the date of such transaction after
giving pro forma effect thereto and any related financing transactions as if
the
same had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described above under the caption
“—
Incurrence of Indebtedness and Issuance of Preferred Stock; and
(5) AREH
has delivered to the trustee an Officers’ Certificate and opinion of counsel
which may be an opinion of in-house counsel of AREP or an Affiliate, each
stating that such transaction complies with the terms of the indenture.
Clauses
(1), (2) or (4) above will not apply to or be required to be complied with
in
connection with any merger or consolidation or the sale, assignment, transfer,
conveyance or other disposition of all or substantially all of AREH’s properties
or assets to:
(1) an
Affiliate that has no material assets or liabilities where the primary purpose
of such transaction is to change AREH into a corporation or other form of
business entity or to change the jurisdiction of formation of AREH and such
transaction does not cause the realization of any material federal or state
tax
liability that will be paid by AREH or any of its Subsidiaries. For purposes
of
this paragraph, the term material refers to any assets, liabilities or tax
liabilities that are greater than 5.0% of the Tangible Net Worth of AREP and
its
Subsidiaries (including AREH) on a consolidated basis;
(2) any
Person; provided that AREP receives consideration in Cash Equivalents and
marketable securities with an aggregate Fair Market Value determined at the
time
of the execution of such relevant agreement of at least $1.0 billion for
such merger or consolidation or the sale, assignment, transfer, conveyance
or
other disposition of all or substantially all of AREH’s properties or assets;
or
(3) any
Person; provided that AREH receives consideration in Cash Equivalents and
marketable securities with an aggregate Fair Market Value determined at the
time
of the execution of such relevant agreement of at least $1.0 billion for
such merger or consolidation or the sale, assignment, transfer, conveyance
or
other disposition of all or substantially all of AREH’s properties or assets and
AREH remains a Subsidiary of AREP.
In any
transaction referred to in clause (2) or (3) above, and subject to the terms
and
conditions thereof, the trustee shall, without the need of any action by the
noteholders, (x) confirm that such other Person shall not be liable for and
shall be released from any obligation of AREP’s or AREH’s under the indenture,
the notes and the Note Guarantees, and (y) release any Guarantor from all
obligations under its Note Guarantee if such Guarantor was directly or
indirectly sold, assigned, transferred, conveyed or otherwise disposed of to
such Person in such transaction.
This
“Merger, Consolidation or Sale of Assets” covenant will not apply to:
(1)
any consolidation or merger, or any sale, assignment, transfer, conveyance,
lease or other disposition of assets between or among AREP, AREH or any one
or
more Guarantors; or
(2)
any sale, assignment, transfer, conveyance or other disposition of Cash
Equivalents, including, without limitation, any investment or capital
contribution of Cash Equivalents, or any purchase of property and assets,
including, without limitation, securities, debt obligations or Capital Stock,
with Cash Equivalents.
Transactions
with
Affiliates
AREP
will
not, and will not permit any of its Subsidiaries (including any Guarantor)
to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its
properties or assets to, or purchase any property or assets
52
Back to Table of Contents
from,
or enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, any Affiliate of AREP (each,
an
“
Affiliate Transaction”), unless:
(1)
the Affiliate Transaction is on terms that are not materially less favorable
to
AREP or the relevant Subsidiary (including any Guarantor) than those that would
have been obtained in a comparable transaction by AREP or such Subsidiary
(including any Guarantor) with an unrelated Person as determined in good faith
by the Board of Directors of AREP; and
(2)
AREP delivers to the trustee:
(a)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $2.0 million, a
resolution of the Board of Directors of AREP set forth in an Officers’
Certificate certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by a majority
of
the disinterested members of the Board of Directors of AREP; and
(b)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million,
an opinion as to the fairness to AREP or such Subsidiary (including any
Guarantor) of such Affiliate Transaction from a financial point of view issued
by an accounting, appraisal or investment banking firm of recognized
standing.
The
following items will not be deemed to be Affiliate Transactions and, therefore,
will not be subject to the provisions of the prior paragraph:
(1)
any employment agreement, employee benefit plan, officer or director
indemnification agreement or any similar arrangement entered into by AREP or
any
of its Subsidiaries (including any Guarantor) in the ordinary course of business
and payments pursuant thereto including payments or reimbursement of payments
by
API with respect to any such agreement, plan or arrangement entered into by
API
with respect to or for the benefit of officers or directors of API (other than
any such agreements, plans or arrangements entered into by AREP or any of its
Subsidiaries (including AREH) with Carl Icahn (other than employee benefit
plans
and officer or director indemnification agreements generally applicable to
officers and directors of API, AREP or its Subsidiaries (including AREH));
(2)
transactions between or among AREP, any Guarantor and/or their respective
Subsidiaries (except any Subsidiaries of which Carl Icahn or Affiliates of
Carl
Icahn (other then AREP, AREH or their Subsidiaries) own more than 10% of the
Voting Stock);
(3)
payment (or reimbursement of payments by API) of directors’ fees to Persons who
are not otherwise Affiliates of AREP;
(4)
any issuance of Equity Interests (other than Disqualified Stock) and Preferred
Unit Distributions of AREP to Affiliates of AREP;
(5)
Restricted Payments that do not violate the provisions of the indenture
described above under the caption “— Restricted Payments”;
(6)
transactions between AREP and/or any of its Subsidiaries (including any
Guarantor), on the one hand, and other Affiliates, on the other hand, for the
provision of goods or services in the ordinary course of business by such other
Affiliates; provided that such other Affiliate is in the business of providing
such goods or services in the ordinary course of business to unaffiliated third
parties and the terms and pricing for such goods and services overall are not
less favorable to AREP and/or its Subsidiaries (including AREH) than the terms
and pricing upon which such goods and services are provided to unaffiliated
third parties;
(7)
the provision or receipt of accounting, financial, management, information
technology and other ancillary services to or from Affiliates, provided that
AREP or its Subsidiaries (including any Guarantor) in the case of the provision
of such services, are paid a fee not less than its out of pocket costs and
allocated overhead (including a portion of salaries and benefits) and in the
case of the receipt of such services, paid a fee not more than such Person’s
out-of-pocket costs and allocated overhead (including a portion of salaries
and
benefits), in each case, as determined by AREP in its reasonable judgment;
53
(8)
the license of a portion of office space pursuant to a license agreement, dated
as of February 1, 1997, between AREP and an Affiliate of API and any
renewal thereof;
(9)
the payment to API and reimbursements of payments made by API of expenses
relating to AREP’s, AREH’s or any Guarantors’ status as a public company;
(10)
services provided and payments received by NEG from NEG Operating LLC,
TransTexas Gas Corporation and Panaco, Inc. pursuant to the NEG Management
Agreements;
(11)
the pledge by NEG of its interest in the Capital Stock of NEG Holding LLC
pursuant to the NEG Credit Agreement;
(12)
the exchange by AREH of its GB Securities for other securities of GB Holdings,
Inc.; provided that such exchange is on terms no less favorable to AREH as
the
exchange of GB Securities offered to other non-Affiliated Persons;
(13)
payments by AREH, AREP or any Subsidiary to API in connection with services
provided to AREH, AREP or any Subsidiary in accordance with the AREP Partnership
Agreement; and
(14)
the Acquisitions.
Reports
Whether
or not required by the rules and regulations of the SEC, so long as any notes
are outstanding, the Issuers will furnish to the holders of notes or cause
the
trustee to furnish to the holders of notes, within the time periods specified
in
the SEC’s rules and regulations:
(1)
all quarterly and annual reports that would be required to be filed with the
SEC
on Forms 10-Q and 10-K if the Issuers were required to file such reports;
and
(2)
all current reports that would be required to be filed with the SEC on Form
8-K
if the Issuers were required to file such reports.
All such
reports will be prepared in all material respects in accordance with all of
the
rules and regulations applicable to such reports. Each annual report on Form
10-K will include a report on the Issuers’ consolidated financial statements by
the Issuers’ certified independent accountants. In addition, the Issuers will
file a copy of each of the reports referred to in clauses (1) and (2) above
with
the SEC for public availability within the time periods specified in the rules
and regulations applicable to such reports (unless the SEC will not accept
such
a filing) and, if the SEC will not accept such a filing, will post the reports
on its website within those time periods.
If, at
any time, the Issuers are no longer subject to the periodic reporting
requirements of the Exchange Act for any reason, the Issuers will nevertheless
continue filing the reports specified in the preceding paragraphs of this
covenant with the SEC within the time periods specified above unless the SEC
will not accept such a filing. The Issuers will not take any action for the
purpose of causing the SEC not to accept any such filings. If, notwithstanding
the foregoing, the SEC will not accept the Issuers’ filings for any reason, the
Issuers will post the reports referred to in the preceding paragraphs on its
website within the time periods that would apply if the Issuers were required
to
file those reports with the SEC.
In
addition, the Issuers agree that, for so long as any notes remain outstanding,
if at any time they are not required to file with the SEC the reports required
by the preceding paragraphs, they will furnish to the holders of notes and
to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Events of Default
and
Remedies
The
following constitutes an Event of Default:
(1)
default in payment when due and payable, upon redemption or otherwise, of
principal or premium, if any, on the notes;
(2)
default for 30 days or more in the payment when due of interest or Liquidated
Damages on the notes;
54
(3)
failure by the Issuers to call or cause to be called for redemption or to
purchase or cause to be called any notes, in each case when required under
the
indenture;
(4)
failure by AREP or any Guarantor for 30 days after written notice from the
trustee to comply with the provisions described under the captions “— Restricted
Payments” or “— Incurrence of Indebtedness and Issuance of Preferred
Stock”;
(5)
failure by AREP or any Guarantor for 30 days after written notice from the
trustee to comply with the provisions described under the captions “—
Maintenance of Interest Coverage” or “— Maintenance of Total Unencumbered
Assets”;
(6)
failure by the Issuers or any Guarantor for 60 days after notice from the
trustee or the holders of at least 25% in aggregate principal amount of the
notes then outstanding to comply with any of their other agreements in the
indenture or the notes or the Note Guarantee;
(7)
default under any mortgage, indenture or instrument under which there is issued
or by which there is secured or evidenced any Indebtedness for money borrowed
by
the Issuers or any Guarantor or default on any Guarantee by the Issuers or
AREH
of Indebtedness, whether such Indebtedness or Guarantee now exists or is created
after the Issuance Date, which default (a) is caused by a failure to pay when
due at final maturity (giving effect to any grace period or waiver related
thereto) the principal of such Indebtedness (a “Payment Default”) or (b) results
in the acceleration of such Indebtedness prior to its express maturity and,
in
each case, the principal amount of any such Indebtedness as to which AREP or
any
Guarantor is obligated to pay, together with the principal amount of any other
such Indebtedness under which a Payment Default then exists or with respect
to
which the maturity thereof has been so accelerated or which has not been paid
at
maturity as to which AREP or any Guarantor is obligated to pay, aggregates
$10.0 million or more;
(8)
failure by the Issuers or any Guarantor to pay final judgments aggregating
in
excess of $10.0 million, which final judgments remain unpaid, undischarged
or unstayed for a period of more than 60 days after such judgment becomes a
final judgment;
(9)
except as permitted by the indenture, any Note Guarantee is held in any judicial
proceeding to be unenforceable or invalid or ceases for any reason to be in
full
force and effect, or AREH or any other Guarantor, or any Person acting on behalf
of any Guarantor, denies or disaffirms its obligations under its Note Guarantee;
and
(10)
certain events of bankruptcy or insolvency with respect to AREP or any Guarantor
that is a Significant Subsidiary.
If any
Event of Default (other than by reason of bankruptcy or insolvency) occurs
and
is continuing, the holders of more than 25% in principal amount of the then
outstanding notes may declare the principal, premium, if any, interest,
Liquidated Damages, if any, and any other monetary obligations on all the notes
to be due and payable immediately. Notwithstanding the foregoing, in the case
of
an Event of Default arising from certain events of bankruptcy or insolvency,
with respect to the Issuers or any Guarantor that is a Significant Subsidiary
all outstanding notes will become due and payable without further action or
notice. Holders of the notes may not enforce the indenture or the notes except
as provided in the indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power conferred on it. However, the
trustee may refuse to follow any direction that conflicts with law or the
indenture that the trustee determines may be unduly prejudicial to the rights
of
other holders of notes or that may involve the trustee in personal liability.
The trustee may withhold from holders of notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal or interest) if it determines that withholding notice
is in
the interests of the holders of the notes. In addition, the trustee shall have
no obligation to accelerate the notes if in the best judgment of the trustee
acceleration is not in the best interest of the holders of the notes.
At any
time after a declaration of acceleration with respect to the notes and subject
to certain conditions, the holders of a majority in aggregate principal amount
of notes outstanding may rescind and cancel such acceleration and its
consequences.
The
holders of at least a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of
the
notes waive any existing Default or Event of Default and its
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consequences
under the indenture except a continuing Default or Event of Default in the
payment of interest on, premium, if any, or the principal of, any note held
by a
non-consenting holder.
The
Issuers will be required to deliver to the trustee annually a statement
regarding compliance with the indenture, and the Issuers will be required,
within ten Business Days, upon becoming aware of any Default or Event of Default
to deliver to the trustee a statement specifying such Default or Event of
Default.
No Personal Liability
of Directors, Officers, Employees, Incorporators and Stockholders
No
director, officer, employee, incorporator, manager (or managing member) direct
or indirect member, partner or stockholder of the Issuers, AREH, API or any
additional Guarantor shall have any liability for any obligations of the
Issuers, AREH, API or any additional Guarantor under the notes, the indenture,
any Note Guarantee or for any claim based on, in respect of, or by reason of
such obligations or its creation. Each holder of the notes by accepting a note
waives and releases all such liability. The waiver and release are part of
the
consideration for issuance of the notes.
Covenant
Defeasance
The
Issuers may, at their option and at any time, elect to have their obligations
and the obligations of any of their Subsidiaries or AREH released with respect
to certain covenants that are described in the indenture (“Covenant
Defeasance”) and, thereafter, any omission to comply with such obligations
shall not constitute a Default or Event of Default with respect to the notes
or
any Note Guarantee. In the event Covenant Defeasance occurs, certain events
(not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under “Events of Default” will no longer constitute an Event
of Default with respect to the notes.
In order
to exercise Covenant Defeasance:
(1)
the Issuers must irrevocably deposit, or cause to be deposited, with the
trustee, in trust, for the benefit of the holders of the notes, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient to pay the principal of, premium, if any, interest
and Liquidated Damages, if any, due on the outstanding notes on the stated
maturity date or on the applicable redemption date, as the case may be, in
accordance with the terms of the indenture;
(2)
no Default or Event of Default shall have occurred and be continuing with
respect to certain Events of Default on the date of such deposit;
(3)
such Covenant Defeasance shall not result in a breach or violation of, or
constitute a default under any material agreement or instrument (other than
the
indenture) to which the Issuers or any of their Subsidiaries is a party or
by
which the Issuers or any of their Subsidiaries is bound;
(4)
the Issuers shall have delivered to the trustee an opinion of counsel, which
may
be an opinion of in-house counsel to AREP or an Affiliate, containing customary
assumptions and exceptions, to the effect that upon and immediately following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally under any applicable law;
(5)
the Issuers shall have delivered to the trustee an Officers’ Certificate stating
that the deposit was not made by the Issuers with the intent of defeating,
hindering, delaying or defrauding any creditors of AREP or others; and
(6)
the Issuers shall have delivered to the trustee an Officers’ Certificate and an
opinion of counsel in the United States, which may be an opinion of in-house
counsel to AREP or an Affiliate (which opinion of counsel may be subject to
customary assumptions and exclusions) each stating that all conditions precedent
provided for or relating to the Covenant Defeasance have been complied
with.
56
The
indenture will be discharged and will cease to be of further effect as to all
notes issued thereunder, when:
(1)
either:
(a)
all notes that have been authenticated, except lost, stolen or destroyed notes
that have been replaced or paid and notes for whose payment money has been
deposited in trust and thereafter repaid to AREP, have been delivered to the
trustee for cancellation; or
(b)
all notes that have not been delivered to the trustee for cancellation (1)
have
become due and payable by reason of the mailing of a notice of redemption or
otherwise, (2) will become due and payable within one year or (3) are to be
called for redemption within 12 months under arrangements reasonably
satisfactory to the trustee for the giving of notice of redemption by the
trustee in the name, and at the reasonable expense of the Issuers, and the
Issuers or any Guarantor have irrevocably deposited or caused to be deposited
with the trustee as trust funds in trust solely for the benefit of the holders,
cash in U.S. dollars, non-callable Government Securities, or a combination
of
cash in U.S. dollars and non-callable Government Securities, in amounts as
will
be sufficient without consideration of any reinvestment of interest, to pay
and
discharge the entire Indebtedness on the notes not delivered to the trustee
for
cancellation for principal and premium, if any, and accrued but unpaid interest
to the date of maturity or redemption;
(2)
no Default of Event of Default has occurred and is continuing on the date of
the
deposit or will occur as a result of the deposit and the deposit will not result
in a breach or violation of, or constitute a default under, any other material
instrument to which the Issuers are a party or by which the Issuers are
bound;
(3)
the Issuers have paid or caused to be paid all sums payable by it under the
indenture; and
(4)
the Issuers or any Guarantor have
delivered irrevocable instructions to the trustee under the indenture to apply
the deposited money toward the payment of the notes at maturity or the
redemption date, as the case may be.
In
addition, the Issuers must deliver an Officers’ Certificate and an opinion of
counsel to the trustee stating that all conditions precedent to satisfaction
and
discharge have been satisfied.
Amendment, Supplement
and Waiver
Except
as
provided in the next two succeeding paragraphs, the indenture, the notes or
the
Note Guarantee may be amended or supplemented with the consent of the holders
of
at least a majority in principal amount of the notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
notes), and any existing default or compliance with any provision of the
indenture, the notes or the Note Guarantee may be waived with the consent of
the
holders of a majority in principal amount of the then outstanding notes
(including consents obtained in connection with a tender offer or exchange
offer
for notes).
Without
the consent of each holder affected, an amendment or waiver may not (with
respect to any notes held by a nonconsenting holder of notes):
(1)
reduce the principal amount of notes whose holders must consent to an amendment,
supplement or waiver;
(2)
reduce the principal of or change the fixed maturity of any note or alter or
waive the provisions with respect to the redemption of the notes;
(3)
reduce the rate of or change the time for payment of interest on any note;
(4)
waive a Default or Event of Default in the payment of principal of, premium
or
interest on the notes (except a rescission of acceleration of the notes by
the
holders of at least a majority in aggregate principal amount of the notes and
a
waiver of the payment default that resulted from such acceleration);
(5)
make any note payable in money other than that stated in the notes;
(6)
make any change in the provisions of the indenture relating to waivers of past
Defaults or the rights of holders of notes to receive payments of principal
of
or premium, if any, or interest on the notes;
57
(7)
release AREH or any other Guarantor from any of its obligations under its Note
Guarantee or the indenture, except in accordance with the terms of the
indenture; or
(8)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding
the foregoing, without the consent of any holder of notes, the Issuers, the
Guarantors and the trustee together may amend or supplement the indenture,
any
Note Guarantee or the notes to cure any ambiguity, defect or inconsistency,
to
comply with the covenant relating to mergers, consolidations and sales of
assets, to provide for uncertificated notes in addition to or in place of
certificated notes, to provide for the assumption of the Issuers’ or any
Guarantor’s obligations to holders of the notes and any Note Guarantee in the
case of a merger, consolidation or asset sale, to make any change that would
provide any additional rights or benefits to the holders of the notes or that
does not adversely affect the legal rights under the indenture of any such
holder.
Concerning the
Trustee
The
indenture will contain certain limitations on the rights of the trustee, should
it become a creditor of the Issuers or AREH, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such
claim as security or otherwise. The trustee will be permitted to engage in
other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days or resign.
The
holders of a majority in aggregate principal amount of the then outstanding
notes will have the right to direct the time, method and place of conducting
any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture will provide that in case an Event of Default
shall occur (which shall not be cured), the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of his own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the indenture
at the request of any holder of notes, unless such holder shall have offered
to
the trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Governing
Law
The
indenture and the notes will be, subject to certain exceptions, governed by
and
construed in accordance with the internal laws of the State of New York, without
regard to the choice of law rules thereof.
The
issuance of the notes and the Note Guarantee will also be subject to a certain
extent to the laws of the jurisdiction of formation of AREP.
Additional
Information
Any
holder of the notes may obtain a copy of the indenture without charge by writing
to American Real Estate Partners, L.P., Attn: Chief Financial Officer at 765
Fifth Avenue, New York, NY 10153.
Book-Entry, Delivery
and Form
The new
notes will be issued in one or more notes in global form or Global Notes. Except
as set forth below, the notes will be issued in registered, global form in
minimum denominations of $1,000 and integral multiples of $1,000 in excess
of
$1,000. The Global Notes will be deposited upon issuance with the trustee as
custodian for DTC or its nominee, in each case for credit to an account of
a
direct or indirect participant in DTC, as described below.
Except
as
set forth below, the Global Notes may be transferred, in whole and not in part,
only to another nominee of DTC or to a successor of DTC or its nominee.
Beneficial interests in the Global Notes may not be exchanged for definitive
notes in registered certificated form (“Certificated Notes”) except in the
limited circumstances described below. See “— Exchange of Global Notes for
Certificated Notes.” Except in the limited circumstances described below, owners
of beneficial interests in the Global Notes will not be entitled to receive
physical delivery of notes in certificated form.
In
addition, transfers of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of DTC and its direct and indirect
participants (including, if applicable, those of Euroclear and Clearstream),
which may change from time to time.
58
Prospective
purchasers are advised that the laws of some states require that certain Persons
take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Note
to
such Persons will be limited to such extent.
So long
as the Global Note Holder is the registered owner of any notes, the Global
Note
Holder will be considered the sole holder under the indenture of any notes
evidenced by the Global Notes. Beneficial owners of notes evidenced by the
Global Notes will not be considered the owners of holders of the notes under
the
indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the trustee thereunder. Neither the
issuers nor the trustee will have any responsibility or liability for any aspect
of the records of DTC or for maintaining, supervising or reviewing any record
of
DTC relating to the notes.
Depository
Procedures
The
following description of the operations and procedures of DTC, Euroclear and
Clearstream are provided solely as a matter of convenience. These operations
and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them. The Issuers take no responsibility for
these
operations and procedures and urge investors to contact the system or their
participants directly to discuss these matters.
DTC has
advised the Issuers that DTC is a limited-purpose trust company created to
hold
securities for its participating organizations (collectively, the
“Participants”) and to facilitate the clearance and settlement of transactions
in those securities between the Participants through electronic book-entry
changes in accounts of its Participants. The Participants include securities
brokers and dealers (including the initial purchaser), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC’s system is
also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the “Indirect
Participants”). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of
the
Participants and Indirect Participants.
Except
as described below, owners of interests in the Global Notes will not have notes
registered in their names, will not receive physical delivery of notes in
certificated form and will not be considered the registered owners or “holders”
thereof under the indenture for any purpose.
Payments
in respect of the principal of, and interest and premium, if any, and Liquidated
Damages, if any, on, a Global Note registered in the name of DTC or its nominee
will be payable to DTC in its capacity as the registered holder under the
indenture. Under the terms of the indenture, the Issuers and the trustee will
treat the Persons in whose names the notes, including the Global Notes, are
registered as the owners of the notes for the purpose of receiving payments
and
for all other purposes. Consequently, neither the Issuers or the trustee nor
any
agent of the Issuers or the trustee has or will have any responsibility or
liability for:
(1)
any aspect of DTC’s records or any Participant’s or Indirect Participant’s
records relating to or payments made on account of beneficial ownership interest
in the Global Notes or for maintaining, supervising or reviewing any of DTC’s
records or any Participant’s or Indirect Participant’s records relating to the
beneficial ownership interests in the Global Notes; or
(2)
any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants.
DTC has
advised the Issuers that its current practice, upon receipt of any payment
in
respect of securities such as the notes (including principal and interest),
is
to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe that it will not receive payment
on such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will
be
the responsibility of the Participants or the Indirect Participants and will
not
be the responsibility of DTC, the trustee or the Issuers. Neither the Issuers
nor the trustee will be liable for any delay by DTC or any of the Participants
or the Indirect Participants in identifying the beneficial owners of the notes,
and the Issuers and the trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all purposes.
59
Transfers
between the Participants will be effected in accordance with DTC’s procedures,
and will be settled in same-day funds, and transfers between participants in
Euroclear and Clearstream will be effected in accordance with their respective
rules and operating procedures.
Cross-market
transfers between the Participants, on the one hand, and Euroclear or
Clearstream participants, on the other hand, will be effected through DTC in
accordance with DTC’s rules on behalf of Euroclear or Clearstream, as the case
may be, by their respective depositaries; however, such cross-market
transactions will require delivery of instructions to Euroclear or Clearstream,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by
delivering or receiving interests in the relevant Global Note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the depositories for
Euroclear or Clearstream.
DTC has
advised the Issuers that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the notes as to which
such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the notes, DTC reserves the right to exchange
the
Global Notes for legended notes in certificated form, and to distribute such
notes to its Participants.
Although
DTC, Euroclear and Clearstream have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC,
Euroclear and Clearstream, they are under no obligation to perform or to
continue to perform such procedures, and may discontinue such procedures at
any
time. None of the Issuers, the trustee and any of their respective agents will
have any responsibility for the performance by DTC, Euroclear or Clearstream
or
their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Global
Notes for Certificated Notes
A Global
Note is exchangeable for Certificated Notes if:
(1)
DTC (a) notifies the Issuers that it is unwilling or unable to continue as
depositary for the Global Notes or (b) has ceased to be a clearing agency
registered under the Exchange Act and, in either case, the Issuers fail to
appoint a successor depositary;
(2)
the Issuers, at their option, notify the trustee in writing that it elects
to
cause the issuance of the Certificated Notes; or
(3)
there has occurred and is continuing a Default or Event of Default with respect
to the notes.
In
addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated
Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures).
Exchange of
Certificated Notes for Global Notes
Certificated
Notes may not be exchanged for beneficial interests in any Global Note unless
the transferor first delivers to the trustee a written certificate (in the
form
provided in the indenture) to the effect that such transfer will comply with
the
appropriate transfer restrictions applicable to such notes.
Same Day Settlement
and Payment
The
Issuers will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and Liquidated Damages,
if
any) by wire transfer of immediately available funds to the accounts specified
by DTC or its nominee. The Issuers will make all payments of principal, interest
and premium, if any, and Liquidated Damages, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the holders of the Certificated Notes or, if no such
account is specified, by
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mailing
a check to each such holder’s registered address. The notes represented by the
Global Notes are expected to be eligible to trade in DTC’s Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
notes will, therefore, be required by DTC to be settled in immediately available
funds. The Issuers expect that secondary trading in any Certificated Notes
will
also be settled in immediately available funds.
Because
of time zone differences, the securities account of a Euroclear or Clearstream
participant purchasing an interest in a Global Note from a Participant will
be
credited, and any such crediting will be reported to the relevant Euroclear
or
Clearstream participant, during the securities settlement processing day (which
must be a business day for Euroclear and Clearstream) immediately following
the
settlement date of DTC. DTC has advised the Issuers that cash received in
Euroclear or Clearstream as a result of sales of interests in a Global Note
by
or through a Euroclear or Clearstream participant to a Participant will be
received with value on the settlement date of DTC but will be available in
the
relevant Euroclear or Clearstream cash account only as of the business day
for
Euroclear or Clearstream following DTC’s settlement date.
Certain
Definitions
Set forth
below are certain defined terms used in the indenture. Reference is made to
the
indenture for full disclosure of all such terms, as well as any other
capitalized terms used herein for which no definition is provided.
“Acquired
Debt” means, with respect to any specified Person:
(1)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether
or
not such Indebtedness is incurred in connection with, or in contemplation of,
such other Person merging with or into, or becoming a Subsidiary of, such
specified Person; and
(2)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
“Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified Person. For purposes of this definition, “control,” as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the Voting
Stock
of a Person will be deemed to be control. For purposes of this definition,
the
terms “controlling,” “controlled by” and “under common control with” have
correlative meanings.
“API”
means American Property Investors, Inc.
“AREH”
means American Real Estate Holdings Limited Partnership.
“AREP”
means American Real Estate Partners, L.P.
“AREP
Finance” means American Real Estate Finance Corp.
“AREP
Partnership Agreement” means AREP’s Amended and Restated Agreement of
Limited Partnership, dated May 12, 1987 as amended February 22, 1995
and August 16, 1996.
“Bad
Boy Guarantees” means the Indebtedness of any specified Person attributable
to “bad boy” indemnification or Guarantees, which Indebtedness would be
non-recourse to AREP and AREH other than recourse relating to the specific
events specified therein, which such events shall be usual and customary
exceptions typically found in non-recourse financings at such time as determined
by management in its reasonable judgment.
“Beneficial
Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5
under the Exchange Act, except that in calculating the beneficial ownership
of
any particular “person” (as that term is used in Section 13(d)(3) of the
Exchange Act), such “person” will be deemed to have beneficial ownership of all
securities that such “person” has the right to acquire by conversion or exercise
of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding meaning.
61
“Board
of Directors” means:
(1)
with respect to a corporation, the
board of directors of the corporation or any committee thereof duly authorized
to act on behalf of such board;
(2)
with respect to a partnership, the
Board of Directors of the general partner of the partnership;
(3)
with respect to a limited liability
company, the managing member or members or any controlling committee of managing
members thereof or the Board of Directors of the managing member; and
(4)
with respect to any other Person,
the board or committee of such Person serving a similar function.
“Business
Day” means any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or is a day on which banking
institutions located in such jurisdictions are authorized or required by law
or
other governmental action to close.
“Capital
Lease Obligation” means, at the time any determination is to be made, the
amount of the liability in respect of a capital lease that would at that time
be
required to be capitalized on a balance sheet prepared in accordance with GAAP,
and the Stated Maturity thereof shall be the date of the last payment of rent
or
any other amount due under such lease prior to the first date upon which such
lease may be prepaid by the lessee without payment of a penalty.
“Capital
Stock” means:
(1)
in the case of a corporation, corporate stock;
(2)
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock;
(3)
in the case of a partnership or limited liability company, partnership interests
(whether general or limited) or membership interests; and
(4)
any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the
issuing Person but excluding from all of the foregoing any debt securities
convertible into Capital Stock, whether or not such debt securities include
any
right of participation with Capital Stock.
“Cash
Equivalents” means:
(1)
United States dollars;
(2)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality of the United States
government (provided that the full faith and credit of the United States is
pledged in support of those securities) having maturities of not more than
one
year from the date of acquisition;
(3)
certificates of deposit and eurodollar time deposits with maturities of one
year
or less from the date of acquisition, bankers’ acceptances with maturities not
exceeding one year and overnight bank deposits, in each case, with any domestic
commercial bank having capital and surplus in excess of $500.0 million and
a Thomson Bank Watch Rating of “B” or better;
(4)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (2) and (3) above entered into
with
any financial institution meeting the qualifications specified in clause (3)
above;
(5)
commercial paper having one of the two highest ratings obtainable from Moody’s
Investors Service, Inc. or Standard & Poor’s Rating Services and, in each
case, maturing within one year after the date of acquisition; and
(6)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.
62
“Cash
Flow of AREP and the Guarantors” means, with respect to any period, the Net
Income of AREP and the Guarantors for such period plus, without
duplication:
(1)
provision for taxes based on income or profits of AREP and the Guarantors or
any
payments of Tax Amounts by AREP for such period, to the extent that such
provision for taxes or such payments of Tax Amounts were deducted in computing
such Net Income of AREP or any Guarantor; plus
(2)
the Fixed Charges of AREP or any Guarantor for such period, to the extent that
such Fixed Charges of AREP and such Guarantor were deducted in computing such
Net Income of AREP and such Guarantor; plus
(3)
depreciation, amortization (including amortization of intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent
that
it represents an accrual of or reserve for cash expenses in any future period
or
amortization of a prepaid cash expense that was paid in a prior period) of
AREP
and any Guarantor for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such Net
Income of AREP and any Guarantor; minus
(4)
non-cash items increasing such Net Income of AREP and any Guarantor for such
period, other than the accrual of revenue in the ordinary course of
business,
in each
case, consolidating such amounts for AREP and any Guarantor but excluding any
net income, provision for taxes, fixed charges, depreciation, amortization
or
other amounts of any of the Subsidiaries of AREP (other than any Guarantor)
and
otherwise determined in accordance with GAAP; provided, further, that the Net
Income of AREP and any Guarantor shall include income from investments or
Subsidiaries of AREP (other than any Guarantor) but only to the extent such
income is realized in Cash Equivalents by AREP or any Guarantor.
“Change
of
Control” means the occurrence of any of the following:
(1)
the sale, lease, transfer, conveyance or other disposition by AREP or AREH
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of AREP
or
AREH to any “person” (as that term is used in Section 13(d) of the Exchange Act)
other than the Principal or a Related Party; provided, however, that (x) if
AREP
or AREH receives consideration in Cash Equivalents and marketable securities
with an aggregate Fair Market Value determined at the time of the execution
of
each relevant agreement of at least $1.0 billion for such sale, lease,
transfer, conveyance or other disposition of properties or assets, then such
transaction shall not be deemed a Change of Control and (y) any sale,
assignment, transfer or other disposition of Cash Equivalents, including,
without limitation, any investment or capital contribution of Cash Equivalents
or purchase of property, assets or Capital Stock with Cash Equivalents, will
not
constitute a sale, assignment, transfer, conveyance or other disposition of
all
or substantially all of the properties or assets for purposes of this clause
(1);
(2)
the adoption of a plan relating to the liquidation or dissolution of AREP;
(3)
the consummation of any transaction (including, without limitation, any merger
or consolidation), the result of which is that any “person” (as defined above),
other than the Principal or the Related Parties, becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the Voting Stock of a Controlling
Entity of AREP, measured by voting power rather than number of shares;
(4)
the first day on which a majority of the members of the Board of Directors
of
the Controlling Entity are not Continuing Directors; or
(5)
for so long as AREP is a partnership, upon any general partner of AREP ceasing
to be an Affiliate of the Principal or a Related Party.
“Change
of
Control Offer” has the meaning assigned to that term in the indenture
governing the notes.
“Consolidated
Net Income” means, with respect to any specified Person for any period, the
aggregate of net income (loss) of such Person, on a consolidated basis with
its
Subsidiaries, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends; provided that:
63
(1)
the Net Income of any Person that is accounted for by the equity method of
accounting or that is a Subsidiary will be included only to the extent of the
amount of dividends or similar distributions paid in cash to the specified
Person or a Subsidiary of the Person;
(2)
the Net Income of any of its Subsidiaries will be excluded to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders; and
(3)
the cumulative effect of a change in accounting principles will be
excluded.
“Continuing
Directors” means, as of any date of determination, any member of the Board
of Directors of AREP who:
(1)
was a member of such Board of Directors on the date of the indenture; or
(2)
was nominated for election or elected to such Board of Directors with the
approval of the Principal or any of the Related Parties or with the approval
of
a majority of the Continuing Directors who were members of such Board of
Directors at the time of such nomination or election.
“Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of management and policies of a Person, whether through the
ownership of Voting Stock, by agreement or otherwise.
“Controlling
Entity” means (1) for so long as AREP is a partnership, any general partner
of AREP, (2) if AREP is a limited liability company, any managing member of
AREP
or (3) if AREP is a corporation, AREP.
“Default”
means any event that is, or with the passage of time or the giving of notice
or
both would be, an Event of Default.
“Disqualified
Stock” means any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in
each
case, at the option of the holder of the Capital Stock), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder of the
Capital Stock, in whole or in part, on or prior to the date that is 91 days
after the date on which the notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital Stock have the right to require AREP or
any
Guarantor to repurchase such Capital Stock upon the occurrence of a change
of
control, event of loss, an asset sale or other special redemption event will
not
constitute Disqualified Stock if the terms of such Capital Stock provide that
AREP or any Guarantor may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption “— Certain Covenants — Restricted
Payments” or where the funds to pay for such repurchase was from the net cash
proceeds of such Capital Stock and such net cash proceeds was set aside in
a
separate account to fund such repurchase. Furthermore, any Capital Stock that
would constitute Disqualified Stock solely because the holders of the Capital
Stock have the right to require AREP or any Guarantor to redeem such Capital
Stock, including, without limitation, upon maturity will not constitute
Disqualified Stock if the terms of such Capital Stock provide that AREP or
any
Guarantor may redeem such Capital Stock for other Capital Stock that is not
Disqualified Stock. The amount of Disqualified Stock deemed to be outstanding
at
any time for purposes of the indenture will be the maximum amount that AREP
and
its Subsidiaries (including any Guarantor) may become obligated to pay upon
the
maturity of, or pursuant to any mandatory redemption provisions of, such
Disqualified Stock, exclusive of accrued dividends. For the avoidance of doubt,
and by way of example, the Preferred Units, as in effect on the date of the
indenture, do not constitute Disqualified Stock.
“Equity
Interests” means Capital Stock and all warrants, options or other rights to
acquire Capital Stock (but excluding any debt security that is convertible
into,
or exchangeable for, Capital Stock).
“Equity
Offering” means an offer and sale of Capital Stock (other than Disqualified
Stock) of AREP (other than an offer and sale relating to equity securities
issuable under any employee benefit plan of AREP) or a capital contribution
in
respect of Capital Stock (other than Disqualified Stock) of AREP.
64
“Existing
Indebtedness” means up to $394.4 million in aggregate principal amount
of Indebtedness of AREP and any Guarantor, in existence on the Issuance Date,
until such amounts are repaid.
“Existing
Notes” means the 7 1/8% Senior Notes due 2013 issued and sold by the Issuers
on February 1, 2005.
“Fair
Market Value” means the value that would be paid by a willing buyer to an
unaffiliated willing seller in a transaction not involving distress or necessity
of either party, determined in good faith by the Board of Directors of AREP
(unless otherwise provided in the indenture).
“Fixed
Charge Coverage Ratio of AREP and the Guarantors” means the ratio of the
Cash Flow of AREP and the Guarantors for such period to the Fixed Charges of
AREP and the Guarantors for such period. In the event that AREP, the Guarantors
or any Guarantor incurs, assumes, guarantees, repays, repurchases, redeems,
defeases or otherwise discharges any Indebtedness (other than ordinary working
capital borrowings) or issues, repurchases or redeems preferred stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio
of
AREP and the Guarantors is being calculated and on or prior to the Quarterly
Determination Date for which the calculation of the Fixed Charge Coverage Ratio
of AREP and the Guarantors is being made (the “Calculation Date”), then the
Fixed Charge Coverage Ratio of AREP and the Guarantors will be calculated giving
pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase, redemption, defeasance or other discharge of Indebtedness, or such
issuance, repurchase or redemption of preferred stock, and the use of the
proceeds therefrom, as if the same had occurred at the beginning of the
applicable four-quarter reference period.
In
addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1)
acquisitions that have been made by the specified Person, including through
mergers or consolidations, or any Person acquired by the specified Person,
and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date will be given pro forma effect (in accordance with Regulation S-X under
the
Securities Act) as if they had occurred on the first day of the four-quarter
reference period;
(2)
the Cash Flow of AREP and the Guarantors attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
(and ownership interests therein) disposed of prior to the Calculation Date,
will be excluded;
(3)
the Fixed Charges of AREP and the Guarantors attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
(and ownership interests therein) disposed of prior to the Calculation Date,
will be excluded, but only to the extent that such Fixed Charges of AREP and
the
Guarantors are equal to or less than the Cash Flow of AREP and the Guarantors
from the related discontinued operation excluded under clause (3) for such
period; and
(4)
if any Indebtedness bears a floating rate of interest, the interest expense
on
such Indebtedness will be calculated as if the rate in effect on the Calculation
Date had been the applicable rate for the entire period (taking into account
any
Hedging Obligation applicable to such Indebtedness if such Hedging Obligation
has a remaining term as at the Calculation Date in excess of 12 months).
“Fixed
Charges of AREP and the
Guarantors” means, with respect to any period, the sum, without
duplication, of:
(1)
the interest expense of AREP, and any
Guarantor for such period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred
in
respect of letter of credit or bankers’ acceptance financings, and net of the
effect of all payments made or received pursuant to Hedging Obligations in
respect of interest rates; plus
(2)
the interest expense of AREP and any Guarantor that was capitalized during
such
period; plus
(3)
any interest on Indebtedness of another
Person that is guaranteed by AREP or any Guarantor (other than Bad Boy
Guarantees unless such Bad Boy Guarantee is called upon) or secured by a Lien
on
assets of AREP or any additional Guarantor, whether or not such Guarantee or
Lien is called upon; provided that for purposes of calculating interest with
respect to Indebtedness that is Guaranteed or secured by a Lien, the principal
amount of Indebtedness will be calculated in accordance with the last two
paragraphs of the definition of Indebtedness; plus
65
(4)
the product of (a) all dividends, whether paid or accrued and whether or not
in
cash, on any series of preferred equity of AREP, other than dividends on
preferred stock to the extent payable in Equity Interests of AREP (other than
Disqualified Stock) or dividends on preferred equity payable to AREP, times
(b)
a fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory income tax
rate of AREP (however, for so long as AREP is a partnership or otherwise a
pass-through entity for federal income tax purposes, the combined federal,
state
and local income tax rate shall be the rate that was utilized to calculate
the
Tax Amount of AREP to the extent that the Tax Amount was actually distributed
with respect to such period (and if less than the Tax Amount is distributed,
such rate shall be proportionately reduced) and if no Tax Amount was actually
distributed with respect to such period, such combined federal, state and local
income tax rate shall be zero), expressed as a decimal; provided that this
clause (4) will not include any Preferred Unit Distribution paid in additional
Preferred Units,
in each
case, determined on a consolidated basis between AREP and any Guarantor but
on a
non-consolidated basis with the Subsidiaries of AREP (other than any Guarantor)
and otherwise in accordance with GAAP.
“GAAP”
means generally accepted accounting principles in the United States set forth
in
the statements and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
Issuance Date. For the purposes of the indenture, the term “consolidated” with
respect to any Person shall mean such Person consolidated with its
Subsidiaries.
“Gaming
Authority” means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or other national government, any state, province or any city or other
political subdivision, including, without limitation, the State of Nevada or
the
State of New Jersey, whether now or hereafter existing, or any officer or
official thereof and any other agency with authority thereof to regulate any
gaming operation (or proposed gaming operation) owned, managed or operated
by
the Principal, its Related Parties, the Issuers or any of their respective
Subsidiaries or Affiliates.
“Gaming
Law” means any gaming law or regulation of any jurisdiction or jurisdictions
to which the Issuers or any of their Subsidiaries (including AREH) is, or may
at
any time after the issue date be, subject.
“Government
Instrumentality” means any national, state or local government (whether
domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, court, tribunal, commission, bureau or entity or any
arbitrator with authority to bind a party at law.
“Government
Securities” means securities that are (1) direct obligations of the United
States of America for the timely payment of which its full faith and credit
is
pledged or (2) obligations of a Person controlled or supervised by and acting
as
an agency or instrumentality of the United States of America the timely payment
of which is unconditionally guaranteed as a full faith and credit obligation
by
the United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such Government Security
or a
specific payment of principal of or interest on any such Government Security
held by such custodian for the account of the holder of such depository receipt;
provided, that (except as required by law) such custodian is not authorized
to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Security or the specific payment of principal of or interest on the Government
Security evidenced by such depository receipt.
“Guarantee”
means a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any
manner (including, without limitation, by way of a pledge of assets or through
letters of credit or reimbursement agreements in respect thereof), of all or
any
part of any Indebtedness (whether arising by virtue of partnership arrangements,
or by agreements to keep-well, to purchase assets, goods, securities or
services, to take or pay or to maintain financial statement conditions or
otherwise).
“Guarantor”
means any Subsidiary of AREP (initially only AREH) that executes a Note
Guarantee in accordance with the provisions of the indenture, and their
respective successors and assigns, in each case, until the Note Guarantee of
such Person has been released in accordance with the provisions of the
indenture.
66
“Hedging
Obligations” means, with respect to any specified Person, the obligations of
such Person under:
(1)
interest rate swap agreements (whether from fixed to floating or from floating
to fixed), interest rate cap agreements and interest rate collar
agreements;
(2)
other agreements or arrangements designed to manage interest rates or interest
rate risk; and
(3)
other agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates or commodity prices.
(2)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof);
(5)
representing the balance deferred and unpaid of the purchase price of any
property or services due more than six months after such property is acquired
or
such services are completed; or
if and
to
the extent any of the preceding items (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of the specified
Person prepared in accordance with GAAP. In addition, the term “Indebtedness”
includes all Indebtedness of others secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by the specified
Person) and, to the extent not otherwise included, the Guarantee by the
specified Person of any Indebtedness of any other Person.
The
amount of any Indebtedness outstanding as of any date attributable to a
Guarantee shall be the maximum principal amount guaranteed by such specified
Person as of such date.
The
amount of any Indebtedness outstanding as of any date shall be (a) the accreted
value thereof, in the case of any Indebtedness with original issue discount,
(b)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness and (c) in respect
of Indebtedness of another Person secured by a Lien on the assets of the
specified Person, the lesser of (x) the Fair Market Value of such assets at
the
date of determination and (y) the amount of the Indebtedness of the other Person
to the extent so secured. Notwithstanding anything in the indenture to the
contrary, Indebtedness of AREP, AREH or any Note Guarantor shall not include
any
Indebtedness that has been either satisfied and discharged or defeased through
covenant defeasance or legal defeasance.
(1)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness renewed, refunded, refinanced,
replaced, defeased or discharged (plus all accrued interest on the Indebtedness
and the amount of all fees and expenses, including premiums, and Other
Liquidated Damages, incurred in connection therewith);
(2)
in the case of any Indebtedness other than notes redeemed in accordance with
“—
Mandatory Disposition Pursuant to Gaming Laws,” such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded,
refinanced, replaced, defeased or discharged; and
(3)
if the Indebtedness being renewed, refunded, refinanced, replaced, defeased
or
discharged is subordinated in right of payment to the notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and is subordinated in right of payment to, the notes on terms at
least
as favorable to the holders of notes as those contained in the documentation
governing the Indebtedness being renewed, refunded, refinanced, replaced,
defeased or discharged.
(1)
any corporation, association or other business entity of which more than 50%
of
the total Voting Stock is at the time owned or Controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and
(2)
any partnership (a) the sole general partner or the managing general partner
of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are that Person or one or more Subsidiaries of that Person
(or
any combination thereof).
For the
avoidance of doubt, AREH will be deemed to be a Subsidiary of AREP so long
as
AREH remains a Guarantor.
The
following general discussion summarizes certain material U.S. federal income
tax
consequences that apply to beneficial owners of the private notes who:
(3)
held the private notes and hold the new notes as “capital assets” (generally,
for investment) as defined in the Code.
This
summary, however, does not consider state, local or foreign tax laws. In
addition, it does not include all of the rules which may affect the U.S. tax
treatment of your investment in the notes. For example, special rules not
discussed here may apply to you if you are:
If you
are a partner in a partnership which holds the new notes, you should consult
your own tax advisor regarding special rules that may apply.
This
summary is based on the Code and applicable Treasury Regulations, rulings,
administrative pronouncements and decisions as of the date hereof, all of which
are subject to change or differing interpretations at any time with possible
retroactive effect. We have not sought and will not seek any rulings from the
Internal Revenue Service, or the IRS, with respect to the statements made and
the conclusions reached in this summary, and there can be no assurance that
the
IRS will agree with such statements and conclusions.
The
exchange of the private notes for the new notes pursuant to this exchange offer
should not be a taxable event for U.S. federal income tax purposes. Accordingly,
holders participating in this exchange offer should not recognize any income,
gain or loss in connection with the exchange. In addition, immediately after
the
exchange, any such holder should have the same adjusted tax basis and holding
period in the new notes as it had in the private notes, immediately before
the
exchange.
If you
are a “U.S. Holder,” as defined below, this section applies to you. Otherwise,
the section “Non-U.S. Holders” applies to you.
You are
a
“U.S. Holder” if you are the beneficial owner of a new note and you are, for
U.S. federal income tax purposes:
Generally,
you
must include the interest on the new notes in your gross income as ordinary
income:
You will
generally recognize taxable gain or loss on the sale, exchange, redemption,
retirement or other taxable disposition of a new note. The amount of your gain
or loss will equal the difference between the amount you receive for the new
note (in cash or other property, valued at fair market value), except to the
extent amounts received are attributable to accrued interest on the note, and
your adjusted tax basis in the new note. Your tax basis in the new note
generally will equal the price you paid for the private note that was exchanged
for the new note. Your gain or loss will generally be long-term capital gain
or
loss if your holding period for the new note is more than one year at the time
of the sale, exchange, redemption, retirement or other taxable disposition.
Otherwise, it will be short-term capital gain or loss. For this purpose, your
holding period for the new note should include your holding period for the
private note that was exchanged for the new note. Long-term capital gains
recognized in years beginning before December 31, 2008 by certain
non-corporate holders are generally taxed at a maximum rate of 15%. The ability
to deduct capital losses is subject to limitations. Payments attributable to
accrued interest which you have not yet included in income will be taxed as
ordinary interest income.
We will
report to certain holders of the new notes and to the IRS the amount of any
interest paid on the new notes in each calendar year and the amounts of tax
withheld, if any, with respect to such payments. You may be subject to a backup
withholding tax when you receive interest payments on a new note or proceeds
upon the sale or other disposition of the new note. Certain holders (including,
among others, corporations, financial institutions and certain tax-exempt
organizations) are generally not subject to information reporting or backup
withholding. In addition, the backup withholding tax will not apply to you
if
you provide to us or our paying agent your correct social security or other
taxpayer identification number, or TIN, in the prescribed manner unless:
The
backup withholding tax rate is currently 28%. Any amounts withheld from a
payment to you under the backup withholding rules may be credited against your
U.S. federal income tax liability, and may entitle you to a refund, provided
the
required information is properly furnished to the IRS on a timely basis.
You
should consult your tax advisor as to your qualification for exemption from
backup withholding and the procedures for obtaining such exemption.
The
following general discussion is limited to the U.S. federal income tax
consequences relevant to a “Non-U.S. Holder.” A “Non-U.S. Holder” is any
beneficial owner of a new note if such owner is, for U.S. federal income tax
purposes, a nonresident alien, or a corporation, estate, or trust that is not
a
U.S. Holder.
However,
income from payments or accruals of interest that is effectively connected
with
the conduct by you of a trade or business in the United States will be subject
to U.S. federal income tax on a net basis at a rate applicable to United States
persons generally (and, if paid to corporate holders, may also be subject to
a
branch profits tax at a rate of 30% or lower applicable treaty rate). If
payments are subject to U.S. federal income tax on a net basis in accordance
with the rules described in the preceding sentence, such payments will not
be
subject to United States withholding tax so long as you provide us or our paying
agent with a properly executed IRS Form W-8ECI.
Non-U.S.
Holders should consult any applicable income tax treaties, which may provide
for
a lower rate of withholding tax, exemption from or reduction of the branch
profits tax, or other rules different from those described above. Generally,
in
order to claim any treaty benefits you must submit a properly executed IRS
Form
W-8BEN.
You will
generally not be subject to U.S. federal income tax or withholding tax on gain
recognized on a sale, exchange, redemption, retirement, or other disposition
of
a new note unless such gain is effectively connected with the conduct by you
of
a trade or business within the United States. Any gain that is effectively
connected with the conduct by you of a trade or business within the United
States will be subject to U.S. federal income tax on a net basis at the rates
generally applicable to U.S. persons as described above.
With
respect to interest payments made on the new notes, however, backup withholding
and information reporting will not apply if you certify, generally on a Form
W-8BEN (or Form W-8ECI) or suitable substitute form, that you are not a U.S.
person in the manner described above under the heading “Non-U.S. Holders —
Interest,” or you otherwise establish an exemption.
Moreover,
with respect to proceeds received on the sale, exchange, redemption, or other
disposition of a new note, backup withholding or information reporting generally
will not apply if you properly provide, generally on Form W-8BEN (or Form
W-8ECI) or a suitable substitute form, a statement that you are an “exempt
foreign person” for purposes of the broker reporting rules, and other required
information. If you are not subject to United States federal income or
withholding tax on the sale or other disposition of a new note, as described
above under the heading “Non-U.S. Holders-Interest — Sale or Other Disposition
of New Notes,” you will generally qualify as an “exempt foreign person” for
purposes of the broker reporting rules.
The
information reporting requirements may apply regardless of whether withholding
is required. Copies of the information returns reporting interest and
withholding also may be made available to the tax authorities in the country
in
which a Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or other agreement.
The
preceding summary is for general information only and is not tax advice. Please
consult your own tax advisor to determine the tax consequences of purchasing,
holding and disposing of the notes under your particular circumstances.
Each
broker-dealer that receives new notes for its own account pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for private notes where such
private notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, starting on the expiration date and
ending on the close of business 270 days after the expiration date (or such
shorter period during which participating broker-dealers are required by law
to
deliver such prospectus), we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such
resale. In addition, until
,
200_ all dealers effecting transactions in the new notes may be required to
deliver a prospectus.
We
will not receive any proceeds from any sale of new notes by broker-dealers.
New
notes received by broker-dealers for their own account pursuant to the exchange
offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation
in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such new notes. Any broker-dealer that resells new notes
that
were received by it for its own account pursuant to the exchange offer and
any
broker or dealer that participates in a distribution of such new notes may
be
deemed to be an “underwriter” within the meaning of the Securities Act and any
profit of any such resale of new notes and any commissions or concessions
received any such persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that by acknowledging
that
it will deliver, and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an “underwriter” within the meaning of the Securities
Act.
Furthermore,
any broker-dealer that acquired any of its private notes directly from us:
For a
period of 270 days after the expiration date, we will promptly send additional
copies of this prospectus and any amendment or supplement to this prospectus
to
any broker-dealer that requests such documents in the letter of transmittal.
We
have agreed to pay all expenses incident to the exchange offer (including the
expenses of one counsel for the holder of the private notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the private notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
The
validity of the notes offered by this prospectus and certain legal matters
in
connection with the exchange offer will be passed upon for us by Proskauer
Rose
LLP, New York, New York.
The consolidated
financial statements of American Real Estate Partners, L.P. and Subsidiaries
as of December 31, 2006 and 2005 and for each of the three years in the
period ended December 31, 2006 and management’s assessment of effectiveness
of internal control over financial reporting as of December 31, 2006, incorporated
by reference in this prospectus have been audited by Grant Thornton LLP, independent
registered public accountants, as indicated in their reports with respect thereto,
(which report on the consolidated financial statements refers to the change
in accounting for the Partnership’s investment in ImClone Systems Incorporated
and Subsidiary from an available for sale security to the equity method) and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
The
consolidated financial statements of American Real Estate Holdings Limited
Partnership and Subsidiaries as of December 31, 2006, and for each of the three
years in the period ended December 31, 2006 included in this prospectus, have
been audited by Grant Thornton LLP, independent registered public accountants,
as stated in its report with respect thereto, (which report on the consolidated financial statements refers to the change
in accounting for the Partnership’s investment in ImClone Systems Incorporated
and Subsidiary from an available for sale security to the equity method) and are included herein
in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The
balance sheet of American Property Investors, Inc., as of December 31, 2006,
included in this prospectus has been audited by Grant Thornton LLP, independent
accountants, as stated in its report with respect thereto, and is included
herein in reliance upon the authority of said firm as experts in accounting
and
auditing in giving said report.
The
consolidated financial statements of ImClone Systems Incorporated and subsidiary
as of December 31, 2006 and 2005, and for each of the years in the three-year
period ended December 31, 2006, have been included and incorporated by reference
herein in reliance upon the report of KPMG LLP, independent registered public
accounting firm, included in this registration statement and incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The audit report covering the December 31, 2006 consolidated
financial statements refers to the Company’s adoption of the provisions of
Statement of Financial Accounting Standards No. 123R, “Share-Based
Payment.”
The consolidated
financial statements of GB Holdings, Inc. and subsidiaries for the year ended
December 31, 2004 have been included and incorporated by reference herein
in reliance upon the report of KPMG LLP, independent registered public accounting
firm, included and incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The
consolidated financial statements and financial statement schedule of Lear
Corporation as of December 31, 2006 and 2005 and for each of the three
years in the period ended December 31, 2006 included elsewhere in this
prospectus have been audited by Ernst & Young LLP, independent registered
public accounting firm, as set forth in their report thereon appearing elsewhere
herein and are included in reliance upon such report given on the authority
of
such firm as experts in accounting and auditing.
We have
filed with the SEC a registration statement on Form S-4 under the Securities
Act. This prospectus is part of the registration statement. This prospectus
does
not contain all the information contained in the registration statement because
we have omitted certain parts of the registration statement in accordance with
the rules and regulations of the SEC. For further information, we refer you
to
the registration statement, which you may read and copy at the public reference
facilities maintained by the SEC at 100 F Street, N. E. Room 1580, Washington,
D.C. 20549. You may obtain copies at the prescribed rates from the Public
Reference Section of the SEC at its principal office in Washington, D.C. You
may
call the SEC at 1-800-SEC-0330 for further information about the public
We
are subject to the informational requirements of the Exchange Act. As a result,
we are required to file reports, proxy statements and other information with
the
SEC. These materials can be copied and inspected at the locations described
above. Copies of these materials can be obtained from the Public Reference
Section of the SEC at 100 F Street, N. E. Room 1580, Washington, D.C. 20549,
at
prescribed rates. Our depositary units are listed on the New York Stock Exchange
under the symbol “ACP.”
The SEC
allows us to “incorporate by reference” the information we file with them, which
means that we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to
be
part of this prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below, all filings made pursuant to the Exchange Act after
the date of the initial registration statement and prior to effectiveness of
the
registration statement and any other future filings we will make with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than Current
Reports on Form 8-K containing disclosure furnished under Items 2.02, 7.01
or
8.01 of Form 8-K, unless otherwise indicated therein):
You may
request a copy of these filings (not including the exhibits to such documents
unless the exhibits are specifically incorporated by reference in the
information contained in this prospectus), at no cost, by writing or telephoning
us at the following address:
American
Real
Estate Partners, L.P.
767 Fifth Avenue, Suite 4700
New York, New York
10153
Attn: Chief Financial Officer
Telephone requests may be directed to
(212) 702-4300
This
prospectus is part of a registration statement we filed with the SEC. You should
rely only on the information or representations provided in this prospectus.
We
have authorized no one to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted.
You
should not assume that the information in this prospectus is accurate as of
any
date other than the date on the front of the document.
Statements
contained in this prospectus as to the contents of any contract or document
are
not necessarily complete and in each instance reference is made to the copy
of
that contract or document filed as an exhibit to the registration statement
or
as an exhibit to another filing, each such statement being qualified in all
respects by such reference and the exhibits and schedules thereto.
We have
audited the accompanying consolidated balance sheets of American Real Estate
Holdings Limited Partnership and Subsidiaries as of December 31, 2006 and 2005,
and the related consolidated statements of operations, changes in partners’
equity and comprehensive income, and cash flows for each of the three years
in
the period ended December 31, 2006. These consolidated financial statements
are
the responsibility of the Partnership’s management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not
audit the financial statements of GB Holdings, Inc. and Subsidiaries for the
year ended December 31, 2004, which statements reflect losses of $12,822,000
included in the discontinued operations. Those statements were audited by other
auditors, whose report thereon has been furnished to us, and our opinion,
insofar as it relates to the amounts included for GB Holdings, Inc. and
Subsidiaries, is based solely on the report of the other auditors. Those
auditors expressed an unqualified opinion with emphasis on a going concern
matter on those financial statements in their report dated March 11, 2005.
Also,
we did not audit the financial statements of ImClone Systems Incorporated and
Subsidiary, the investment in which, as discussed in Notes 2 and 7 to the
financial statements, is accounted for by the equity method of accounting.
The
investment in ImClone Systems Incorporated and Subsidiary was $164,307,000
and
$97,255,000 as of December 31, 2006 and 2005, respectively, and the equity
in