1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 PUBLIC MEETING NO. 10-08-04 6 7 - - - - - - - - - - - - - - - - - - - 8 9 Wednesday, August 4, 2010 10 Atlantic City Commission Offices 11 Joseph P. Lordi Public Meeting Room - First Floor 12 Tennessee Avenue and Boardwalk 13 Atlantic City, New Jersey 08401 14 10:36 a.m. to 12:44 p.m. 15 16 17 Certified Court Reporter: Darlene Sillitoe 18 - - - - - - - - - - - - - - - - - - - - - - - - - - - 19 20 ATLANTIC CITY COURT REPORTING, LLC 21 CERTIFIED COURT REPORTERS AND VIDEOGRAPHERS 22 1125 ATLANTIC AVENUE, SUITE 700 23 ATLANTIC CITY, NEW JERSEY 08401 24 (609) 345-8448 www.accourtreporting.com 25 2 1 B E F O R E : 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 SHARON ANNE HARRINGTON, VICE CHAIR MICHAEL C. EPPS, COMMISSIONER 4 WILLIAM T. SOMMELING, COMMISSIONER EDWARD J. FANELLE, COMMISSIONER 5 6 PRESENT FOR THE CASINO CONTROL COMMISSION: DARYL W. NANCE, ADMINISTRATIVE ANALYST 7 DANIEL J. HENEGHAN, PUBLIC INFORMATION OFFICER LISA SPENGLER, PUBLICATIONS COORDINATOR 8 OFFICE OF THE GENERAL COUNSEL: 9 DIANNA W. FAUNTLEROY, GENERAL COUNSEL/EXECUTIVE SECRETARY 10 MARY WOZNIAK, ASSISTANT GENERAL COUNSEL TERESA M. NAGENGAST, SENIOR COUNSEL 11 SETH H. BRILLIANT, SENIOR COUNSEL LON E. MAMOLEN, SENIOR COUNSEL 12 ROBERT A. MONCRIEF, JR., COUNSEL TRACY E. RICHARDSON, COUNSEL 13 CLAIRE FRANK, PROGRAM MANAGER BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 14 SANDRA DeLIA, LEGAL SUPPORT SPECIALIST 15 DIVISION OF GAMING ENFORCEMENT: DEPUTY ATTORNEYS GENERAL 16 BRIAN C. BISCIEGLIA, DEPUTY ATTORNEY GENERAL TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL 17 JAMES C. FOGARTY, DEPUTY ATTORNEY GENERAL LOUIS ROGACKI, DEPUTY ATTORNEY GENERAL 18 DOROTHY TURI, DEPUTY ATTORNEY GENERAL R. LANE STEBBINS, DEPUTY ATTORNEY GENERAL 19 20 21 22 23 24 25 3 1 A P P E A R A N C E S : 2 ITEM NO. 4 LON E. MAMOLEN, SENIOR COUNSEL TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL 3 COOPER LEVENSON N. LYNNE HUGHES, ESQ. 4 FOR: SHOWBOAT ATLANTIC CITY OPERATING COMPANY, LLC 5 ITEM NO. 8 TERESA M. NAGENGAST, SENIOR COUNSEL 6 JAMES C. FOGARTY, DEPUTY ATTORNEY GENERAL FOX ROTHSCHILD, LLP 7 MARIE JONES, ESQ. FOR: GENERAL ELECTRIC COMPANY 8 ITEM NO. 9 MARY WOZNIAK, ASSISTANT GENERAL COUNSEL 9 DOROTHY TURI, DEPUTY ATTORNEY GENERAL STERNS & WEINROTH, PC 10 PAUL M. O'GARA, ESQ. FOR: HARRAH'S ENTERTAINMENT, INC. 11 ITEM NO. 10 TRACY E. RICHARDSON, COUNSEL 12 JAMES C. FOGARTY, DEPUTY ATTORNEY GENERAL COOPER LEVENSON 13 LYNNE LEVINE KAUFMAN, ESQ. FOR: MARINA DISTRICT DEVELOPMENT COMPANY, 14 LLC, MARINA DISTRICT FINANCE COMPANY, INC. 15 ITEM NO. 12 SETH H. BRILIANT, SENIOR COUNSEL TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL 16 FOX ROTHSCHILD, LLP MARIE JONES, ESQ. 17 FOR: WMS GAMING, INC. 18 19 20 21 22 23 24 25 4 1 AGENDA PUBLIC MEETING NO. 10-08-04 2 August 4, 2010, 10:36 a.m. ITEM PAGE VOTE 3 1 Ratification of the minutes of the 8 8 July 14, 2010, public meeting 4 Value Award presentation 8 2 Applications for employee and casino 5 service industry licenses 6 initial and/or renewal of casino key 11 11 6 and casino employee licenses 5 initial and/or renewal of casino key 11 12 7 and casino employee licenses 3 Stipulations of settlement and consent agreements: 8 a) Debrah M. Balaam (09-0561-ER) 12 14 b) Shevelle A. Green (09-0618-ER) 12 14 9 c) Igor Ilijoski (09-0702-RC) 12 14 d) Jessica Mangina (09-0547-RC) 12 14 10 e) Naynaben Patel (a/k/a Nayan Patel) 12 14 (10-0046-RC) 11 f) Shontrell D. Washington (09-0036-RC) 12 14 g) Servando H. Sanchez (10-0084-RC) 12 14 12 h) Brittany L. Benjamin (10-0135-EA) 12 14 i) Quishana A. Parks (10-0017-EA) 12 14 13 j) Terri J. Nelson (10-0006-ER) 12 14 k) Fernando Javier (09-0493-RC) 12 14 14 l) Amanda Mann (10-0100-RC) 12 14 4 Stipulations of settlement in State v. 14 17 15 Showboat Atlantic City Operating Company, LLC, (t/a Showboat Casino Hotel), David 16 Helveston, Nora Maldonado, and Paul Clark (09-0634-VC) 17 5 Petitions for early reapplication: a) Ebony R. Chapman (10-0187-RA) 18 20 18 b) Anthony D. Mansfield (10-0188-RA) 20 22 sworn 21 19 c) Mark J. Mutko (10-0190-RA) 23 24 d) Joseph O. Smiley, III (10-0176-RA) 24 25 20 6 Applications for suspension: 25 27 a) Michael Bell (10-0223-RC) 21 b) Melvin R. Delcid-Carias (10-0206-RC) 7 Consideration of forfeiture orders in: 27 30 22 a) Trump Marina Associates, et. al. (10-0159-VC) 23 b) RIH Acquisition NJ, LLC, et. al. (10-0166-VC) 24 8 Petition of General Electric Company 92 97 for an exemption from non-gaming casino 25 service industry licensure (PRN 0841001) 5 1 CONTINUED AGENDA PUBLIC MEETING NO. 10-08-04 2 August 4, 2010, 10:36 a.m. ITEM PAGE VOTE 3 9 Petition of Harrah's Entertainment, Inc., 30 36 for approval of the reclassification and 4 issuance of common stock and the amended certificate of incorporatin of a holding 5 company and other relief (PRN 1661003) 10 Amended joint petition of Marina District 36 92 6 Development Company, LLC, and Marina District Finance Company, Inc., for 7 declaratory relief for approval of material debt Transactions and with respect to 8 qualification and certain other issues related to material debt transactions 9 (PRN 2022001) Josh Hirsberg, sworn 42 10 Hugh T. Turner, Jr., sworn 75 11 Proposed readoption of NJAC 19:42 97 98 11 (Hearings) 12 Petition of WMS Gaming, Inc., for 98 101 12 permission to transfer a progressive annuity slot jackpot pursuant to NJAC 13 19:45-1.39(n) (PRN 1831001) 13 Proposed adoption of amendments to NJAC 101 102 14 19:43-7.3 and 7.6 (alternate configurations or locations for gaming pits and slot zones) 15 14 Proposed adoption of amendments to NJAC 102 103 19:40-1.1; 19:45-1.37, and 1.37B; NJAC 16 19:46-1.28; NJAC 19:51-1.1, and 1.2; and proposed new rule NJAC 19:46-1.28D 17 (Multi-player slot machine system) 15 Proposed adoption of amendments to NJAC 103 105 18 19:45-1.20 (table inventories; table inventory container; chip reserve compartment) 19 16 Proposed adoption of amendments and new 105 106 rules for "Mississippi Stud" 20 17 Proposed publication of amendments to 106 107 NJAC 19:40-1.2 and 19:45-1.37A (PIN sharing) 21 22 23 24 25 6 1 E X H I B I T S : 2 NO. 2 DESCRIPTION EVD 3 4 P-1 Remand for hearings 6 license X 5 P-2 Grant 5 licenses X 6 7 NO. 10 8 D-1 DGE report, 7-28-10, Petition No. 2011001 X 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (Exhibits retained by Commission.) 25 7 1 (Public Meeting 10-08-04 was commenced 2 at 10:36 a.m.) 3 MR. NANCE: Good morning. I'd like to 4 read an opening statement: 5 This is to advise the general public 6 that in compliance with Chapter 231 of the 7 public laws of 1975 entitled the "Open Public 8 Meeting Act," the New Jersey Casino Control 9 Commission on October 15, 2009, filed with the 10 Secretary of State at the State House in 11 Trenton an annual meeting schedule. On October 12 16, copies were mailed to subscribers. 13 Members of the press will be permitted 14 to take photographs. We ask that this be done 15 in a manner which is not disruptive or 16 distracting to the Commission. 17 The use of cell phones in the public 18 meeting room is prohibited. 19 Any member of the public who wish to 20 address the Commission will be given the 21 opportunity to do so before the Commission 22 adjourns for the day. 23 Please stand for the Pledge of 24 Allegiance. 25 (The flag salute was recited.) 8 ITEM NO. 1 1 CHAIR KASSEKERT: Good morning. 2 MR. NANCE: Good morning. 3 The matters discussed in closed session 4 were: Employee and enterprise license matters. 5 The Commission approved the July 14th, 6 2010, closed-session minutes. 7 Item No. 1, ratification of the minutes 8 of July 14th, 2010, public meeting. 9 COMMISSIONER SOMMELING: Move to 10 approve. 11 VICE CHAIR HARRINGTON: Second. 12 CHAIR KASSEKERT: The motion has been 13 made and seconded. All in favor? 14 (Ayes.) 15 CHAIR KASSEKERT: Opposed? 16 (No response.) 17 CHAIR KASSEKERT: The motion carries. 18 MR. NANCE: Miss Spengler? 19 MS. SPENGLER: Madame Chair, 20 Commissioners, good morning. We're here today 21 to present the Value Award certificate to Mr. 22 John M. Williams in the Compliance Division, 23 Inspection Unit. This will be for the month of 24 August. 25 I'll ask you to step down and present 9 1 John with the certificate, and I will take a 2 picture. If you have any comments. 3 CHAIR KASSEKERT: Sure. 4 I know you hate this, don't you? 5 (Applause.) 6 MS. SPENGLER: Great. Thank you very 7 much. 8 MR. WILLIAMS: Thank you, everybody. 9 CHAIR KASSEKERT: I know Commissioner 10 Fanelle is going to have some more words, but, 11 you know, John, first of all, is a very long 12 time employee. Over 30 years? 13 MR. WILLIAMS: Thirty-one. 14 CHAIR KASSEKERT: Thirty-one years. And 15 was instrumental when we had the recent issue 16 with the air conditioning problems in Trump and 17 Caesars. I know Commissioner Fanelle wants to 18 add to that, but I can't think of anybody more 19 deserving of this award. 20 MR. WILLIAMS: Appreciate it. 21 CHAIR KASSEKERT: Thank you. 22 (Applause.) 23 COMMISSIONER FANELLE: I'm going to take 24 my Commissioner hat off for a second and put 25 the former hats I used to wear, both being a 10 1 trooper for 25 years and being a public safety 2 director. 3 The incident that took place with the 4 air conditioning was a travesty as far as of 5 the economic input into the city. Gorgeous, 6 warm weekend. The casinos had to replace, you 7 know, reassign their people, and the people 8 that came in. I went to Trump Plaza, and I 9 saw -- and I saw John, and I saw the things 10 that he was doing. And I saw that he came back 11 on his own time to be self-assured that things 12 went the way they were supposed to be. 13 If you look up the definition of 14 "dedication" it would have John's picture. I 15 worked side by side with him. I know in 16 today's society -- in today's environment with 17 the, you know, streamlining of certain things, 18 sometimes the inspectors come under, you know, 19 a little discretion. My point being is that if 20 it wasn't for John and his staff and his 21 supervisor, the Trump Plaza closing wouldn't 22 have taken place the way it did. So my credit 23 goes to the inspector's staff, John 24 specifically. In this case we worked closely 25 together. And we brought a bad resolution -- 11 ITEM NO. 2 1 bad thing to a resolution in a very efficient 2 way. And I think it's due to his dedication 3 and efforts that made it come out that way. 4 So personally, from my old hats, I want 5 to thank you for the efforts you put through. 6 MR. WILLIAMS: Thank you. 7 (Applause.) 8 MR. NANCE: Item No. 2, application for 9 employee and casino service industry licenses. 10 This agenda item will be entered as 11 Exhibit List 1 and 2. 12 Exhibit List 1 consists of six 13 applications for initial and/or renewal of 14 casino key and casino licenses. 15 The Division have objected to licensure. 16 CHAIR KASSEKERT: Is there a motion to 17 remand for hearings? 18 COMMISSIONER SOMMELING: Move to remand 19 for hearings, Madame Chair. 20 VICE CHAIR HARRINGTON: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Ayes.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 12 ITEM NO. 3 1 CHAIR KASSEKERT: Motion carries. 2 MR. NANCE: Exhibit List 2 consists of 3 five applications for initial and/or renewal of 4 casino key and casino employee licenses. 5 Staff and the Division have recommended 6 that these licenses be granted. 7 COMMISSIONER SOMMELING: Move to grant 8 the applications. 9 VICE CHAIR HARRINGTON: Second. 10 CHAIR KASSEKERT: The motion has been 11 made and seconded. All in favor? 12 (Ayes.) 13 CHAIR KASSEKERT: Opposed? 14 (No response.) 15 CHAIR KASSEKERT: Motion carries. 16 MR. NANCE: Item No. 3, stipulations of 17 settlement and consent agreement. When I call 18 your name please come forward, stand behind 19 this middle table, spreading across the room so 20 that you may be seen: Debrah Balaam, Shevelle 21 Green, Igor Ilijoski, Jessica Mangina, Naynaben 22 Patel, Shontrell Washington, Servando Sanchez, 23 Brittany Benjamin, Quishana Parks, Terri 24 Nelson, Fernando Javier, and Amanda Mann. 25 CHAIR KASSEKERT: Has everyone whose 13 ITEM NO. 3 1 name been called come forward at this point? 2 Okay. 3 I'm going to ask that you each state 4 your name for the record. Starting with you, 5 sir. 6 MR. ILIJOSKI: Igor Iligoski. 7 MS. NELSON: Terri Nelson. 8 CHAIR KASSEKERT: Okay. In a moment we 9 are going to vote on the stipulations which 10 you've agreed to with the Division of Gaming 11 Enforcement. I'm going to ask at this point if 12 any of you wish to be heard on your matter. 13 You don't have to say anything if you don't 14 want to. 15 Does anyone wish to be heard? 16 (No response.) 17 CHAIR KASSEKERT: No? I will take that 18 as a no. 19 Mr. Biscieglia? 20 MR. BISCIEGLIA: Thank you. Good 21 morning, Chair and Commissioners. 22 The Division has nothing further and 23 asks the stipulations be adopted -- or be 24 approved as submitted. 25 CHAIR KASSEKERT: Thank you. 14 ITEM NO. 4 1 Any questions? 2 COMMISSIONER SOMMELING: No questions, 3 Madame Chair. 4 COMMISSIONER EPPS: Move to approve the 5 stipulations. 6 COMMISSIONER FANELLE: Second. 7 CHAIR KASSEKERT: The motion has been 8 made and seconded. All in favor? 9 (Ayes.) 10 CHAIR KASSEKERT: Opposed? 11 (No response.) 12 CHAIR KASSEKERT: Thank you for coming. 13 The motion passes. Thank you for coming. Good 14 luck. 15 FROM THE FLOOR: Thanks a lot. 16 MR. NANCE: Item No. 4, stipulations of 17 settlement in State versus Showboat Atlantic 18 City Operating Company, LLC, David Helveston, 19 Nora Maldonado, and Paul Clark. 20 Mr. Mamolen? 21 MR. MAMOLEN: Good morning, Chair and 22 Commissioners. 23 You have before you four separate 24 stipulations in this matter, one between the 25 casino licensee and the Division, the other 15 ITEM NO. 4 1 three between individual employees, a pit boss, 2 a cashier, and a security officer. 3 The stipulation for the casino licensee 4 calls for a $25,000 civil penalty. The 5 stipulations with the various employees call 6 for suspensions for the pit boss, three-day 7 working day suspension. And the other two 8 employees one day and individual letters of 9 reprimand. 10 CHAIR KASSEKERT: Thank you. 11 MR. MAMOLEN: Before you is Lynne Hughes 12 for Showboat and Tim Ficchi for Division. 13 CHAIR KASSEKERT: Miss Hughes? 14 MS. HUGHES: Yes. Good morning, Chair 15 and Commissioners. 16 I have reviewed over the stipulation and 17 ask that you adopt it. 18 CHAIR KASSEKERT: Thank you. 19 Mr. Ficchi? 20 MR. FICCHI: Yes. Good morning, Madame 21 Chair and Commissioners. We would also ask 22 that you adopt the stipulation. 23 I would just like to add as to the three 24 individuals, they are not here. They certainly 25 do respect the Commission and would have 16 ITEM NO. 4 1 appeared, but due to the cooperation of, you 2 know, your staff and to kind of not to appear. 3 But for the, you know -- for the Division and 4 the Commission staff to handle this matter for 5 them. They were very appreciative. They 6 wouldn't be required to come from work to 7 appear, so I thank you on their behalf. 8 CHAIR KASSEKERT: Thank you very much. 9 Any questions? 10 COMMISSIONER EPPS: Are the suspensions 11 all been served? 12 MS. HUGHES: Yes. 13 COMMISSIONER EPPS: Madame Chair, I move 14 that we approve the four stipulations of 15 settlement and assess the following penalties 16 for violation of Commission -- 17 MS. HUGHES: Wait. There was one 18 suspension. I don't believe all of them were 19 suspended. There were suspensions that were -- 20 MR. FICCHI: Sorry to interrupt, 21 Commissioner Epps, but to answer your question, 22 my understanding is that they haven't been 23 suspended. They were awaiting for the 24 Commission's order. 25 CHAIR KASSEKERT: To rule. 17 ITEM NO. 4 1 MS. HUGHES: One of them, I think, was 2 suspended after of fact. But we can check that 3 out. 4 COMMISSIONER EPPS: Okay. 5 CHAIR KASSEKERT: Thanks, Mr. Ficchi. 6 COMMISSIONER EPPS: Okay. Assess the 7 following penalties for violation of Commission 8 regulations regarding accounting and internal 9 controls and: A, impose a civil penalty of 10 25,000 against Showboat Atlantic City Operating 11 Company, LLC; B, suspend David Helveston's 12 casino key employee license for three working 13 days and issue a letter of reprimand to be made 14 a part of his employee file; C, suspend Nora 15 Maldonado's casino employee license for one 16 working day and issue a letter of letter of 17 reprimand to be made a part of her employee 18 file, and; D, suspend Paul Clark for one 19 working day and issue a letter of reprimand to 20 be made a part of his permanent employee file. 21 COMMISSIONER SOMMELING: Second. 22 CHAIR KASSEKERT: The motion has been 23 made and seconded. All in favor? 24 (Ayes.) 25 CHAIR KASSEKERT: Opposed? 18 ITEM NO. 5 1 (No response.) 2 CHAIR KASSEKERT: Motion carries. 3 Thank you. 4 MR. FICCHI: Thank you. 5 MS. HUGHES: Thank you. 6 MR. NANCE: Item No. 5, petitions for 7 early reapplication, Ebony Chapman, Anthony 8 Mansfield, Mark Mutko, and Joseph Smiley, III. 9 Miss Frigen? 10 MS. FRIGEN: Good morning, Madame Chair, 11 and Commissioners. Miss Chapman called me this 12 morning indicating she might have a problem 13 coming in. 14 The other two -- other three 15 gentlemen -- you guys have a seat just for a 16 moment, and I'll call you up one by one as your 17 cases come. I have to take care of Miss 18 Chapman first and then Mr. Mansfield will be 19 next. 20 (Laughter.) 21 MS. FRIGEN: Three guys coming up. 22 But Miss Chapman called me this morning 23 indicating she might have difficulty getting 24 here due to a family matter. Considering the 25 nature of the motion and the fact that the 19 ITEM NO. 5 1 Division is not objecting, I said with the 2 permission of the Commissioners, we would go 3 ahead and hear the case, and she was fine with 4 that. So if the Commission is agreeable for 5 your consideration is her petition seeking 6 permission to obtain non-credential hotel 7 registration early. 8 By letter June 28th, the Division has 9 interposed no objection to her request. 10 CHAIR KASSEKERT: Thank you. 11 Mr. Biscieglia? 12 MR. BISCIEGLIA: Thank you. 13 As Frigen just stated, the Division 14 interposed no objection to the relief sought by 15 the petition due to our June 28th, 2010, 16 letter. 17 And we'll answer questions you may have. 18 Thank you. 19 CHAIR KASSEKERT: Thank you. 20 Any questions? 21 COMMISSIONER SOMMELING: No questions, 22 Madame Chair. 23 VICE CHAIR HARRINGTON: I move that we 24 grant Miss Chapman permission to obtain 25 employment as a -- early as a non-credential 20 ITEM NO. 5 1 hotel employee. 2 COMMISSIONER EPPS: Second. 3 CHAIR KASSEKERT: The motion is made and 4 seconded. All in favor? 5 (Ayes.) 6 CHAIR KASSEKERT: Opposed? 7 (No response.) 8 CHAIR KASSEKERT: The motion carries. 9 MS. FRIGEN: Okay. The next case we 10 have is Anthony Mansfield. Mr. Mansfield, if 11 you could please come forward and have a seat. 12 This is Mr. Mansfield. For your 13 consideration is his petition seeking 14 permission to reapply early for a license, a 15 casino employee license, a registration and/or 16 non-credential hotel employment. 17 By letter dated June 28th, the Division 18 has also interposed no objection to his 19 petition. 20 CHAIR KASSEKERT: Thank you. 21 Mr. Mansfield, is there anything you'd 22 like to say today? 23 MR. MANSFIELD: Yes. The matter at 24 hand, I took care of it already. 25 CHAIR KASSEKERT: Okay. Well, I -- let 21 ITEM NO. 5 1 me swear you in then if you want to tell us -- 2 so I know you're telling me under oath. 3 Mr. Nance? 4 5 ANTHONY D. MANSFIELD, was duly sworn to 6 testify in this matter. 7 8 MR. NANCE: Please state your name for 9 the record. 10 MR. MANSFIELD: Anthony Mansfield. 11 MR. NANCE: Thank you. 12 CHAIR KASSEKERT: Okay. Now that we're 13 official. 14 MR. MANSFIELD: Well, as for that 15 student loan, I pretty much paid that, and I 16 already graduated from college. And I have 17 three more credits. And the motor vehicles, 18 that was a relative who used my name, which I 19 took it to court and they pleaded guilty. So I 20 don't even know why motor vehicle kept it on my 21 record. They many made me pay $6,000, which 22 I'm down to 1100, and I'm still going to fight 23 it, but I was going to pay it to get it out the 24 way. 25 CHAIR KASSEKERT: Okay. Very good. 22 ITEM NO. 5 1 Mr. Biscieglia? 2 MR. BISCIEGLIA: Thank you. Once again, 3 the Division has interposed no objection if Mr. 4 Mansfield chooses to apply for a casino 5 license, any of the outstanding debts will be 6 looked at during the application process. 7 Thank you. 8 CHAIR KASSEKERT: Thank you. 9 Any questions? 10 COMMISSIONER SOMMELING: No questions, 11 Madame Chair. 12 VICE CHAIR HARRINGTON: Good job. 13 I will move that we grant Mr. Mansfield 14 permission to reapply early for a casino 15 employee license, a casino service employee 16 registration, and/or to obtain employment early 17 as a non-credential hotel employee. 18 COMMISSIONER EPPS: Second. 19 CHAIR KASSEKERT: The motion is made and 20 seconded. All in favor? 21 (Ayes.) 22 CHAIR KASSEKERT: Opposed? 23 (No response.) 24 CHAIR KASSEKERT: The motion carries. 25 Thank you for coming. Good luck. 23 ITEM NO. 5 1 MR. MANSFIELD: Thank you so much. 2 MS. FRIGEN: Okay. The next case we 3 have is Mark Mutko. 4 Mr. Mutko, could you please come forward 5 and have a seat. 6 In this case Mr. Mutko is seeking 7 permission to reapply early for a registration 8 and/or on a non-credential hotel employment. 9 By letter dated July 2nd, the Division 10 interposed no objection to his petition. 11 CHAIR KASSEKERT: Thank you. 12 Mr. Mutko, is there anything you'd like 13 to say today? 14 MR. MUTKO: No, ma'am. 15 CHAIR KASSEKERT: Okay. Mr. Biscieglia? 16 MR. BISCIEGLIA: Thank you. 17 Once again, the Division has interposed 18 no objection to the relief sought by the 19 Petitioner. 20 I'll answer any questions that you have. 21 Thank you. 22 CHAIR KASSEKERT: Thank you. 23 Is there any questions? 24 COMMISSIONER SOMMELING: No questions, 25 Madame Chair. 24 ITEM NO. 5 1 COMMISSIONER FANELLE: Madame Chair, 2 move to grant Mr. Mutko permission to reapply 3 early for a casino service employee 4 registration and/or to obtain employment early 5 as a non-credential hotel employee. 6 VICE CHAIR HARRINGTON: Second. 7 CHAIR KASSEKERT: The motion has been 8 made and seconded. All in favor? 9 (Ayes.) 10 CHAIR KASSEKERT: Opposed? 11 (No response.) 12 CHAIR KASSEKERT: The motion carries. 13 Thank you for coming. Good luck. 14 MR. MUTKO: Okay. Thank you. 15 MS. FRIGEN: Next case we have and 16 finally is Joseph Smiley? Mr. Smiley? Okay. 17 Mr. Smiley is also seeking permission to 18 reapply early for a registration and/or a 19 non-credential hotel employment. 20 By letter dated June 28th, the Division 21 interposed no objection to his request. 22 CHAIR KASSEKERT: Thank you. 23 Mr. Smiley, is there anything you'd like 24 to say today? 25 MR. SMILEY: No, ma'am. 25 ITEM NO. 6 1 CHAIR KASSEKERT: Okay. Mr. Biscieglia? 2 MR. BISCIEGLIA: Thank you. 3 The Division has interposed no 4 objection. And we will answer any questions 5 that the Commission may have. 6 Thank you. 7 CHAIR KASSEKERT: Thank you. 8 Any questions? 9 COMMISSIONER SOMMELING: No questions, 10 Madame Chair. 11 COMMISSIONER EPPS: Move that we grant 12 Mr. Smiley permission to reapply early for 13 casino service employee registration and/or to 14 obtain employment early as a non-credential 15 hotel employee. 16 COMMISSIONER SOMMELING: Second. 17 CHAIR KASSEKERT: The motion has been 18 made and seconded. All in favor? 19 (Ayes.) 20 CHAIR KASSEKERT: Opposed? 21 (No response.) 22 CHAIR KASSEKERT: The motion carries. 23 Thank you for coming. Good luck. 24 MR. SMILEY: Thank you. 25 MR. NANCE: Item No. 6, application for 26 ITEM NO. 6 1 suspension, Michael Bell, Melvin Delcid-Carias. 2 Miss DeLia? 3 MS. DeLIA: Good morning, Chair, 4 Commissioners. 5 For the record, I'd like to ask if the 6 Respondents are here or represented? 7 (No response.) 8 MS. DeLIA: Okay. Apparently not. 9 Mr. Biscieglia is here on behalf of the 10 Division. 11 CHAIR KASSEKERT: Thank you. 12 Mr. Biscieglia? Now you get to do the 13 opposite end of your job. 14 (Laughter.) 15 MR. BISCIEGLIA: Thank you. 16 The Division will rely on the arguments 17 set forth in the complaint and the suspension 18 application. I would like to add that both of 19 these individuals are currently pending -- 20 their cases are currently pending a grand jury 21 with no date set. 22 CHAIR KASSEKERT: Thank you. 23 MR. BISCIEGLIA: Thank you. 24 CHAIR KASSEKERT: Any questions? 25 COMMISSIONER SOMMELING: Madame Chair, 27 ITEM NO. 7 1 move to grant the Division's applications for 2 suspension. 3 COMMISSIONER EPPS: Second. 4 COMMISSIONER FANELLE: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Ayes.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 MR. BISCIEGLIA: Thank you. 12 MR. NANCE: Item No. 7, consideration of 13 forfeiture orders in Trump Marina Associates, 14 et al., and RIH Acquisition New Jersey, LLC, et 15 al. 16 Miss DeLia? 17 MS. DeLIA: For the Commission's 18 consideration are two forfeiture orders seeking 19 money confiscated by Trump Marina and Atlantic 20 City Hilton from self-excluded and excluded 21 patrons to be turned over to the Commission for 22 disposition. 23 Respective counsel for the two licensees 24 have provided letters advising that they have 25 no objection to the entry of a forfeiture 28 ITEM NO. 7 1 order. 2 Each patron was provided with a notice 3 of the forfeiture action and the opportunity to 4 be heard. They have either not responded or 5 stated that they would not be contesting the 6 case. 7 The matter is now being presented to the 8 Commission for final action. 9 Mr. Stebbins is here on behalf of the 10 Division. 11 CHAIR KASSEKERT: Thank you. 12 Mr. Stebbins? 13 MR. STEBBINS: Good morning, Madame 14 Chair, members of the Commission. 15 The paperwork is in front of you. I 16 would request that the appropriate order be 17 entered in each case. 18 I would note the following, however. 19 With regard to 7b, in the matter of Hilton, the 20 individual there is a fellow by the name of 21 Morris -- last name of Morris -- who was put on 22 the exclusion list in 1989, over 20 years ago. 23 He was put on the list for swindling and 24 cheating, past-posting at a game. This matter 25 involves the very same conduct, so there's the 29 ITEM NO. 7 1 idea, you know, spots and leopards and things 2 like that. However, he was caught. And as 3 part of that processing, we now have an updated 4 picture of him. It's not going to be 20 years 5 old, and we can be more effective with our 6 monitoring of excluded persons. So there's 7 good and then there's good that comes out of 8 this. So that's where we are. Just provide 9 that update for you. 10 CHAIR KASSEKERT: Thank you, Mr. 11 Stebbins. 12 Any questions? 13 COMMISSIONER SOMMELING: I have no 14 questions, Madame Chair. 15 VICE CHAIR HARRINGTON: Well, I will 16 move that based upon the patrons having gambled 17 while either on the self-exclusion list or 18 exclusion list we find that these individuals 19 have forfeited the money and/or things of value 20 seized pursuant in NJSA 5:12-71.3 and the 21 respective casinos are directed to remit the 22 forfeited funds to the Commission for 23 appropriate disposition in accordance with NJSA 24 5:12-71.3(c). 25 COMMISSIONER EPPS: Second. 30 ITEM NO. 9 1 CHAIR KASSEKERT: The motion has been 2 made and seconded. All in favor? 3 (Ayes.) 4 CHAIR KASSEKERT: Opposed? 5 (No response.) 6 CHAIR KASSEKERT: The motion carries. 7 Thank you. 8 MR. STEBBINS: Thank you. 9 MS. DeLIA: Thank you. 10 MR. NANCE: For your consideration Item 11 No. 9, petition of Harrah's Entertainment, 12 Inc., for approval of reclassification and 13 issuance of common stock and the amended 14 certificate of incorporation of a holding 15 company and other relief. 16 Miss Wozniak? 17 MS. WOZNIAK: Good morning, Chair and 18 Commissioners. 19 Mr. O'Gara is here on behalf of the 20 Petitioner and Miss Turi for the Division. 21 I have distributed a draft resolution 22 that, with your approval, includes a request to 23 redact portions of the Division's report. 24 CHAIR KASSEKERT: Thank you. 25 Mr. O'Gara? 31 ITEM NO. 9 1 MR. O'GARA: Yes, ma'am. 2 They're very small portions. Very 3 small. 4 It's an ATT petition, and it's for the 5 approval to reclassify the stock. At the time 6 that Harrah's was taken private, there were two 7 classes of stock. There were three actually, 8 preferred issue and there was voting and 9 non-voting stock. The preferred has been 10 cancelled in exchange for non-voting common. 11 With an amendment to the certificate, it will 12 authorize Harrah's to cancel the non-voting 13 common and exchange a voting common which will 14 be the only classification of stock. It will 15 be distributed to the fund entities which 16 presently hold it. And they will exercise, 17 each of them in the co-invest, an irrevocable 18 proxy to the VoteCo, which consists of the big 19 six, the six individuals that serve on the 20 Harrah's board who are qualified, and who on, 21 in the case of New Jersey, of consequence, who 22 control the economics and also controlled the 23 vote previously. There will also be an 24 exchange. 25 They'll be an issuance of additional 32 ITEM NO. 9 1 shares. And those shares will be exchanged for 2 debt securities which are held presently by 3 Paulson & Co., who is an investor, and by the 4 sponsor investors. And they will exchange the 5 bonds which they have which they, remarkably 6 enough, acquired from something called HBC, 7 which is a Harrah's entity which got them that 8 the exchange. And they'll -- the cash will 9 then go to ATT. And these bonds will be 10 exchanged for common stock. And that common 11 stock will carry with it registration rights 12 and there will be an S1 filed, and with that 13 filing of the S1, it will register the first of 14 these shares, and it will then apply for a 15 listing on the New York Stock Exchange. 16 Harrah's will again be a public company. 17 And the certificate of amendments call for the 18 issuance of an additional shares beyond that 19 which will be done with followup registration. 20 I believe that there's nothing in the 21 order that we have any problem with. It's 22 suitable to us. 23 And with respect to the exchange with 24 the sponsors, they are obviously qualified, TPG 25 Capital and Apollo Management. 33 ITEM NO. 9 1 With respect to Paulson, we've been 2 informed that they have submitted to you the 3 evidence of their 40F investment bonds that are 4 registrated to the funds they are buying. And 5 until they have that ruling from either an 6 institutional investor, we will exchange 4.9 7 percent with them. And when, if, and as they 8 obtain same, we'll allow them to exchange 9 additional bonds which will take them to 9.9 of 10 the outstanding common stock of Harrah's 11 Entertainment. 12 CHAIR KASSEKERT: Thank you. 13 MR. O'GARA: Thank you. 14 CHAIR KASSEKERT: Let me ask if there 15 any questions for Mr. O'Gara before we hear 16 from Miss Turi? 17 COMMISSIONER SOMMELING: No questions, 18 Madame Chair. 19 CHAIR KASSEKERT: Miss Turi? 20 MS. TURI: Good morning Chair, 21 Commissioners. 22 As Mr. O'Gara advised, there's going to 23 be a reclassification of the stock of Harrah's 24 Entertainment, Inc., and there's going to be 25 issuance of new common stock which is going to 34 ITEM NO. 9 1 be voting stock. However, there will be 2 control only by the entity that has currently 3 has control because of irrevocable proxies that 4 will be executed in conjunction with this 5 particular transaction. 6 Subsequently there will be a 7 debt-for-equity exchange, and we recommend at 8 this particular time that that exchange with 9 Paulson, which is an outside investor, be up to 10 the 4.9 percent. And the Division Director 11 would concur in the waiver of Paulson provided 12 there be the issuance of only up to 4.9 13 percent. 14 We are also in receipt of information 15 from Paulson & Co. trying -- which will set 16 forth and has set forth its position regarding 17 its status and whether or not it can be waived 18 up to 9.9 percent. And in due course we will 19 respond to that particular petition. 20 Also, we have no objection to the 21 redaction, the very small redaction, as Mr. 22 O'Gara said, to the Division's report at this 23 time. 24 We've reviewed the draft resolution, and 25 subject to the conditions therein, we have no 35 ITEM NO. 9 1 objection to its entry. 2 Thank you. 3 CHAIR KASSEKERT: Thank you. 4 Any questions for Miss Turi? 5 COMMISSIONER SOMMELING: No questions, 6 Madame Chair. 7 CHAIR KASSEKERT: Since the redaction is 8 contained in the order, I don't need to do a 9 separate -- 10 MS. WOZNIAK: No. You do not. 11 CHAIR KASSEKERT: Very good. Okay. 12 Is there a motion? 13 COMMISSIONER EPPS: I move we approve -- 14 I mean adopt the draft resolution and: A, 15 approve the reclassification of the Harrah's 16 Entertainment common stock, the issuance of the 17 new voting common stock and proposed exchange 18 offer; B, approve the relevant amendments to 19 the Harrah's Entertainment Certificate of 20 Incorporation; and, C, find that all holders of 21 the new voting common stock have either been 22 qualified or waiver of qualification subject to 23 the conditions in the resolution. 24 COMMISSIONER SOMMELING: Second. 25 CHAIR KASSEKERT: The motion has been 36 ITEM NO. 10 1 made and seconded. This is a roll call vote. 2 MR. NANCE: Commissioner Sommeling? 3 COMMISSIONER SOMMELING: Yes. 4 MR. NANCE: Commissioner Epps? 5 COMMISSIONER EPPS: Yes. 6 MR. NANCE: Commissioner Fanelle? 7 COMMISSIONER FANELLE: Yes. 8 MR. NANCE: Vice Chair Harrington? 9 VICE CHAIR HARRINGTON: Yes. This is 10 very encouraging, so. 11 MR. NANCE: Chair Kassekert? 12 CHAIR KASSEKERT: Yes. 13 MR. NANCE: The record will reflect that 14 the motion is unanimous. 15 CHAIR KASSEKERT: Thank you. 16 MR. O'GARA: Thank you. 17 MS. TURI: Thank you. 18 MR. NANCE: For your consideration, Item 19 No. 10, amended joint petition of Marina 20 District Development Company, LLC, and Marina 21 District Finance Company, Inc., for declaratory 22 relief for approval of material debt 23 transactions and with respect to qualification 24 and certain other issues related to material 25 debt transactions. 37 ITEM NO. 10 1 Miss Richardson? 2 MS. RICHARDSON: Good morning, Chair and 3 Commissioners. 4 Counsel please enter their appearances? 5 MS. KAUFMAN: Lynne Kaufman, Cooper 6 Levenson, for MDFC, the borrower, and MDDC, the 7 casino licensee. 8 MR. FOGARTY: Good morning. James 9 Fogarty, Deputy Attorney General, for the 10 Division of Gaming. 11 CHAIR KASSEKERT: Thank you. 12 The Commission is considering today the 13 an amended joint petition of Marina District 14 Development Company, LLC, better known as the 15 Borgata, and the Borgata's financing 16 subsidiary, Marina District Finance Company, 17 Inc., or MDFC, for various relief concerning 18 approval of two material debt transactions. 19 To assist the Commission with evaluating 20 the relief, the Petitioners seek, and we will 21 hear testimony today. There is also an exhibit 22 that has been premarked. 23 Mr. Nance? 24 MR. NANCE: The pre-marked exhibit is as 25 follows: The Division of Gaming Enforcement 38 ITEM NO. 10 1 has one exhibit which is premarked as D-1, DGE 2 report dated July 28th, 2010, regarding 3 Petition No. 2011001. 4 CHAIR KASSEKERT: Thank you. 5 Are there any objections to the 6 admission of this exhibit? And are there any 7 sealing requests? 8 MS. KAUFMAN: Madame Chair, we do have a 9 sealing request for the Division's report. 10 CHAIR KASSEKERT: Thank you. 11 Mr. Fogarty? 12 MR. FOGARTY: Yes. I moved that report 13 into evidence. I am aware of the sealing 14 request. I've received the sealing request. I 15 reviewed it, and we have no objection to the 16 requests that are made and that redaction. 17 CHAIR KASSEKERT: Thank you. All right. 18 I'll, therefore, move exhibit D-1 into 19 evidence and grant Petitioner's sealing 20 request. 21 With those exhibits in the record, we're 22 prepared to proceed. 23 Are there any other procedural matters 24 that need to be brought to our attention at 25 this time? 39 ITEM NO. 10 1 MS. KAUFMAN: No. 2 MR. FOGARTY: None from the Division. 3 CHAIR KASSEKERT: Very good. 4 We're now set for opening statements, 5 which the parties may waive and elect to 6 instead of proceed directly to testimony. 7 Counsel, what's your preference? 8 MS. KAUFMAN: Madame Chair, I have a 9 brief opening statement. 10 We filed the petition, as you've 11 mentioned, and are here today to request 12 approve of material debt transactions that will 13 replace the existing credit facility which has 14 been in place basically in some form since the 15 beginning of Borgata. The current credit 16 facility is set to mature in January -- January 17 31st, specifically, 2011. 18 In connection with the approval of the 19 material debt transaction, we're requesting a 20 financial stability ruling under Section 84a of 21 the Act and NJAC 19:43-4.2 and 3, as well as 22 certain other rulings with regard to the 23 transaction documents and lender qualification. 24 Although the maturity date of the credit 25 facility, as I mentioned, is not until the end 40 ITEM NO. 10 1 of January, 2010, MDDC and MDFC started working 2 very early in trying to secure favorable 3 financing in this difficult credit market well 4 before the facility matured, and we're pleased 5 that we have done that. 6 I also note that in view of the maturity 7 date, during Borgata's recent license renewal, 8 the Commission required us to come back to you 9 by December 1st, 2010, to tell you of our plan 10 for replacing the credit facility and to submit 11 projections. We clearly are prior to that 12 December 1st date. 13 The testimony today and the submissions 14 will show that Borgata will continue to meet 15 the required criteria of financial stability. 16 Certain of the forecasted materials are set 17 forth in the Division's report which we have 18 redacted. And then we have testimony today 19 which will set forth our belief that, yes, we 20 will continue to be financially stable. 21 I have Josh Hirsberg, who is the Boyd 22 gaming Senior Vice President, CFO, and 23 Treasurer, as well as the Marina District 24 Finance Company Vice President, CFO, and 25 Treasurer. I also have Hugh Turner, who is the 41 ITEM NO. 10 1 Vice President of Finance of Borgata. And I 2 note that I use "MDDC" and "Borgata" 3 interchangeably. 4 CHAIR KASSEKERT: Interchangeably. 5 MS. KAUFMAN: Josh? 6 CHAIR KASSEKERT: Thank you. 7 Let me just is ask if Mr. Fogarty has an 8 opening statement. 9 MS. KAUFMAN: Oh, I'm sorry about that. 10 (Laughter.) 11 MR. FOGARTY: Good morning. Very, very 12 briefly. 13 Yes. This is an application to approve 14 as material debt transactions up to borrowings 15 up to $950 million which will be used for two 16 principal purposes, one as Miss Kaufman 17 indicated, to pay down an existing credit 18 facility and get another one, and also to pay 19 dividends. 20 We have filed our report, which I note 21 is in evidence, dated July 28th, 2010, which 22 addresses the various matters that were raised 23 in the petitions and discusses and gives you 24 the benefit of our view as to the financial 25 stability aspects of this material debt 42 ITEM NO. 10 1 transaction. 2 This is the third time that this is 3 being attempted. We hope, and I'm sure Borgata 4 hopes, that the third time is the charm. 5 Thank you. 6 CHAIR KASSEKERT: Thank you. 7 Miss Kaufman, you may call your first 8 witness. 9 MS. KAUFMAN: Mr. Hirsberg? 10 11 JOSH HIRSBERG, was duly sworn to testify 12 in this matter. 13 14 MR. NANCE: Please state your name for 15 the record. 16 THE WITNESS: Josh Hirsberg. 17 MR. NANCE: Thank you. 18 CHAIR KASSEKERT: Miss Kaufman, you may 19 proceed. 20 21 DIRECT EXAMINATION BY MS. KAUFMAN: 22 Q. Yes. Welcome back to Atlantic City and 23 the witness box. 24 Could you please state your title with 25 Boyd gaming and MDFC, even though I just did. 43 ITEM NO. 10 1 A. Sure. My name is Josh Hirsberg. I'm 2 the Senior Vice President, Chief Financial Officer, 3 and Treasurer of Boyd Gaming. I've been in that 4 position since January of 2008. And I also hold the 5 position of Vice President of -- Chief Financial 6 Officer, and Treasurer of MDFC, the issuer of these 7 bonds. 8 MS. KAUFMAN: Okay. If I may 9 respectfully ask if I could waive the 10 background since we heard about it a month ago. 11 CHAIR KASSEKERT: Sure. 12 MS. KAUFMAN: And, hopefully, it hasn't 13 changed. 14 A. It hasn't changed. 15 (Laughter.) 16 Q. Mr. Hirsberg, you're mere to today to 17 seek approval of a material debt transaction which 18 will total a capacity of up to $950 million with 19 800 -- with up to $875 million to be anticipated 20 outstanding at closing, consisting of both a note 21 offering and a credit facility. Borgata, Mr. Fogarty, 22 and Miss Richardson, and all the financial evaluation 23 units have been working for several months on 24 refinancing alternatives, and we truly appreciate 25 everyone's efforts. 44 ITEM NO. 10 1 Could you start off by addressing the 2 current structure? 3 A. Sure. And I guess I would like to take 4 a minute. As Mr. Fogarty indicated, this is our third 5 attempt at this, so we appreciate both the patience 6 and the cooperation we've received from everyone at 7 the Commission and at the DGE because I -- it has been 8 a -- probably an unusual process. That's -- we'll 9 probably go into that in a little bit. 10 But in terms of the structure itself, we 11 really started conversations with our lenders and 12 bankers almost a year ago to start to figure out what 13 this transaction would look like and what the best 14 timing would be for it. And at that point, one of the 15 initial items that we recognized was that we had a 16 $740 million existing credit facility at that point. 17 And that the bank market was just not going to be 18 there in full to replace it dollar for dollar. And so 19 we knew at that point that we were going to need to 20 introduce another form of capital into the capital 21 structure. And really throughout the process, it was 22 one of balancing how much bank debt we could obtain 23 versus the cost it would have on the other piece of 24 capital that we would introduce into the capital 25 structure. 45 ITEM NO. 10 1 And over time, we evolved to the 2 structure that we're having today, which is a smaller 3 bank facility, and a larger bond facility or a larger 4 bond issuance. That gave us the lowest cost of 5 capital relative to the capital that's availability as 6 well as a lot of flexibility around the operations of 7 the facility -- of the property going forward. So 8 that is the process that we've gone through to arrive 9 at the point that we are today. 10 Q. Thank you. 11 Mr. Fogarty and you both did just 12 mention that, yes, this is not the first time we've 13 contemplated a refinancing. Could you explain why 14 there were starts and stops both in the regulatory and 15 in the marketing process? 16 A. Sure. I think the biggest factor had to 17 deal with the market volatility. When we started this 18 process a year ago, the market was much different than 19 when we approached the Commission the first time 20 around in -- I think initially in June it was. And 21 the market at that point was very good, and the 22 structure was changing in our favor at that point. 23 And as we made changes, we had to react, given the 24 approval process and the analysis that needed to be 25 done in association with those changes. And we tried 46 ITEM NO. 10 1 to provide a wide range of various scenarios that 2 probably tried the patience of all the financial 3 analysis that was under way. 4 At the end of the day, what we -- our 5 ultimate goal was to try to align the approval process 6 and match it with the volatility of the marketplace. 7 We were trying to get it so that ultimately we were 8 able to attack the market at the best possible time 9 and get the approval lined up accordingly. And when 10 we started this over the last couple of times, it was 11 not possible to really accomplish that. And so that 12 is largely what I would say is the reason for the 13 start and stops associated with this process that has 14 been experienced over the last several months 15 Q. Okay. So more in layman's terms -- 16 A. Uh-hum. 17 Q. -- you were trying to get regulatory 18 approval and close the deal -- 19 A. As close together as possible. 20 Q. -- as close together as possible. 21 A. And I would say another factor was the 22 deal kept evolving and changing. And so every time we 23 provided information, we wanted to make sure that what 24 was being evaluated was as close to what was going to 25 happen as possible. Knowing even today that 47 ITEM NO. 10 1 everything we've given is projections and assumptions 2 and is as close as we could get until, you know, the 3 deal actually closes. 4 Q. Okay. Thank you. 5 A. Sure. 6 Q. We had discussed that there are two 7 parts to the offering, a credit facility and a note 8 offering. 9 A. Uh-hum. 10 Q. Could you start off by describing the 11 note offering? 12 A. Sure. The note offering will most 13 likely be an $800 million -- not to exceed $800 14 million note offering, which is a senior secured note 15 offering that has the same collateral as the existing 16 credit facility has. That is, the real and personal 17 property of Borgata. It will have an interest rate 18 that will be less than or no greater than, certainly, 19 of 11 percent, as we've shown in our projections. 20 The credit facility -- I'm sorry -- the 21 bonds are expected to be, and most likely will be, 22 five year tranches and eight year tranches. So it 23 will be split, most likely, 50/50 between those two 24 maturities. The notes will official initially be 25 issued as private-placement issuances. And then 48 ITEM NO. 10 1 through a registration rights agreement, within one 2 year the notes will be fully tradable as public 3 securities. 4 Q. Okay. And how about the new credit 5 facility? 6 A. The new credit facility will be a $150 7 million credit facility. We will have $75 million 8 drawn initially. It's a four-year credit facility 9 secured by the name collateral that's securing the 10 bonds, which is also the same collateral that's 11 securing the existing credit facility, and it will be 12 available to us initially at a rate of LIBOR plus 4.25 13 percent. 14 Q. And you alluded to this, but could you 15 describe a little more why there's such a difference 16 between the amount of note offering and the amount of 17 credit facility? 18 A. Sure. The -- as we -- to the extent 19 that we raised more bank capital, which is obviously 20 very flexible for us and has a lower cost of capital, 21 the offset is the restriction that the note holders 22 would put on us, the bondholders. And so what we were 23 trying to do is raise the most capital we could in the 24 most efficient way. So it's really a balancing act, 25 if you will. 49 ITEM NO. 10 1 Q. The current -- the interest rate on the 2 current facility which we secured -- 3 A. Uh-hum. 4 Q. -- quite some time ago is lower than the 5 projected rate on the new facility? 6 A. Uh-hum. 7 Q. Could you just give us a little 8 information about why? 9 A. I think the key to understanding the 10 difference in rate has to do with two separate 11 factors. One is, is the credit facility was put in 12 place literally in 2003 at a very different time than 13 we are today. Obviously, there's been amendments. 14 And every time you do an amendment, the lenders have 15 an opportunity. They will try to increase the rate 16 that you borrow. However, it's never really market to 17 market at that point, so you're always borrowing under 18 a very favorable rate given where the credit facility 19 started with. So that's number one. We had -- we had 20 the benefit of very low interest rates at -- at the 21 time Borgata opened. 22 The other aspect of it is that we are 23 really putting longer term capital into the capital 24 structure of Borgata. Borgata, from a financial 25 perspective, has been very successful. It had in its 50 ITEM NO. 10 1 first five years of operation really the high-class 2 problem of more demand than it knew what to do with 3 and expanded on several occasions to meet that demand. 4 The initial investment was significant. The 5 expansions thereafter where part of the master plan to 6 meet the success of the property. 7 Now we're moving into a different stage 8 of the property, and that is one where there is 9 limited opportunities to expand capital other than 10 maintenance and refurbishment projects and keeping the 11 property up to date so it can be competitive and 12 maintain its brand and its position in the marketplace 13 relative to competition all over the East Coast. So 14 it's really moving into a stage where it doesn't need 15 the capital for expansion. And it generates a lot of 16 free cash flow. And so from the perspective of being 17 able to handle the level of debt that we're putting on 18 it, the cash really has only one source, and that is 19 to reduce -- to de-leverage the enterprise. 20 Q. Okay. And how will you be allocating 21 the proceeds of these debt transactions? 22 A. Uh-hum. As Mr. Fogarty mentioned, there 23 are two primary purposes of the proceeds from this 24 offering. Number one is to retire the existing credit 25 facility, which as of June 30 was estimated to be 51 ITEM NO. 10 1 about $630 million of the debt outstanding on the 2 credit facility. The second is to pay the expenses 3 associated with the transaction. And the final is to 4 distribute whatever is remaining to the partners in 5 the form of a dividend or distribution. 6 Q. Okay. And how will the distribution be 7 divided between Boyd and the divestiture trustee? 8 A. According to the agreement between Boyd 9 and MGM, as part of the transfer of the interest into 10 the divestiture trust, Boyd will receive the first $30 11 million of the distribution. It gets a little 12 convoluted, but basically half of that distribution or 13 $15 million -- and I'm using round numbers. I think 14 the number is more like 31 million, so -- but half of 15 the distribution ultimately is to reimburse Boyd for 16 advances that Boyd made on behalf of MGM. So the 17 first 30 million of the distribution comes to Boyd. 18 And really probably the easiest way to think about it 19 is 50 percent is of it is Boyd's share that it would 20 normally get and 50 percent of that distribution is 21 MGM share but to reimburse Boyd for that advance. So 22 that's why we get the first $30 million. After that, 23 whatever is remaining from the proceeds of the 24 distribution we split 50/50. Fifty percent comes to 25 Boyd, and 50 percent goes to the divestiture trust. 52 ITEM NO. 10 1 Once the divestiture trust receives its 50 percent 2 share, then it will pay to Boyd as soon as 3 logistically possible a $10 million fee. 4 So at the end of the day, after you kind 5 of put all this down on paper and see how the flows 6 work, Boyd ends up with its 50 percent share plus $25 7 million; 15 reimbursement of the 30 million initially 8 and the $10 million payment at the end of the stream. 9 MGM -- or really the trustee or the trust -- receives 10 50 percent less the 15 million that was paid as part 11 of the initial reimbursement, less the $10 million 12 payment. 13 Q. Okay. I think that probably a lot of 14 people -- anybody who is paying attention -- are 15 slightly confused because -- and I think the number's 16 exactly 30.8 million. 17 A. Okay. 18 Q. But last time that you testified, we 19 didn't get into this much detail. And we just talked 20 about Boyd getting, I think it was, 24.8 million or 21 25.8 22 A. Twenty-five. 23 Q. Twenty-five. And I guess I'm just 24 trying to reconcile it. And my understanding, if you 25 could just confirm -- 53 ITEM NO. 10 1 A. Uh-hum. 2 Q. -- is that by doing the calculation of 3 taking the 30.8, even though we take the 30.8 half, of 4 that money is money that we were already required to 5 spend as -- was part of our capital contribution; 6 correct? 7 A. That's right. 8 Q. And so, therefore, when you talk about 9 getting 25 million, it's because the documents say we 10 get -- almost 31 million, but that 31 million really 11 translates into 15-point-something million; correct? 12 A. That's right. 13 Q. Okay. So and then we add the 10 14 million. So you took that 15 million. You added 10, 15 and you got 25. And that's why -- it's my 16 understanding, and please confirm -- 17 A. You're right. Maybe I confused the 18 matter by trying to make it simple. 19 (Laughter.) 20 Q. Or you made it simple, and I made it 21 complicated. 22 A. Either way. So we get 30. We split 23 50/50, and 10 comes back our way. 24 Q. Okay. 25 A. Maybe that's an easier way to understand 54 ITEM NO. 10 1 it. 2 Q. Okay. And why are you taking the 3 distribution? 4 A. Well, I think it goes to a couple of 5 things. First of all, the success of Borgata in terms 6 of its level of operations, Borgata has done a great 7 job both in terms of the product offering and the 8 management team of being able to generate a very 9 stable level of cash flow. In this environment where 10 the whole industry has been impacted by the economy, 11 and then, obviously, Atlantic City and in particular 12 Borgata as well, has had to deal with regional 13 competition. At the end of the day, the cost of the 14 offering of Borgata is really because of the ability 15 of the management team to react to the challenges of 16 the environment. The cash flow has been very stable; 17 $197 million in 2008, $197 million in 2009, and even 18 on the last 12-months basis, when you kind of factor 19 out mother nature, $197 million. So the property has 20 been a very consistent performer. 21 So relative to the operations, the 22 dividend is reasonable. Relative to the amount of 23 investment that's gone into the property. Originally 24 $1.2 billion was the initial investment. $200 million 25 for the north expansion that was completed in July of 55 ITEM NO. 10 1 2006, $450 million for the Water Club that opened in 2 July of 2008. So nearly $2 billion has been invested 3 in the asset. So in relation to the investment, the 4 distribution is reasonable. In relation to the amount 5 of investment that it was equity contributed by the 6 partners initially. Just over a half a billion 7 dollars was invested by Boyd and MGM initially and the 8 rest was debt, was -- makes the dividend reasonable. 9 In light of even the distributions that have been 10 made, other than tax distributions over the seven 11 years. MGM and Boyd together have taken less than 12 $215 million on a over-half-billion-dollar investment. 13 And then, lastly, the property itself, 14 through the ability to generate cash flow, has 15 reinvested in Atlantic City and the regional economy 16 with over one and a half billion dollars of salaries 17 and wages paid since 2003, $1.2 billion of payments to 18 vendors, $750 million paid in terms of fees and taxes 19 and other regulatory items. 20 So at the end of the day, those numbers 21 are very large numbers. And the distribution, in 22 light of those numbers, is, again, reasonable. 23 Q. Okay. And is the investment community 24 aware that you are planning to make this distribution? 25 A. Yes. 56 ITEM NO. 10 1 Q. Okay. Getting back to some terms of the 2 notes and the credit facility, are there any covenants 3 and, if so, could you describe them? 4 A. Sure. There are covenants in the credit 5 facility and then in current space tests in the notes 6 and interest. And let me explain those. 7 In the credit facility we have two 8 covenants. There's a minimum EBITDA test which says 9 that Borgata must generate at least $150 million of 10 EBITDA and, again, it's run rate is about 197, 11 excluding odd weather, before it can continue to 12 borrow under its credit facility. Or in order to 13 enable it to borrow under its credit facility. 14 The other covenant is a liquidity test, 15 and it basically says, to the extent that Boyd 16 decides-- or Borgata, rather -- decides to make a 17 distribution that there has to be availability in 18 combination under the credit facility as well as 19 excess cash at the property, not including cage cash 20 but excess cash, in an amount of $30 million. In 21 reality, Borgata doesn't really keep any excess cash, 22 so it is just availability under the revolver that 23 will be the test for us. And so we need to keep at 24 least $30 million of availability to the extent we 25 desire to make the other distributions. Or Borgata 57 ITEM NO. 10 1 decides to make the other distributions. 2 There are also restrictions on future 3 distributions. The banks have basically said that 4 they will allow distributions to the extent that 5 leverage is four times or below. Right now, based on 6 the contemplated structure, we would be at 4.3 times, 7 so it will take us a little time to get under the four 8 times before the banks will even say you kind of have 9 the green light to make a distribution. But then, 10 once the bank says you have the green light, then you 11 have the limitations within the bonds. And the bonds 12 said -- basically say, they have something called a 13 basket, a restricted payment basket. That says this 14 is how much we will allow you to make at any one time. 15 And that basket starts at $35 million, and kind of a 16 general basket, and it grows at 50 percent of net 17 income. So over time, the more successful the 18 property is, the larger that basket grows. If Borgata 19 doesn't perform well and has a little bit more 20 difficult time, the basket will probably stay about 21 the same or grow certainly less quickly. And so over 22 time, really, the limitations are to get below the 23 leverage threshold first and then limited by whatever 24 the basket amount is. And the investors have gotten 25 comfortable that the investment basket is not 58 ITEM NO. 10 1 significant relative to their loaning the money to the 2 property. 3 Q. Okay. Do you have anything further to 4 add? 5 A. Yeah. I guess I would reiterate my 6 earlier comments that we sincerely appreciate the 7 cooperation we received through this process. And, 8 then, secondly, I would say that the reason we're able 9 to raise this type of financing is because of the 10 success of Borgata. Borgata, the amenities they offer 11 are second to none in terms of the region. It enables 12 it to compete not only in the city but also in the 13 region against East Coast competitors. And it's a 14 real positive story not only for Borgata and Boyd but 15 also Atlantic City. So I would say Borgata and the 16 management team of Borgata and the success they've had 17 through the challenging environment is what has 18 enabled us to be successful here today. 19 MS. KAUFMAN: I have no further 20 questions, although I do just want to mention 21 that Mr. Turner will be addressing financial 22 stability issues at the Borgata level and will 23 talk about performance and projections. 24 CHAIR KASSEKERT: Thank you. 25 Mr. Fogarty? Cross-examination? 59 ITEM NO. 10 1 MR. FOGARTY: Yes, thanks. 2 3 CROSS-EXAMINATION BY MR. FOGARTY: 4 Q. When do you expect on close the 5 transaction? $64,000 question. 6 A. Assuming we receive approval today, we 7 will try to close as quickly as possible and close by 8 the end of the week. 9 Q. And do you expect to close at $800 10 million in notes? 11 A. We expect to close at $800 million of 12 notes, and we have reconfirmation from the credit -- 13 from the banks in the credit facility that they are 14 good for $150 million. And we would only have 15 outstanding, initially, the $75 million as we 16 proposed. 17 Q. On the credit facility. 18 A. On the credit facility. 19 Q. Okay. What can you tell us about the 20 interest rate? I know you've presented your case here 21 today on the basis of no greater than 11. And if I'm 22 going into area that you don't want or you don't think 23 is beneficial to your company is going into, but maybe 24 you can give us a range? 25 A. Yes. 60 ITEM NO. 10 1 Q. Is it 11? Is it well below 11 percent? 2 Give me a sense of -- 3 A. Sure. We provided 11 percent given 4 where we were at the time in terms of where the market 5 really was. And we wanted to try to be as 6 conservative as possible. I would say that, based on 7 what we know today, we will be below that. And I 8 would say that it's possible that it may be below 10 9 percent. 10 Q. Ten percent? 11 A. So in that neighborhood. 12 Q. Congratulations. 13 A. Thank you. 14 The market has improved. And really the 15 ability for the financial team to work with our team 16 to be responsive has enabled us to execute in a quick 17 manner. 18 Q. If I followed closely, and I think I 19 understood the use of the proceeds -- but I'm going to 20 try to put a number on it. You project from your 21 petition that the amount of dividends that this 22 financing will give you at $800 million note offering 23 is $212 million; is that correct? 24 A. Yes. That -- that is -- that is the 25 projection. I will tell you that we are expecting -- 61 ITEM NO. 10 1 and that's based on some assumptions around a couple 2 of things. Number one, the debt balance that arrives 3 at that 2.12 number, that's a June 30 debt balance. 4 And so -- 5 Q. You're talking about the debt balance on 6 the existing credit facility? 7 A. Yes. Thanks for clarifying it. Yes. 8 And understanding that our business really takes off 9 in June and July, we are expecting that debt balance 10 to be less. It is to be as much as 15 to $20 million 11 less. So that would increase the potential dividend. 12 As well as we factored in, again, trying to be 13 conservative and where we were in the marketplace at 14 the time, some discount. In other words, the notes 15 may not be issued at par. They would be issued at 16 some level of discounts. So we factored in a discount 17 that may or not would be -- may or may not reflect 18 where the deal ends up. So that's possibly anywhere 19 from a difference of possibly 8 to $10 million, 20 depending on how well we negotiate that aspect of it. 21 So, all in all, there's a possible range 22 and, again, fee estimates as well. So let's say, all 23 in all, it's possible that the dividend could be as 24 high as somewhere between 240 and 250 if everything 25 goes exactly in our favor. If we're -- if it's not in 62 ITEM NO. 10 1 our favor, then it would be probably less than that. 2 Q. If we could -- and I appreciate that. 3 If you could stick with the 212 -- 4 A. Okay. 5 Q. -- that you all have used 6 conservatively -- 7 A. Okay. 8 Q. -- as you've indicated. I think I 9 understood that of that 212, 30.8 million comes right 10 off to Boyd? 11 A. That's correct. 12 Q. For the reasons you've explained on 13 direct. Which I'm not going to go through. 14 A. Thank you. 15 Q. Okay? And the difference of that gets 16 split between you and the Trustee? 17 A. Yes. 18 Q. And then out of the trustee's end comes 19 back another 10 million to Boyd. 20 A. Correct. 21 Q. Summing that all up, based upon $212 22 million dividend, Boyd would get 131.4 million in 23 dividend, approximately. Key word. 24 A. Yes. Approximately. That sounds about 25 right. 63 ITEM NO. 10 1 Q. And the Trustee 80. -- 80.6? 2 A. Yes. That sounds about right. 3 Q. That sounds about right? 4 A. Yes, sir. 5 Q. But, again, as you've indicated, that 6 dividend amount goes up because the fees are less -- 7 A. Or the discount's less. 8 Q. Or the pay-off on the existing credit 9 facility is less. The dividend number could go up, 10 but it would be that same basic formula. 11 A. That's right. It would follow that same 12 framework, and we wouldn't get any more from the 13 trustee or from -- as a result of the $30 million. 14 The increment is just for the 50/50 is divided up 15 between the two parties. 16 Q. The first two attempts, the dividend was 17 at 300 -- projected at $313 million. Why the roughly 18 $1 million difference, the 313 to 312? 19 A. It really goes to the change in the 20 marketplace. When we come to you originally with the 21 first proposal, it was the market was willing to give 22 us more money than we were really comfortable taking, 23 so we were kind of the governing factor. Now I would 24 say the market is the governing factor. We have the 25 confidence in the Borgata's ability to operate, to be 64 ITEM NO. 10 1 able to handle kind of the original proposal that we 2 had put forth. The market has changed in terms of 3 what's going on more, not only nationally and 4 internationally with the risk that has been increased 5 in the economy, but also in terms of their view of 6 Atlantic City. They are concerned about 7 Pennsylvania's table games. They're concerned about 8 Borgata's ability to hold on to its loyal customers. 9 We being closer to the business and feeling very 10 confident in our management team feel like, you know, 11 that the property could handle the amount of leverage 12 that we originally proposed. So it's really a cross 13 section of where we're comfortable and where the 14 market is comfortable as to where we are ending up 15 today. The proceeds will result in the lower 16 dividend. 17 Q. You're essentially borrowing funds to 18 pay a dividend here, aren't you? 19 A. Yes. 20 Q. Is that a usual business practice, to 21 borrow monies to pay stockholders dividends, owner's 22 dividends? 23 A. I think it's a usual practice to run a 24 business at -- to have some leverage associated with 25 it to have the most efficiency, efficient aspect for 65 ITEM NO. 10 1 the amount of money that's been invested initially. 2 And so to the extent that you've entered into a phase 3 of a property where -- or the investment, for that 4 matter -- where it's generating a lot of free cash 5 flow like Borgata, then you are in a position to 6 leverage it up more than where it's currently 7 leveraged today, and the result of that is the 8 dividend. I would say that it's certainly not 9 uncommon to see leveraging events that yield 10 dividends. 11 The other aspect of it is the property, 12 you know, is currently leveraged at below three times. 13 And we're talking about taking it, the leverage, up to 14 four and a quarter, maybe worst case four and a half, 15 depending on how the property runs. That is still a 16 very manageable level of leverage in relation to the 17 amount of cash flow the property generates. 18 Q. I don't think anybody questions that 19 Borgata has done well. 20 A. Uh-hum. 21 Q. Has done well. Hopefully continues to 22 do well. Or that the leverage isn't as you described 23 it. But my question really is, you're borrowing ten 24 percent money to pay dividend. 25 A. Uh-hum. 66 ITEM NO. 10 1 Q. Isn't there a better use of Borgata's 2 funds than that? 3 A. Well, there's really no other use. I 4 mean, there's nothing that Borgata really needs 5 capital for other than to repay its existing debt. 6 Q. Was the market at all concerned, best 7 you could tell, about the fact that this financing 8 would be funding a large dividend to Boyd? 9 A. No. I think -- 10 Q. And its other party? 11 A. No, sir. The market was most 12 concerned -- question number one was Pennsylvania 13 table games and how was the Borgata going to perform? 14 And from our perspective, we have the benefit of being 15 able to explain to them how Borgata has performed in 16 relation to the introduction of slots in Pennsylvania. 17 Borgata has not -- has been not impacted as much as 18 the rest of Atlantic City has from the introduction of 19 slots. That really goes to the product itself and, 20 again, the management team. And also because of the 21 differentiated experience going forward, we believe 22 Borgata will not be impacted as significantly from the 23 introduction of Pennsylvania table games as the rest 24 of the market could. So we had to spend a lot of 25 time, and I'm sure we will going forward spend a lot 67 ITEM NO. 10 1 of time, making investors feel comfortable that we 2 have our hands around the business. We have our hands 3 around knowing who our customers are and being able to 4 manage through that. That was our main concern. 5 Q. Was there any concern by the investor 6 regarding the fact that a large portion of these 7 proceeds would be used as dividend? 8 A. That question didn't come up directly. 9 I would say it came up perhaps indirectly through the 10 amount of leverage that they were comfortable with. 11 And that was kind of the restraining factor that I 12 spoke about earlier. Just given the environment we're 13 in today, kind of four and four and a half times 14 leverage is more where investors are comfortable 15 whereas, say, three months ago, they were more 16 comfortable four and a half to five times leverage. 17 So but that indirectly gets to the dividend, so. 18 Q. The interest rate on the current credit 19 facility, the existing credit facility, is roughly 20 2.7? 21 A. Yes. It's under three percent. 22 Q. We had estimated in our report that the 23 interest rate on the new credit facility -- it varies, 24 and I know you said the beginning rate is LIBOR plus 25 4.25 percent. I'm not sure what that means, but I 68 ITEM NO. 10 1 think we said somewhere between 5 and 7.2 percent. 2 A. That's right. 3 Q. Is that a fair range? 4 A. That's a fair range. And I think that 5 goes to reflect, really, not only do you have a much 6 smaller credit facility than the original credit 7 facility, you have a credit facility that's in a much 8 more secure position. And yet just, you know, that 9 price increase reflects kind of the difference of 10 where we are in the credits markets versus the one 11 where we were when we had the 2.7 percent credit 12 facility put in place. 13 Q. Now, you could have continued to utilize 14 that existing credit facility, right? and not do this 15 financing. 16 A. Well, it matures in January, so we would 17 have run out -- 18 Q. In six months. 19 A. We would have run out of time at that 20 point. 21 Q. Right. But, I mean, it wasn't an 22 immediate need -- 23 A. No. 24 Q. -- to pay this thing off and go get a 25 new credit facility and to pay a temporary additional 69 ITEM NO. 10 1 money to pay the dividend? 2 A. I think what we were cautious of is kind 3 of waiting to the last minute and hoping the markets 4 are there or, you know, that we can have everything 5 lined up to be able to get a transaction done to kind 6 of pinpoint accuracy. And I'm sure that any 7 responsible financial person would want to take that 8 risk. 9 Q. Thank you, sir. 10 A. But, you could -- 11 Q. Oh, I'm sorry. 12 A. You could have the credit facility last 13 longer. You are correct. Absolutely. 14 Q. And you could actually just raise -- 15 well, you could just go out and get a new credit 16 facility. You don't have to go out and get additional 17 financing for the dividend? 18 A. That's right. The new credit facility 19 most likely would not be able to replace fully the 20 existing credit facility, so as I mentioned earlier -- 21 Q. I doubt you would get that 2.7 percent? 22 A. Say that again? 23 Q. I doubt you would get 2.7 percent? 24 A. Right. So what you would -- another 25 alternative, if that's what you're trying to ask me 70 ITEM NO. 10 1 is, is you have a larger credit facility than what you 2 have today but at a higher cost. And probably even 3 the one that we have in place today. And then we 4 would have another piece of debt that would have to 5 come in to make up the gap between the shortfall of 6 the new credit facility and the amount that's out -- 7 out -- due from the existing credit facility. And 8 that debt would have higher costs than the debt we're 9 putting in place today because of the amount of 10 capital that effectively would be in front of it, the 11 larger bank facility. 12 Q. Thank you, sir. 13 MR. FOGARTY: That's all I have, Chair. 14 CHAIR KASSEKERT: Thank you. 15 Mr. Hirsberg, I note yesterday that you 16 had one of your quarterly earnings calls. Did 17 anything revealed in that call give you pause 18 with respect to this refinancing? 19 THE WITNESS: No, ma'am. 20 CHAIR KASSEKERT: Okay. Questions from 21 the Commissioners? 22 COMMISSIONER SOMMELING: I have no 23 questions, Madame Chair. 24 CHAIR KASSEKERT: Commissioner Epps? 25 Questions? 71 ITEM NO. 10 1 COMMISSIONER EPPS: I have a couple 2 questions, and this is just for my 3 understanding, because I'm not necessarily a 4 money guy, so I need elementary kind of 5 understanding. 6 THE WITNESS: That's fine. 7 COMMISSIONER EPPS: But I understand 8 your testimony to basically be that the 9 partners, based on what they've put in and the 10 work that they've done over the time, kind of 11 feel like it's time for them to get something 12 back for their investment? It's -- 13 THE WITNESS: I wouldn't say it's the 14 time. It's an opportunity to get it back. The 15 opportunity has kind of created itself because 16 of the maturity of the existing credit facility 17 and because of what the markets will allow and 18 where we feel comfortable lending the business. 19 COMMISSIONER EPPS: I guess more 20 accurately on your testimony, it's reasonable 21 based on what they've done up to today? 22 THE WITNESS: Yes. 23 COMMISSIONER EPPS: The part where I 24 don't understand is, it seemed to me that you 25 said your mission over time to de-leverage the 72 ITEM NO. 10 1 enterprise with -- 2 THE WITNESS: Right. 3 COMMISSIONER EPPS: -- free cash flow 4 and everything. So if you want to -- your goal 5 is to de-leverage the enterprise, and you have 6 reasonable cash flow so if you're going good in 7 that direction -- 8 THE WITNESS: Why go back? 9 COMMISSIONER EPPS: -- why go the other 10 way? 11 THE WITNESS: The reality is at some 12 point it becomes -- you could basically be, you 13 know, not have anything to be able to do with 14 the cash. The cash basically -- right now 15 we're below 3. If we're able to keep the 16 existing credit facility in place, probably by 17 next year, we would have -- we would be below 2 18 and then it would be gone. So the reality is 19 what this allows us is to kind of put an 20 appropriate level of debt on the enterprise and 21 use the cash flow to de-leverage over time. So 22 it's really just either taking it today in the 23 form of what the market will allow or kind of 24 paying down over time and getting to the point 25 where there's nothing else but just a 73 ITEM NO. 10 1 distribute to the partners a hundred percent at 2 that point if that were allowed? It's -- 3 COMMISSIONER EPPS: And I guess -- let 4 me understand you correctly. It's either the 5 partners get their money now from a borrowing, 6 or if you continue to go favorably, the 7 partners get their money a little bit later 8 with less debt on the books, so everything they 9 make is there. 10 THE WITNESS: No debt on the books. 11 COMMISSIONER EPPS: No debt. So then 12 they get -- they just get -- 13 THE WITNESS: But from a financial 14 perspective, the property -- you know, there's 15 always rationale from an investor's perspective 16 to have some leverage on the property because 17 of the lower cost of capital than what you are 18 investing your money at. That's how you get a 19 return. 20 COMMISSIONER EPPS: Okay. I think I 21 understand. 22 Um... I had another question somewhere 23 that I lost. 24 Oh, the covenant test for distribution. 25 THE WITNESS: Uh-hum. 74 ITEM NO. 10 1 COMMISSIONER EPPS: Does that apply to 2 the initial distribution, also, where you have 3 to meet the covenant before the initial 4 distribution happens? Or can that first one 5 happen, and then thereafter you have to meet 6 the test? 7 THE WITNESS: The covenants contemplate 8 that the first one has happened. So, in other 9 words, if you're talking about, you know, the 10 minimum EBITDA test or the liquidity test or 11 the baskets, they all assume that that money's 12 gone out already, and then it starts. It's 13 almost like it half -- I guess the easiest 14 way to -- 15 COMMISSIONER EPPS: So that's part of 16 the deal and thereafter -- 17 THE WITNESS: You have to default. 18 COMMISSIONER EPPS: And that was the 19 test. 20 THE WITNESS: Right. 21 COMMISSIONER EPPS: Okay. That was my 22 other question. 23 CHAIR KASSEKERT: Okay. 24 VICE CHAIR HARRINGTON: I just want to 25 say thank you for making this understandable 75 ITEM NO. 10 1 and clear and presenting it so well. 2 THE WITNESS: Thank you. 3 CHAIR KASSEKERT: Commissioner Fanelle? 4 Anything on redirect? 5 MS. KAUFMAN: No, thank you. 6 CHAIR KASSEKERT: Anything on recross? 7 MR. FOGARTY: Nothing further from me. 8 CHAIR KASSEKERT: You may step down. 9 You may call your next witness. 10 MS. KAUFMAN: Yes. Mr. Hugh Turner. 11 12 HUGH T. TURNER, JR., was duly sworn to 13 testify in this matter. 14 15 MR. NANCE: Please state your name for 16 the record. 17 THE WITNESS: Hugh T. Turner, Jr. 18 MR. NANCE: Thank you. 19 CHAIR KASSEKERT: You may proceed. 20 21 DIRECT EXAMINATION BY MS. KAUFMAN: 22 Q. Hi. Mr. Turner, could you please state 23 your title? 24 A. I'm the Vice President of Finance for 25 the Borgata. 76 ITEM NO. 10 1 Q. Okay. And as with Mr. Hirsberg, I will 2 waive your background. 3 As part of entering into a material debt 4 transaction, we need to prove financial stability, 5 even though we just proved financial stability at our 6 recent license renewal. Although, we went through the 7 2009 numbers and even spoke a little about the 8 beginning of 2010, could you refresh our recollection, 9 since I have a hard time remembering things from the 10 day before, and that was a month ago, and also, I know 11 that since the hearing, there have been some recent 12 developments. Some more numbers have come out. 13 A. Yes. For the full calendar year of 2009 14 versus the prior year, our net revenues declined by 15 about 5.8 percent. And on the gaming revenue side, 16 that represented a decline in gaming revenue by about 17 $42 million. Our net revenue, which includes all of 18 our non-gaming operation the hotel food and beverage 19 and less promotional allowances, that total for net 20 revenues declined over $50 million from year to year. 21 And I think Mr. Hirsberg mentioned our EBITDA was 197 22 for 2009, and that compared with 197 million for 2008, 23 and we're able to maintain the relatively flat 24 earnings on pretty significant decline in net 25 revenues. And we believe if it wasn't for that really 77 ITEM NO. 10 1 bad weather really late in the fourth quarter that we 2 actually would have had an increase in earnings. And 3 we credit the ability to adjust the operations to both 4 the Borgata's positioning in product as well as our 5 talent -- which is how we refer to our human 6 resources, our employees -- and their ability to 7 manage, you know, through a difficult situation both 8 from the economic pressures and from the pressures 9 that we faced from our regional competitors and, 10 namely, across the river in Pennsylvania who were in 11 with slot machines at that time. 12 Q. Thank you. 13 When you gave your testimony at a 14 license renewal, you mentioned a concept of market 15 share versus fair share, and you talked about a 16 premium on table games. I think you discussed the May 17 numbers, and they are very favorable for Borgata. How 18 has the trend been continuing? 19 A. We still through -- we look at 20 everything on a last 12-month basis, which kind of 21 encompasses a full year's worth of operations. And we 22 maintain our marketing of table games at just below 45 23 percent over fair share and over 28 percent for slot. 24 So relatively unchanged since the last time that we 25 spoke. 78 ITEM NO. 10 1 Q. Okay. That's great. 2 We mentioned Pennsylvania. And as, you 3 know, July was the first month that table games 4 opened. Didn't open in the beginning of the month, 5 and they kind of ramped up, but have you seen any 6 impact yet? 7 A. It's really at this point -- with far 8 less than a full month of operations, it would be 9 unreasonable to speculate. There's nothing that 10 surprised us. And I don't really want to talk about 11 any numbers yet for July in a public forum. But we 12 didn't see anything that was unexpected. And we are, 13 you know, have seen very, throughout the summer 14 season, strong occupancies on the hotel front. And 15 I'll note that when we talked about our first half 16 results for 2010 versus the first six months of 2009, 17 we continued to see increases in our non-gaming 18 segments of our business. 19 Q. And have you done anything proactively, 20 or are you continuing your usual marketing efforts? 21 A. We have been focusing on, you know, all 22 segments of our business and have paid particularly 23 close attention to our table games business for well 24 over a year now and are looking at -- we're looking at 25 expanding those efforts on that segment of our 79 ITEM NO. 10 1 business long before the, you know, competition 2 entered the market. 3 Q. Okay. And I'm presuming you're also 4 capitalizing on the fact that you have a level of 5 amenities and not to mention the shore that 6 Pennsylvania doesn't have. Could you elaborate a 7 little on that? 8 A. Yes. We feel that we have, as we've 9 mentioned before, destination resort. With the type 10 of amenities that we believe are even more appealing 11 to our table games customers that cannot be duplicated 12 anywhere in the region. We also believe there's value 13 to Atlantic City as far as what we would call as, you 14 know, clustering effect that, you know, our 15 competition, our developments in various jurisdictions 16 in municipalities in Pennsylvania where we do have the 17 benefit of being, you know, very close to our 18 competitors giving visitors an option if they choose 19 to visit other properties. And we think there's value 20 being located in a destination rather than just, you 21 know, one casino inside of a municipality. 22 Q. Okay. As Mr. Fogarty had mentioned, we 23 have larger debt. We had a distribution. Now we have 24 regional competition. Your projections show that 25 Borgata will continue to be financially stable and 80 ITEM NO. 10 1 successful. But if something unexpected happens, what 2 kind of cushions or backup plans do you have built in? 3 A. Well, the projections that we have, the 4 revenues that we've presented, give us the option to 5 pay down, make optional payments against our 6 outstanding debt. And I think over the period of time 7 that we're looking at through 2012, we project well 8 over a hundred million dollars worth of those optional 9 payments that we're not required to make, but as part 10 of our strategy that Mr. Hirsberg talked about, we 11 will make with our excess cash flow. So we would 12 have -- I would call it a reasonable cushion built 13 into our numbers. 14 Q. Okay. And what about with respect to 15 unused capacity on the credit facility? 16 A. We expect after the initial draw of 75 17 million that we will continue to reduce that facility. 18 It's a little bit of an ebb and flow. But all 19 together, I have some projections here in my notes. 20 We would pay down the facility by about $12 million 21 just by the end of this calendar year. And I think if 22 you look inside the detail, you'd see probably we paid 23 down more through the busier seasons of the year in 24 the third quarter and, you know, with the shoulder 25 months and fourth quarter, it might actually go up a 81 ITEM NO. 10 1 little bit. But still going to be net down from our 2 initial draw according to our projections. 3 Q. So in your projections you never have 4 the facility with more than $75 million outstanding? 5 A. That's correct. 6 Q. Okay. And at the license renewal you 7 also talked about some efficiencies that you've 8 achieved that helped you do -- cut your losses more or 9 do better that way than some of the other properties. 10 Is there any more room for efficiencies? And can you 11 talk about that a little? 12 A. I think that there's -- the way with 13 look at our business, there's always going to be some 14 new things that we'll learn as we continue to operate 15 the business. I would hesitate to say, to the extent 16 that we saw the cost reductions between 2008 and 2009, 17 I would think that they wouldn't be at the same 18 magnitude, but we continue to look and refine our 19 business on a daily basis. 20 Q. One of the aspects of determining 21 financial stability is having funds to make capital 22 maintenance expenditures. Mr. Hirsberg did mention 23 that you are pretty fully fitted out. However, could 24 you tell us about those -- any plans? 25 A. Yeah. Our main focus on capital 82 ITEM NO. 10 1 investment will be in the next two years, in 2011, 2 2012. Baked into our projections we have a total 50 3 million, which is spread between the two years. And 4 our plan now is to refurbish the typical rooms inside 5 the Borgata Hotel to keep that product fresh and up at 6 the top of the market. And that's the only rooms 7 within the hotel that we've yet to refurbish. We've 8 already been through all the suites. 9 Q. Do you have anything else that you would 10 like to add? 11 A. Not at this time. I'd just like to 12 reiterate and thank everyone, both at the Commission 13 and Division and especially in the financial staff, 14 for the many repetitions that we've produced of 15 modeling and the exchange of information and review of 16 documents that, you know, allowed us to complete this 17 process very efficiently. 18 Q. Thank you. 19 CHAIR KASSEKERT: Mr. Fogarty, 20 cross-examination? 21 MR. FOGARTY: Yes. Just one. 22 23 CROSS-EXANIMATION BY MR. FOGARTY: 24 Q. Mr. Turner, you are the Vice President 25 of Finance for Borgata. 83 ITEM NO. 10 1 A. Yes. 2 Q. Is that the CFO? 3 A. Yes. 4 Q. Okay. Good idea; not so good idea from 5 the perspective of CFO for Borgata for the licensee to 6 leverage the business as you are at the cost of 10 7 percent to pay a substantial dividend? Good idea? 8 Not so good idea? 9 A. I think being able to evaluate the 10 options under the credit conditions that we operate 11 today, I think based on analyzing the market and 12 looking at leverage throughout the industry, I think, 13 you know, I would have to agree that that is, you 14 know, the most efficient way to finance the property 15 at this point. 16 Q. That kind of leverage is for when the 17 property -- when the business is using those funds to 18 do something for itself, that's not the case with the 19 dividend. It's going to somebody else. Still a good 20 idea? 21 A. I would think it's -- it's nothing -- I 22 think the one thing to take into consideration is that 23 the Borgata is a true 50/50 joint venture where you 24 have two unrelated entities, and there is no other 25 ability for any of those two entities to distribute 84 ITEM NO. 10 1 any cash other than through a formal distribution 2 wherein some other corporate structures that I'm 3 familiar with, you have the availability to, you know, 4 use cash at a corporate level on a day-to-day basis 5 and more flexibility within credit terms and capital 6 structures. And I think the reason we talk about a 7 distribution is because that's the only way to move 8 money between the owners or to the owners from the 9 operating business. 10 Q. If you as the CFO for Borgata had your 11 way, would you just go out and get a new credit 12 facility and not do a dividend? 13 A. I guess it would be hard to speculate 14 because I'd be stepping into Mr. Hirsberg's shoes, 15 and -- 16 (Laughter.) 17 A. I'm not -- I don't represent the owners. 18 Q. So you're not going to answer that one? 19 (Laughter.) 20 Q. I don't blame you, sir. 21 FROM THE FLOOR: That was a good answer. 22 MR. FOGARTY: That's all I have. 23 Thank you, Chair. 24 CHAIR KASSEKERT: Thank you. 25 Any questions from the Commissioners? 85 ITEM NO. 10 1 COMMISSIONER SOMMELING: No questions, 2 Madame Chair. 3 COMMISSIONER EPPS: I just have a 4 variation of Mr. Fogarty's question from a 5 different perspective. 6 Your testimony was revenue decline, and 7 then when we couple that with the fact that we 8 know that the economy has a turn -- you know, 9 the market is favorable but the economy hasn't 10 turned yet so John Q. Public hasn't really felt 11 the turn that the market is seeing. And you've 12 got increased competition in Pennsylvania. Now 13 they've got table games. So it's stepped up 14 yet again. Is the timing of this to add 15 leverage, from a timing perspective, it seems 16 like not maybe not such a good time where you 17 might be wanting to go the other way. Now, I 18 understand the company's position is you'll be 19 able to get it back, and you'll use the cash 20 money to pay it down. But it seems like now 21 might be not be such a good time to add 22 leverage. Help me understand why it still 23 makes sense. 24 THE WITNESS: I guess the -- from a 25 timing perspective, the one deadline that we 86 ITEM NO. 10 1 have is the end of the year and/or January of 2 2011, and from a finance perspective, you don't 3 want to, as Mr. Hirsberg mentioned, take the 4 risk of waiting a number of months and then 5 having a worse credit market than what's out 6 there today. And just in months that we've 7 been working on this transaction, we've seen, 8 you know, the market go from good to bad to 9 back to being fairly favorable again as it is 10 today. And so that's one of the factors with 11 the timing. 12 The -- of course, I think, you know -- 13 we would, you know -- and little bit to Mr. 14 Fogarty's point, if there is availability to 15 maintain the same blunt interest rates that we 16 enjoyed today, I think we all would choose that 17 option, and it's just simply not available at 18 this point. So I would say that our interest 19 rates that we enjoyed previously just aren't 20 available today even -- and I think when we 21 look at the future, which is always uncertain, 22 there is no reason to believe that it would get 23 any better. And the deadline looming just kind 24 of forces our hand to want to take action at 25 this point before we take any more risk. 87 ITEM NO. 10 1 COMMISSIONER EPPS: Okay. 2 CHAIR KASSEKERT: Thank you. 3 Anything on redirect? 4 MS. KAUFMAN: No. 5 CHAIR KASSEKERT: Anything on recross? 6 MR. FOGARTY: Nothing further. 7 CHAIR KASSEKERT: Thank you. 8 You may step down. 9 THE WITNESS: Thank you. 10 CHAIR KASSEKERT: Let me ask if the 11 parties wish to make closing statements? 12 Mr. Fogarty? 13 MR. FOGARTY: Yes. Just very briefly. 14 We have been provided and have reviewed 15 a draft resolution by your counsel, Ms. 16 Richardson, and we would have no objection to 17 its entry. 18 Beyond that I have nothing further. 19 CHAIR KASSEKERT: Thank you. 20 Thank you. 21 Miss Kaufman? 22 MS. KAUFMAN: Thank you. Yes. 23 I just wanted to say that I wanted to 24 thank everybody again. Also mention Mr. Glaum 25 isn't here today, and he was also part of the 88 ITEM NO. 10 1 team that also helped us move this along with 2 the Division. 3 The financial stability regulations 4 require that you meet certain criteria. You 5 have a casino bank roll. You can meet your 6 operating expenses, pay your taxes, pay debt. 7 The testimony today showed the Borgata 8 certainly is capable and more in doing that. 9 They not only can meet the financial stability 10 criteria, but they actually can perform 11 profitably. 12 Borgata will continue to capitalize on 13 its strength, its strong and stable management 14 team, its innovative approach, its premier 15 products, its ability to respond to the 16 marketplace. We look forward to continuing to 17 go in that direction. 18 As the witnesses stated, we have 19 invested almost $2 billion in Atlantic City. 20 We're proud of the accomplishments. We're 21 proud. We're here today. And we're especially 22 proud that the lending community is willing to 23 make that large of a commitment to a casino 24 that is solely based in Atlantic City. And we 25 think that's a good story for everyone. 89 ITEM NO. 10 1 CHAIR KASSEKERT: Thank you. 2 We'll take a brief recess. 3 (A recess was taken from 12:00 to 12:29 4 p.m.) 5 CHAIR KASSEKERT: Thank you. We'll go 6 back on the record. 7 Let me ask at this point if there are 8 any more matters that need to be brought to our 9 attention at this time? 10 MR. FOGARTY: Not from the Division, 11 Chair. 12 MS. KAUFMAN: Not from Borgata. 13 CHAIR KASSEKERT: Very good. 14 Borgata has petitioned for approval of a 15 refinancing of its debt by the issuance of new 16 senior secured notes and the entry of a new 17 credit agreement. Although the draft 18 resolution specifies all the necessary findings 19 and rulings, most of which are technical, some 20 comment on the criteria of financial stability, 21 integrity, and responsibility is in order. 22 With the proposed material debt 23 transactions, Borgata through MDFC, will issue 24 up to $800 million in senior secured notes, 25 carrying an interest rate of no greater than 11 90 ITEM NO. 10 1 percent and maturing in 2015 and 2018. 2 Along with the senior notes, Borgata 3 will obtain a revolving credit facility of 150 4 million, which will mature in 2014. Borgata 5 will borrow up to 75 million from the new 6 credit facility at closing. 7 Borgata will use the proceeds of the 8 notes issued and the initial credit line 9 borrowings primarily to pay off its current 10 credit facility but also to provide a dividend 11 of potentially over 200 million to its joint 12 venture partners. 13 While Petitioners have set forth 14 information supporting their continued 15 financial stability with the proposed 16 refinancing, the dividend to be distributed to 17 joint venture partners Boyd Gaming and the MGM 18 divestiture trust, administered by Former Chief 19 Justice James Zazzali, implicates not only the 20 financial stability and criterion but also 21 financial responsibility. For my part, I had 22 some initial concern with one of the stronger 23 performers in the Atlantic City market 24 incurring larger debt in order to provide a 25 significant dividend to its holding companies 91 ITEM NO. 10 1 during what remains difficult economic times. 2 In that regard we have heard testimony 3 today concerning the need for the dividend, and 4 Boyd Gaming is confident that the financial 5 projections for Borgata amply support its 6 ability to remain a healthy and competitive 7 market performer even with the initial debt 8 proposed. 9 In its report, the Division concludes 10 after a detailed review of Borgata's financial 11 forecasts, that Borgata will remain financially 12 stable following issuance of the new notes and 13 entry into the new credit facility. In my 14 view, all of the available information filed by 15 Petitioners and the testimony given today 16 provide clear and convincing evidence of 17 Borgata's continuing financial stability, 18 integrity, and responsibility. 19 So, accordingly, I now move that the 20 Commission adopt the draft resolution and grant 21 the relief requested in the petition along with 22 the sealing request in each case to the extent 23 set forth in the findings and rulings and 24 subject to the conditions in the resolution, 25 and I so move. 92 ITEM NO. 8 1 Is there a second? 2 COMMISSIONER EPPS: Second. 3 COMMISSIONER SOMMELING: Second. 4 CHAIR KASSEKERT: Motion is made and 5 seconded. This is a roll call vote. 6 MR. NANCE: Commissioner Sommeling? 7 COMMISSIONER SOMMELING: Yes. 8 MR. NANCE: Commissioner Epps? 9 COMMISSIONER EPPS: Yes. 10 MR. NANCE: Commissioner Fanelle? 11 COMMISSIONER FANELLE: Yes. 12 MR. NANCE: Vice Chair Harrington? 13 VICE CHAIR HARRINGTON: Yes. 14 MR. NANCE: Chair Kassekert? 15 CHAIR KASSEKERT: Yes. 16 MR. NANCE: The record will reflect that 17 the motion is unanimous. 18 CHAIR KASSEKERT: Thank you. 19 MS. KAUFMAN: Thank you. 20 MR. FOGARTY: Thank you. 21 MR. NANCE: For your consideration, Item 22 No. 8, petition of General Electric Company for 23 an exemption from non-gaming casino service 24 industry licensure. 25 MS. KAUFMAN: I'll just get my things. 93 ITEM NO. 8 1 CHAIR KASSEKERT: Sure. 2 Miss Nagengast? 3 MS. NAGENGAST: Chair, Commissioners, 4 for your consideration is the petition of 5 General Electric. They are seeking a removal 6 from the prohibited vendors list and subsequent 7 to that an exemption from non-gaming CSI 8 licensure. 9 Miss Kaufman is here on behalf of the 10 petitioner. Mr. Rogacki on behalf of the 11 Division. 12 CHAIR KASSEKERT: Thank you. 13 Miss Kaufman? 14 MS. KAUFMAN: Okay. Good afternoon now. 15 CHAIR KASSEKERT: Uh-hum. 16 MS. KAUFMAN: General Electric 17 Corporation filed a petition for a public 18 company exemption as well as removal from the 19 prohibited vendor list. GE had done business 20 with casinos prior to 1992 when they hit the 21 threshold and were required to file. Due to 22 the size of General Electric and minimal amount 23 of Atlantic City casino business, the 24 executive -- in fact, the chief executive 25 officer of GE made the decision that they would 94 ITEM NO. 8 1 not file. Therefore, they were placed on the 2 prohibited vendor list. 3 I'm pleased to say that the public 4 company exemption, I believe, was created for 5 companies like GE who would not otherwise do 6 business, in the case of GE did business and 7 stopped and were placed on the prohibited 8 vendor list. GE meets the criteria. They are 9 a public company. They have less than the 10 threshold of business because they are on the 11 prohibited list, and they're doing no business, 12 and there's no public policy reason to prohibit 13 them from conducting business with casinos. 14 A benefit -- an extra benefit of them 15 being a removed from the prohibited vendor list 16 has to do with the sale and purchase of casino 17 securities. Although there is a record that 18 says that they are permitted to engage now in 19 the sale and purchase of casino securities, 20 over the past few years, there's been a little 21 debate as to whether they actually can. And GE 22 had been cautioned that perhaps they should 23 seek licensure, and now in this case an 24 exemption. And we look forward to coming back 25 to New Jersey to not only doing business with 95 ITEM NO. 8 1 casinos in New Jersey but also being involved 2 in the purchase and sale of casino securities. 3 CHAIR KASSEKERT: Thank you. 4 Mr. Rogacki? 5 MR. ROGACKI: Madame Chair, 6 Commissioners, you have the Division's position 7 letter dated April 26th recommending that the 8 petition be granted. 9 I'll be happy to answer any questions. 10 CHAIR KASSEKERT: Thank you. 11 Any questions? 12 COMMISSIONER SOMMELING: No questions, 13 Madame Chair. 14 COMMISSIONER EPPS: I have one question. 15 Miss Kaufman, is it -- to the extent that you 16 know, is it the strategy of GE to reenter the 17 market but engage -- continually stay under the 18 threshold because if they go and engage and get 19 to business where -- I don't know how far it 20 would -- they would need to go before they go 21 over, but if they go over the threshold are 22 they then going to turn around and say we don't 23 want to be licensed again? So -- 24 MS. KAUFMAN: No. It's my 25 understanding, as explained to me, that GE 96 ITEM NO. 8 1 intends to stay under the threshold. 2 COMMISSIONER EPPS: Okay. 3 MS. KAUFMAN: But that also being 4 involved in the purchase and sale of casino 5 securities doesn't implicate the threshold 6 because that's a separate casino licensing 7 issue. 8 COMMISSIONER EPPS: Okay. 9 MS. KAUFMAN: So they plan to do both -- 10 both aspects of business. 11 COMMISSIONER EPPS: Okay. 12 CHAIR KASSEKERT: Thank you. 13 Any other questions? 14 COMMISSIONER EPPS: I will move that we 15 approve the petition of General Electric 16 Company and: A, remove GE from the prohibited 17 vendor list pursuant to NJSA 19:43-10.1(e)(3); 18 and, B, grant GE an exemption from non-gaming 19 casino service industry licensing as permitted 20 by NJSA 12:92(c) and NJSA 19:51-1.13 -- 21 COMMISSIONER SOMMELING: Second. 22 COMMISSIONER EPPS: -- subject to the 23 conditions in the resolution. 24 COMMISSIONER SOMMELING: Second. 25 CHAIR KASSEKERT: The motion has been 97 ITEM NO. 11 1 made and seconded. All in favor? 2 (Ayes.) 3 CHAIR KASSEKERT: Opposed? 4 (No response.) 5 CHAIR KASSEKERT: The motion carries. 6 Thank you. 7 MR. NANCE: Chair -- 8 CHAIR KASSEKERT: Oh. 9 VICE CHAIR HARRINGTON: Please note that 10 I'll abstain. 11 CHAIR KASSEKERT: Yes. One abstention. 12 Thank you. 13 MS. KAUFMAN: Thank you. 14 MR. NANCE: Item No. 11, proposed 15 readoption of NJSA 19:42. 16 Miss Frank? 17 MS. FRANK: Good afternoon, Chair and 18 Commissioners. 19 Chapter 42 of the Commission's 20 regulations hearings is scheduled to expire on 21 September 22nd of this year. The proposed 22 readoption of the chapter is being presented to 23 you for your consideration. 24 If approved, the proposed readoption 25 will appear in the September 7th New Jersey 98 ITEM NO. 12 1 "Register" and the expiration date will be 2 extended 180 days to March 21st of 2011. 3 CHAIR KASSEKERT: Thank you. 4 Any questions? 5 COMMISSIONER SOMMELING: No questions, 6 Madame Chair. 7 VICE CHAIR HARRINGTON: I'll move that 8 we approve the proposed readoption for 9 publication without amendment. 10 COMMISSIONER FANELLE: Second. 11 CHAIR KASSEKERT: The motion has been 12 made and seconded. All in favor? 13 (Ayes.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: The motion carries. 17 Thank you. 18 MS. FRANK: Thank you. 19 MR. NANCE: Item No. 12, petition of WMS 20 Gaming, Inc., for permission to transfer a 21 progressive annuity slot jackpot pursuant to 22 NJSA 19:45-1.39(n). 23 Mr. Briliant? 24 MR. BRILIANT: Good afternoon, Madame 25 Chair and Commissioners. Marie Jones is here 99 ITEM NO. 12 1 on behalf of the Petitioner. Mr. Ficchi is 2 here on behalf of the Division. 3 I did circulate a proposed resolution, 4 and Miss Jones was kind enough to point out one 5 typo in one of the acronyms, which we will fix 6 on the fly. 7 And the matter is now before the 8 Commission. 9 CHAIR KASSEKERT: Thank you. 10 Miss Jones? 11 MS. JONES: Good afternoon, Chair, 12 Commissioners. 13 With me today is representatives from 14 WMS in case you have any questions. They found 15 the whole proceedings very interesting this 16 morning. 17 But we've looked at the draft 18 resolution. We find it acceptable, and we urge 19 you to adopt it. 20 CHAIR KASSEKERT: Thank you. 21 Mr. Ficchi? 22 MR. FICCHI: Yes. Good afternoon, 23 again, Madame Chair and Commissioners. The 24 Division has reviewed the draft resolution and 25 have no objection to its adoption. 100 ITEM NO. 12 1 Thank you. 2 MS. JONES: Oh, I'm sorry. I understand 3 that there are new Commissioners who may not 4 know all the representatives of WMS, so if you 5 would indulge me for a minute. 6 CHAIR KASSEKERT: Sure. Sure. 7 MS. JONES: First I have Daurean Sloan, 8 Vice President of the Regulatory Affairs. 9 Beside her Ernie Domschine, Systems and Network 10 Administrator. Did I get that right? And Carl 11 Clay, Regional Gaming Operations Manager. And 12 Carl is in charge of the local WMS office and 13 does a great job. 14 CHAIR KASSEKERT: Good to see you all 15 again. 16 FROM THE FLOOR: Thank you. 17 CHAIR KASSEKERT: Let me ask if there 18 are any questions? 19 COMMISSIONER SOMMELING: No questions, 20 Madame Chair. 21 Move to adopt the draft resolution, 22 grant the relief requested by WMS Gaming, 23 Incorporated, to permit the progressive annuity 24 slot jackpot transfer subject to compliance 25 with the 30-day notice requirement and under 101 ITEM NO. 13 1 NJAC 19:45-1.39(n). 2 VICE CHAIR HARRINGTON: Second. 3 CHAIR KASSEKERT: The motion has been 4 made and seconded. All in favor? 5 (Ayes.) 6 CHAIR KASSEKERT: Opposed? 7 (No response.) 8 CHAIR KASSEKERT: The motion carries. 9 Thank you. 10 MR. FICCHI: Thank you. 11 MS. JONES: Thank you. 12 MR. NANCE: Item No. 13, proposed 13 adoption of amendment to NJAC 19:43-7.3 and 14 7.6. 15 Mr. Briliant? 16 MR. BRILIANT: This proposal, which was 17 requested by the Casino Association of New 18 Jersey, would codify the Commission's present 19 practice of permitting a casino licensee to 20 include various alternate configurations for a 21 gaming pit or slot zone when submitting 22 proposed floor plans for its casino or 23 simulcasting area. 24 The notice of proposal was published in 25 the New Jersey "Register" on May 17, 2010. 102 ITEM NO. 14 1 When the public comment period closed on July 2 16th, one comment had been received from the 3 Division of Gaming Enforcement, and we have 4 recommended that that comment be adopted or 5 accepted, and the change has been made as a 6 minor substantive change so that no 7 republication would be needed. 8 CHAIR KASSEKERT: Thank you. 9 Any questions? 10 COMMISSIONER SOMMELING: No questions, 11 Madame Chair. 12 COMMISSIONER FANELLE: Move to adopt as 13 published with minor substantive changes not 14 requiring publication. 15 VICE CHAIR HARRINGTON: Second. 16 CHAIR KASSEKERT: The motion is made and 17 seconded. All in favor? 18 (Ayes.) 19 CHAIR KASSEKERT: Opposed? 20 (No response.) 21 CHAIR KASSEKERT: The motion carries. 22 MR. NANCE: Item No. 14, proposed 23 adoption of amendment and proposed new rule 24 concerning multi-player slot machine systems. 25 Mr. Briliant? 103 ITEM NO. 15 1 MR. BRILIANT: This proposal was 2 requested by IGT. It would permit a casino 3 licensee to offer a multi-player slot machine 4 system. 5 The notice of proposal was published in 6 the New Jersey "Register" on May 17, 2010, and 7 we did not receive any public comment. 8 So the matter is now before the 9 Commission for final adoption. 10 CHAIR KASSEKERT: Thank you. 11 Any questions? 12 COMMISSIONER SOMMELING: No questions, 13 Madame Chair. 14 VICE CHAIR HARRINGTON: I will move that 15 we adopt as published without change. 16 COMMISSIONER FANELLE: Second. 17 CHAIR KASSEKERT: The motion has been 18 made and seconded. All in favor? 19 (Ayes.) 20 CHAIR KASSEKERT: Opposed? 21 (No response.) 22 CHAIR KASSEKERT: The motion carries. 23 MR. NANCE: Item No. 15, proposed 24 adoption of amendments to NJAC 19:45-1.20. 25 Mr. Briliant? 104 ITEM NO. 15 1 MR. BRILIANT: All right. This proposal 2 was requested by casino licensee Bally's Park 3 Place, and it would permit the use of a 4 modified table inventory container at a gaming 5 table. 6 The notice of proposal was published in 7 the "Register" May the 17th. No public comment 8 has been received. 9 Our principal inspectors at both Caesars 10 and Bally's have indicated that there were no 11 issues experienced with the so-called split 12 float during the test period. 13 So the matter is now before the 14 Commission for consideration and for final 15 adoption. 16 CHAIR KASSEKERT: Thank you. 17 Any questions? 18 COMMISSIONER SOMMELING: No questions, 19 Madame Chair. 20 VICE CHAIR HARRINGTON: Well, I'm glad 21 that it's working, so I will move that we adopt 22 as published without change. 23 COMMISSIONER FANELLE: Second. 24 CHAIR KASSEKERT: The motion has been 25 made and seconded. All in favor? 105 ITEM NO. 16 1 (Ayes.) 2 CHAIR KASSEKERT: Opposed? 3 (No response.) 4 CHAIR KASSEKERT: Motion carries. 5 MR. BRILIANT: Yeah. I also indicate, 6 too, that the inspectors did indicate that 7 there seemed to be good reduction in the number 8 of fills being requested, so it is serving its 9 purpose. 10 CHAIR KASSEKERT: Purpose. Right. 11 MR. NANCE: Item No. 16, proposed 12 adoption of amendment and new rule for 13 Mississippi Stud. 14 Mr. Mamolen? 15 MR. MAMOLEN: Madame Chair and 16 Commissioners, this is before you for a final 17 adoption. It's a five-card stud variation with 18 the rules are pretty simple. Typically a 19 five-card stud is dealt. You have now before 20 you the Division's confirmatory mathematical 21 analysis. 22 It is ripe now for adoption as published 23 without comment. 24 CHAIR KASSEKERT: Thank you. 25 Any questions? 106 ITEM NO. 17 1 COMMISSIONER SOMMELING: No questions, 2 Madame Chair. 3 COMMISSIONER FANELLE: Move to adopt as 4 published. 5 VICE CHAIR HARRINGTON: Second. 6 CHAIR KASSEKERT: The motion has been 7 made and seconded. All in favor? 8 (Ayes.) 9 CHAIR KASSEKERT: Opposed? 10 (No response.) 11 CHAIR KASSEKERT: The motion carries. 12 MR. NANCE: Item No. 17, proposed 13 publication of amendments concerning PIN 14 sharing. 15 Mr. Briliant? 16 MR. BRILIANT: All right. These 17 proposed rule amendments would permit a casino 18 licensee with an electronic transfer credit 19 system to share a patron's PIN number with 20 other affiliated casino licensees. The result 21 would be that a PIN created in one affiliate 22 casino by a patron could be used by that same 23 patron in another affiliated casino. 24 The matter is now before you for 25 publication for public comment. 107 ITEM NO. 17 1 CHAIR KASSEKERT: Any questions? 2 COMMISSIONER SOMMELING: Madame Chair, 3 move to approve for publication 4 COMMISSIONER EPPS: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Ayes.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 Thank you. 12 MR. BRILIANT: Thank you. 13 MR. NANCE: In accordance with 14 Resolution No. 09-12-16-20, the next closed 15 session of the Commission shall be held on 16 Wednesday, August 15th, 2010, at 9:15 a.m. in 17 the Commission offices. 18 It is now time for the public 19 participation portion of the meeting. 20 CHAIR KASSEKERT: Is there anyone from 21 the public that wishes to be heard? 22 (No response.) 23 CHAIR KASSEKERT: Seeing no one, I'll 24 declare this portion of the meeting closed and 25 entertain a motion to adjourn. 108 1 COMMISSIONER SOMMELING: Motion to 2 adjourn. 3 COMMISSIONER FANELLE: Second. 4 COMMISSIONER EPPS: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Ayes.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 Thank you. 12 (Public Meeting 10-08-04 was adjourned 13 at 12:44 p.m.) 14 15 16 17 18 19 20 21 22 23 24 25 109 1 2 C E R T I F I C A T E 3 4 5 I, DARLENE SILLITOE, a Certified Court 6 Reporter and Notary Public of the State of New 7 Jersey, certify that the foregoing is a true 8 and accurate transcript of the proceedings. 9 10 11 I further certify that I am neither 12 attorney, of counsel for, nor related to or 13 employed by any of the parties to the action; 14 further that I am not a relative or employee of 15 any attorney or counsel employed in this case; 16 nor am I financially interested in the action. 17 18 19 DARLENE SILLITOE CCR 20 License No XI01023 21 22 Dated: August 8, 2010 23 My Notary Commission Expires July 22, 2014 24 ID No 2062871 25