10-Q 1 a2013630-10q.htm 10-Q 2013.6.30-10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 
_________________________________
FORM 10-Q
 _____________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission file number 033-80655
 __________________________________________
MOHEGAN TRIBAL GAMING AUTHORITY
(Exact name of registrant as specified in its charter)
 __________________________________________ 
Not Applicable
 
06-1436334
(State or other jurisdiction
of incorporation or organization)
 
(IRS Employer
Identification No.)
 
 
One Mohegan Sun Boulevard, Uncasville, CT
 
06382
(Address of principal executive offices)
 
(Zip Code)
(860) 862-8000
(Registrant’s telephone number, including area code)
 ___________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  x
Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):     Yes  ¨    No  x


MOHEGAN TRIBAL GAMING AUTHORITY
INDEX TO FORM 10-Q
 
 
Page
Number
PART I.
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 6.
 
 
 
Signatures.


PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
 
June 30,
2013
 
September 30,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
80,291

 
$
114,084

Restricted cash
26,723

 
47,865

Receivables, net
29,457

 
26,556

Inventories
14,370

 
14,438

Other current assets
19,111

 
28,315

Total current assets
169,952

 
231,258

Non-current assets:
 
 
 
Property and equipment, net
1,473,080

 
1,490,398

Goodwill
39,459

 
39,459

Other intangible assets, net
405,621

 
405,928

Other assets, net
86,372

 
86,664

Total assets
$
2,174,484

 
$
2,253,707

LIABILITIES AND CAPITAL
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
4,057

 
$
19,787

Current portion of relinquishment liability
70,406

 
63,312

Due to Mohegan Tribe
6,613

 
9,950

Current portion of capital leases
2,256

 
3,385

Trade payables
10,491

 
12,674

Construction payables
8,591

 
5,063

Accrued interest payable
24,395

 
46,362

Other current liabilities
137,667

 
149,980

Total current liabilities
264,476

 
310,513

Non-current liabilities:
 
 
 
Long-term debt, net of current portion
1,645,270

 
1,646,564

Relinquishment liability, net of current portion
22,228

 
57,470

Due to Mohegan Tribe, net of current portion
24,795

 
21,500

Capital leases, net of current portion
3,731

 
5,440

Other long-term liabilities
4,446

 
2,957

Total liabilities
1,964,946

 
2,044,444

Commitments and Contingencies


 


Capital:
 
 
 
Retained earnings
209,372

 
208,681

Mohegan Tribal Gaming Authority capital
209,372

 
208,681

Non-controlling interests
166

 
582

Total capital
209,538

 
209,263

Total liabilities and capital
$
2,174,484

 
$
2,253,707

The accompanying notes are an integral part of these condensed consolidated financial statements.


3

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
(unaudited)
 
 
For the
 
For the
 
For the
 
For the
 
Three Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Nine Months Ended
 
June 30, 2013
 
June 30, 2012
 
June 30, 2013
 
June 30, 2012
Revenues:
 
 
 
 
 
 
 
Gaming
$
304,582

 
$
307,093

 
$
885,602

 
$
940,753

Food and beverage
22,400

 
22,700

 
63,404

 
68,627

Hotel
10,318

 
10,152

 
30,363

 
29,524

Retail, entertainment and other
32,346

 
29,946

 
84,521

 
82,458

Gross revenues
369,646

 
369,891

 
1,063,890

 
1,121,362

Less-Promotional allowances
(25,401
)
 
(25,455
)
 
(69,195
)
 
(73,896
)
Net revenues
344,245

 
344,436

 
994,695

 
1,047,466

Operating costs and expenses:
 
 
 
 
 
 
 
Gaming
179,537

 
193,019

 
525,409

 
582,017

Food and beverage
10,231

 
11,240

 
31,035

 
33,355

Hotel
3,743

 
3,658

 
10,674

 
10,703

Retail, entertainment and other
11,858

 
10,578

 
31,314

 
29,819

Advertising, general and administrative
48,038

 
48,730

 
143,271

 
147,186

Corporate
5,933

 
4,651

 
19,624

 
12,653

Depreciation and amortization
20,350

 
21,693

 
60,465

 
64,077

Loss on disposition of assets
144

 
31

 
277

 
320

Severance
51

 
—

 
29

 
—

Pre-opening
173

 
—

 
245

 
—

Total operating costs and expenses
280,058

 
293,600

 
822,343

 
880,130

Income from operations
64,187

 
50,836

 
172,352

 
167,336

Other income (expense):
 
 
 
 
 
 
 
Accretion of discount to the relinquishment liability
(1,243
)
 
(2,062
)
 
(3,730
)
 
(6,186
)
Interest income
1,533

 
1,842

 
4,421

 
3,559

Interest expense, net of capitalized interest
(42,379
)
 
(41,581
)
 
(128,213
)
 
(103,047
)
Loss on early exchange of debt
—

 
(17
)
 
(403
)
 
(14,323
)
Other income (expense), net
53

 
7

 
(1,732
)
 
(31
)
Total other expense
(42,036
)
 
(41,811
)
 
(129,657
)
 
(120,028
)
Net income
22,151

 
9,025

 
42,695

 
47,308

Loss attributable to non-controlling interests
146

 
336

 
2,767

 
1,147

Net income attributable to Mohegan Tribal Gaming Authority
$
22,297

 
$
9,361

 
$
45,462

 
$
48,455


The accompanying notes are an integral part of these condensed consolidated financial statements.


4

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(in thousands)
(unaudited)
 
 
Total                 
 
Mohegan Tribal  Gaming Authority
 
Non-controlling      
Interests
Balance, March 31, 2013
$
202,387

 
$
202,075

 
$
312

Net income (loss)
22,151

 
22,297

 
(146
)
Distributions to Mohegan Tribe
(15,000
)
 
(15,000
)
 
—

Balance, June 30, 2013
$
209,538

 
$
209,372

 
$
166

 
 
 
 
 
 
Balance, September 30, 2012
$
209,263

 
$
208,681

 
$
582

Net income (loss)
42,695

 
45,462

 
(2,767
)
Distributions to Mohegan Tribe
(35,000
)
 
(35,000
)
 
—

Repurchase of membership interest
(7,420
)
 
(9,771
)
 
2,351

Balance, June 30, 2013
$
209,538

 
$
209,372

 
$
166

 
 
 
 
 
 
Balance, March 31, 2012
$
211,306

 
$
209,515

 
$
1,791

Net income (loss)
9,025

 
9,361

 
(336
)
Distributions to Mohegan Tribe
(12,500
)
 
(12,500
)
 
—

Balance, June 30, 2012
$
207,831

 
$
206,376

 
$
1,455

 
 
 
 
 
 
Balance, September 30, 2011
$
198,724

 
$
196,403

 
$
2,321

Cumulative-effect of adoption of amendments to ASC 924 regarding jackpot liabilities
1,968

 
1,968

 
—

Contributions from members
281

 
—

 
281

Net income (loss)
47,308

 
48,455

 
(1,147
)
Distributions to Mohegan Tribe
(40,450
)
 
(40,450
)
 
—

Balance, June 30, 2012
$
207,831

 
$
206,376

 
$
1,455


The accompanying notes are an integral part of these condensed consolidated financial statements.


5

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
 
For the
 
For the
 
Nine Months Ended
 
Nine Months Ended
 
June 30, 2013
 
June 30, 2012
Cash flows provided by (used in) operating activities:
 
 
 
Net income
$
42,695

 
$
47,308

Adjustments to reconcile net income to net cash flows provided by operating activities:
 
 
 
Depreciation and amortization
60,465

 
64,077

Accretion of discount to the relinquishment liability
3,730

 
6,186

Cash paid for accretion of discount to the relinquishment liability
(3,927
)
 
(5,935
)
Loss on early exchange of debt
403

 
14,323

Amortization of debt issuance costs
7,852

 
6,300

Accretion of discount
1,332

 
825

Amortization of net deferred gain on settlement of derivative instruments
(66
)
 
(231
)
Provision for losses on receivables
2,574

 
1,835

Loss on disposition of assets
277

 
320

Loss from unconsolidated affiliates
1,698

 
—

Changes in operating assets and liabilities:
 
 
 
 Increase in receivables
(3,754
)
 
(6,500
)
(Increase) decrease in inventories
68

 
(1,024
)
(Increase) decrease in other assets
5,285

 
(3,214
)
Decrease in trade payables
(2,181
)
 
(5,325
)
Increase (decrease) in accrued interest
(21,967
)
 
18,034

Increase (decrease) in other liabilities
(8,875
)
 
7,312

Net cash flows provided by operating activities
85,609

 
144,291

Cash flows provided by (used in) investing activities:
 
 
 
Purchases of property and equipment, net of increase (decrease) in construction payables of $3,528 and $(6,507), respectively
(39,185
)
 
(40,638
)
Issuance of third-party loans and advances
(1,655
)
 
(570
)
Payments received on third-party loans
103

 
113

Decrease in restricted cash, net
21,669

 
261

Proceeds from asset sales
171

 
134

Investments in unconsolidated affiliates
(4,965
)
 
—

Proceeds from Commonwealth of Pennsylvania's facility improvement grant
—

 
2,000

Net cash flows used in investing activities
(23,862
)
 
(38,700
)
Cash flows provided by (used in) financing activities:
 
 
 
Bank Credit Facility borrowings - revolving loan
3,000

 
154,000

Bank Credit Facility repayments - revolving loan
(3,000
)
 
(289,000
)
Bank Credit Facility repayments - term loan
(3,000
)
 
(2,000
)
Term Loan Facility borrowings, net of discount
—

 
220,500

Line of Credit borrowings
—

 
225,215

Line of Credit repayments
—

 
(225,215
)
Borrowings from Mohegan Tribe
—

 
20,600

Repayments to Mohegan Tribe
(7,462
)
 
—

Repayments of other long-term debt
(15,798
)
 
(66,454
)
Salishan-Mohegan Bank Credit Facility repayments - revolving loan
—

 
(15,250
)
Principal portion of relinquishment liability payments
(27,951
)
 
(28,756
)
Distributions to Mohegan Tribe
(35,000
)
 
(40,450
)
Payments of financing fees
(3,491
)
 
(50,178
)
Payments on capital lease obligations
(2,838
)
 
(528
)
Non-controlling interest contributions
—

 
281

Net cash flows used in financing activities
(95,540
)
 
(97,235
)
Net increase (decrease) in cash and cash equivalents
(33,793
)
 
8,356

Cash and cash equivalents at beginning of period
114,084

 
112,174

Cash and cash equivalents at end of period
$
80,291

 
$
120,530

Supplemental disclosures:
 
 
 
Cash paid during the period for interest
$
140,281

 
$
78,119

Capital lease
$
—

 
$
4,048

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1—ORGANIZATION:
The Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe” or the “Tribe”) established the Mohegan Tribal Gaming Authority (the “Authority”) in July 1995 with the exclusive authority to conduct and regulate gaming activities for the Tribe on Tribal lands and the non-exclusive authority to conduct such activities elsewhere. The Tribe is a federally-recognized Indian tribe with an approximately 544-acre reservation situated in Southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, federally-recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal lands, subject to, among other things, the negotiation of a compact with the affected state. The Tribe and the State of Connecticut entered into a compact (the “Mohegan Compact”), which was approved by the United States Secretary of the Interior. The Authority is primarily engaged in the ownership, operation and development of gaming facilities. In October 1996, the Authority opened Mohegan Sun, a gaming and entertainment complex situated on a 185-acre site on the Tribe's reservation. The Authority is governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council, the governing body of the Tribe. Any change in the composition of the Mohegan Tribal Council results in a corresponding change in the Authority's Management Board.
As of June 30, 2013, the following subsidiaries were wholly-owned by the Authority: Mohegan Basketball Club, LLC (“MBC”), Mohegan Golf, LLC (“Mohegan Golf”), Mohegan Commercial Ventures-PA, LLC (“MCV-PA”), Mohegan Ventures-Northwest, LLC (“Mohegan Ventures-NW”), Mohegan Ventures Wisconsin, LLC (“MVW”), MTGA Gaming, LLC (“MTGA Gaming”), Downs Lodging, LLC ("Downs Lodging") and Mohegan Gaming Advisors, LLC ("Mohegan Gaming Advisors").
MBC owns and operates the Connecticut Sun, a professional basketball team in the Women's National Basketball Association (the “WNBA”). MBC currently owns a 4.2% membership interest in WNBA, LLC.
Mohegan Golf owns and operates the Mohegan Sun Country Club at Pautipaug golf course in Southeastern Connecticut.
MCV-PA holds a 0.01% general partnership interest in each of Downs Racing, L.P., Backside, L.P., Mill Creek Land, L.P. and Northeast Concessions, L.P. (collectively, along with MCV-PA, the “Pocono Downs Subsidiaries”), while the Authority holds the remaining 99.99% limited partnership interest in each entity. Downs Racing, L.P. (“Downs Racing”) owns and operates Mohegan Sun at Pocono Downs, a gaming and entertainment facility situated on a 400-acre site in Plains Township, Pennsylvania, and several off-track wagering facilities located elsewhere in Pennsylvania (collectively, the “Pennsylvania Facilities”). The Authority views Mohegan Sun and the Pennsylvania Facilities as two separate operating segments.
Mohegan Ventures-NW and the Tribe hold 49.15% and 7.85% membership interests in Salishan-Mohegan, LLC (“Salishan-Mohegan”), respectively, which was formed with an unrelated third-party to participate in the development and management of a proposed casino to be owned by the federally-recognized Cowlitz Indian Tribe of Washington (the “Cowlitz Tribe”) and to be located in Clark County, Washington (the “Cowlitz Project”). Salishan-Mohegan holds a 100% membership interest in Salishan-Mohegan Two, LLC ("Salishan-Mohegan Two"), which was formed to acquire certain property related to the Cowlitz Project.
MVW holds a 100% membership interest in Wisconsin Tribal Gaming, LLC (“WTG”), which was formed to participate in the development of a proposed casino to be owned by the federally-recognized Menominee Indian Tribe of Wisconsin (the “Menominee Tribe”) and to be located in Kenosha, Wisconsin (the “Menominee Project”).
Prior to March 2013, MTGA Gaming and the Tribe held 49% and 51% membership interests in Mohegan Gaming & Hospitality, LLC (“MG&H”), respectively. On March 29, 2013, MG&H purchased and acquired all of the Tribe's membership interests in MG&H and retired the membership interests. Accordingly, MTGA Gaming now holds a 100% membership interest in MG&H, which has been designated as an unrestricted subsidiary of the Authority. MG&H holds a 100% membership interest in Mohegan Resorts, LLC (“Mohegan Resorts”). Mohegan Resorts holds a 100% membership interest in Mohegan Resorts Mass, LLC, which was formed to pursue potential gaming opportunities in the Commonwealth of Massachusetts. Mohegan Resorts also holds 100% membership interests in Mohegan Resorts New York, LLC and Mohegan Gaming New York, LLC (collectively, the “Mohegan New York Entities”). The Mohegan New York Entities were formed to pursue potential gaming opportunities in the State of New York.
Downs Lodging, an unrestricted subsidiary of the Authority, was formed to develop, finance and build Project Sunlight, a hotel and convention center to be located at Mohegan Sun at Pocono Downs.

7
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Mohegan Gaming Advisors, an unrestricted subsidiary of the Authority, was formed to pursue gaming opportunities outside the State of Connecticut, including management contracts and consulting agreements for casino and entertainment properties in the United States. Mohegan Gaming Advisors holds 100% membership interests in MGA Holding NJ, LLC and MGA Gaming NJ, LLC (collectively, the "Mohegan New Jersey Entities"). The Mohegan New Jersey Entities were formed to pursue management contracts and consulting agreements in the State of New Jersey. In October 2012, MGA Holding NJ, LLC acquired a 10% ownership interest in Resorts Casino Hotel in Atlantic City, New Jersey ("Resorts Atlantic City").
Mohegan Gaming Advisors also holds 100% membership interests in MGA Holding MA, LLC and MGA Gaming MA, LLC (collectively, the “Mohegan MA Entities”). The Mohegan MA Entities were formed to pursue potential gaming opportunities in the Commonwealth of Massachusetts.
In addition, Mohegan Gaming Advisors holds 100% membership interests in MGA Holding PA, LLC and MGA Gaming PA, LLC (collectively, the “Mohegan PA Entities”). The Mohegan PA Entities were formed to pursue potential gaming opportunities in the Commonwealth of Pennsylvania.



NOTE 2—BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In management's opinion, all adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of the Authority's operating results for the interim period, have been included. The Authority's operating results for the three months and nine months ended June 30, 2013 are not necessarily indicative of results for the fiscal year ending September 30, 2013.
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Authority's Annual Report on Form 10-K for the fiscal year ended September 30, 2012.
The Authority's operating results for the three months and nine months ended June 30, 2012 reflect adjustments to increase interest income by $1.1 million and reserves for doubtful collection of long-term receivables by $326,000 relating to unrecorded interest income and the related receivables and reserves in connection with reimbursable costs and expenses advanced by Salishan-Mohegan on behalf of the Cowlitz Tribe for the Cowlitz Project that were not recorded during fiscal 2007, 2008, 2009, 2010, 2011 and 2012, and interim periods within those fiscal years. Because amounts involved were not material to the Authority’s financial statements in any individual prior period, and the cumulative amount was not material to operating results for the fiscal year ending September 30, 2012, the Authority recorded the cumulative effect of correcting these items during the three months ended June 30, 2012.
Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Authority and its majority and wholly-owned subsidiaries and entities. In accordance with authoritative guidance issued by the Financial Accounting Standards Board (the “FASB”) pertaining to consolidation of variable interest entities, the accounts of Salishan-Mohegan are consolidated into the accounts of Mohegan Ventures-NW, as Mohegan Ventures-NW is deemed to be the primary beneficiary. In addition, the accounts of MG&H, Mohegan Resorts and its subsidiaries were consolidated into the accounts of MTGA Gaming, as MTGA Gaming was deemed to be the primary beneficiary. However, on March 29, 2013, MG&H purchased and acquired all of the Tribe's membership interests in MG&H and retired the membership interests (refer to Note 1). In consolidation, all intercompany balances and transactions were eliminated.



8
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Long-Term Receivables
Long-term receivables consist primarily of receivables from affiliates and tenants and others. The following table presents a reconciliation of long-term receivables and the related reserves for doubtful collection of these long-term receivables (in thousands):
 
Long-Term Receivables
 
Affiliates
 
Tenants and Others
 
Total
Balance, March 31, 2013 (1)
$
53,678

 
$
3,520

 
$
57,198

Additions:
 
 
 
 
 
   Issuance of affiliate advances and tenant loans, including interest receivable
1,920

 
74

 
1,994

Deductions:
 
 
 
 
 
   Payments received
—

 
(35
)
 
(35
)
Balance, June 30, 2013 (1)
$
55,598

 
$
3,559

 
$
59,157

 
 
 
 
 
 
Balance, September 30, 2012 (1)
$
49,841

 
$
3,533

 
$
53,374

Additions:
 
 
 
 
 
   Issuance of affiliate advances and tenant loans, including interest receivable
5,757

 
129

 
5,886

Deductions:
 
 
 
 
 
   Payments received
—

 
(103
)
 
(103
)
Balance, June 30, 2013 (1)
$
55,598

 
$
3,559

 
$
59,157

__________
(1)
Includes interest receivable of $25.7 million, $27.2 million and $22.9 million as of March 31, 2013, June 30, 2013 and September 30, 2012, respectively. The WTG receivables no longer accrue interest pursuant to a release and reimbursement agreement entered into in September 2010.
 
Reserves for Doubtful Collection of Long-Term Receivables
 
Affiliates        
 
Tenants and Others        
 
Total             
Balance, March 31, 2013
$
22,958

 
$
65

 
$
23,023

Additions:
 
 
 
 
 
   Charges to bad debt expense
576

 
—

 
576

Deductions:
 
 
 
 
 
   Adjustments
—

 
(2
)
 
(2
)
Balance, June 30, 2013
$
23,534

 
$
63

 
$
23,597

 
 
 
 
 
 
Balance, September 30, 2012
$
21,807

 
$
70

 
$
21,877

Additions:
 
 
 
 
 
   Charges to bad debt expense
1,727

 
—

 
1,727

Deductions:
 
 
 
 
 
   Adjustments
—

 
(7
)
 
(7
)
Balance, June 30, 2013
$
23,534

 
$
63

 
$
23,597

Fair Value of Financial Instruments
The fair value amounts presented below are reported to satisfy disclosure requirements pursuant to authoritative guidance issued by the FASB pertaining to disclosures about fair values of financial instruments and are not necessarily indicative of amounts that the Authority could realize in a current market transaction.
The Authority applies the following fair value hierarchy, which prioritizes the inputs utilized to measure fair value into three levels:
•
Level 1 - Quoted prices for identical assets or liabilities in active markets;
•
Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets or valuations based on models where the significant inputs are observable or can be corroborated by observable market data; and
•
Level 3 - Valuations based on models where the significant inputs are unobservable. The unobservable inputs reflect the Authority's estimates or assumptions that market participants would utilize in pricing such assets or liabilities.
The Authority's assessment of the significance of a particular input requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy.

9
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

The carrying amount of cash and cash equivalents, receivables, trade payables and promissory notes approximates fair value. The estimated fair value of the Authority's financing facilities and notes were as follows (in thousands):
 
June 30, 2013
 
Carrying Value         
 
Fair Value         
Bank Credit Facility
$
394,000

 
$
378,240

Term Loan Facility
$
221,737

 
$
221,625

2009 11 1/2% Second Lien Senior Secured Notes
$
195

 
$
222

2012 11 1/2% Second Lien Senior Secured Notes
$
194,819

 
$
221,778

2012 10 1/2% Third Lien Senior Secured Notes
$
417,771

 
$
406,805

2004 7 1/8% Senior Subordinated Notes
$
21,156

 
$
20,098

2005 6 7/8% Senior Subordinated Notes
$
9,654

 
$
9,503

2012 11 % Senior Subordinated Notes
$
344,190

 
$
320,527


The estimated fair values of the Authority's financing facilities and notes were based on Level 2 inputs (quoted market prices or prices of similar instruments) on or about June 30, 2013.
Severance Costs and Expenses

In September 2012, the Authority implemented a workforce reduction of approximately 330 positions in Uncasville, Connecticut, in an effort to further streamline its organization and better align operating costs with current market and business conditions. In addition, in March 2013, the Authority implemented a workforce reduction at its Pennsylvania Facilities. The costs associated with related post-employment severance benefits were expensed at the time the termination was communicated to the employees. Cash payments related to the September 2012 workforce reduction commenced in October 2012 and are anticipated to be completed in September 2014. Cash payments related to the March 2013 workforce reduction commenced in March 2013 and are anticipated to be completed in August 2013. The Authority does not anticipate incurring any additional severance charges in connection with these workforce reductions, other than charges that may arise from adjustments to the initial estimates utilized under the plans. The following table presents a reconciliation of the related severance liability by business segment (in thousands):
 
Mohegan Sun
 
Corporate
 
Mohegan Sun at Pocono Downs
 
Total
Balance, March 31, 2013
$
3,972

 
$
—

 
$
99

 
$
4,071

Adjustments
—

 
—

 
51

 
51

Cash payments
(1,993
)
 
—

 
(140
)
 
(2,133
)
Balance, June 30, 2013
$
1,979

 
$
—

 
$
10

 
$
1,989

 
 
 
 
 
 
 
 
Balance, September 30, 2012
$
12,497

 
$
24

 
$
—

 
$
12,521

Accrued severance at measurement date
—

 
—

 
124

 
124

Adjustments
(146
)
 
—

 
51

 
(95
)
Cash payments
(10,372
)
 
(24
)
 
(165
)
 
(10,561
)
Balance, June 30, 2013
$
1,979

 
$
—

 
$
10

 
$
1,989

Investments in Unconsolidated Affiliates

In October 2012, the Authority, through its indirect wholly-owned subsidiary, MGA Holding NJ, LLC, acquired a 10% ownership interest in Resorts Atlantic City. The Authority's investment in Resorts Atlantic City is accounted for under the equity method as the Authority has significant influence.





 


10
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)



NOTE 3—LONG-TERM DEBT:
Long-term debt consisted of the following (in thousands, including current maturities):
 
June 30,
2013
 
September 30,
2012
Bank Credit Facility, due March 2015
$
394,000

 
$
397,000

Term Loan Facility, due March 2016, net of discount of $3,263 and $3,988, respectively
221,737

 
221,012

2009 11 1/2% Second Lien Senior Secured Notes, due November 2017, net of discount of $5 and $6, respectively
195

 
194

2012 11 1/2% Second Lien Senior Secured Notes, due November 2017, net of discount of $4,981 and $5,587, respectively
194,819

 
194,213

2012 10 1/2% Third Lien Senior Secured Notes, due December 2016
417,771

 
417,771

2005 6 1/8% Senior Unsecured Notes, due February 2013
—

 
15,775

2004 7 1/8% Senior Subordinated Notes, due August 2014
21,156

 
21,156

2005 6 7/8% Senior Subordinated Notes, due February 2015
9,654

 
9,654

2012 11 % Senior Subordinated Notes, due September 2018
344,190

 
344,190

2009 Mohegan Tribe Promissory Note, due September 2014
5,125

 
10,000

2012 Mohegan Tribe Minor's Trust Promissory Note, due March 2016
18,500

 
20,000

Mohegan Tribe Credit Facility, due September 2013
363

 
1,450

2013 Mohegan Tribe Promissory Note, due December 2018
7,420

 
—

Downs Lodging Credit Facility, due July 2016
45,000

 
45,000

Salishan-Mohegan Promissory Notes, due December 2014
485

 
—

Subtotal
1,680,415

 
1,697,415

Plus: net deferred gain on derivative instruments sold
320

 
386

Long-term debt, excluding capital leases
1,680,735

 
1,697,801

Less: current portion of long-term debt
(10,670
)
 
(29,737
)
Long-term debt, net of current portion
$
1,670,065

 
$
1,668,064


Bank Credit Facilities

First Lien, First Out Credit Facility

On March 6, 2012, the Authority entered into a Fourth Amended and Restated Bank Credit Facility providing for a $400.0 million term loan and a revolving loan with letter of credit and borrowing capacity of up to $75.0 million from a syndicate of financial institutions and commercial banks, with Bank of America, N.A. serving as Administrative Agent (the "Bank Credit Facility"). Principal outstanding on the term loan under the Bank Credit Facility is to be repaid at a rate of $1.0 million per quarter. The Bank Credit Facility matures on March 31, 2015, upon which date all outstanding balances are payable in full. As of June 30, 2013, there were $394.0 million in term loans and no revolving loans outstanding under the Bank Credit Facility. As of June 30, 2013, letters of credit issued under the Bank Credit Facility totaled $3.4 million, of which no amount was drawn. Inclusive of letters of credit, which reduce borrowing availability under the Bank Credit Facility, and after taking into account restrictive financial covenant requirements, the Authority had approximately $71.6 million of borrowing capacity under the Bank Credit Facility as of June 30, 2013.
Borrowings under the Bank Credit Facility incur interest as follows: (i) for base rate revolving loans, base rate plus an applicable margin based on a leverage-based pricing grid between 2.25% and 3.25%; (ii) for Eurodollar rate revolving loans, the applicable LIBOR rate plus an applicable margin based on a leverage-based pricing grid between 3.50% and 4.50%; (iii) for base rate term loans, base rate plus an applicable margin equal to 3.25%; and (iv) for Eurodollar rate term loans, the applicable LIBOR rate plus 4.50%. For Eurodollar rate term loans, LIBOR is subject to a 1.0% floor. There also is a fee of between 0.25% and 0.50%, based on a leverage-based pricing grid, charged on unused revolving commitments. Interest on Eurodollar rate loans is payable at the end of each applicable interest period for periods of three months or less and for loans of more than three months, each March, June, September or December that occurs after the beginning of such interest period. Interest on base rate loans is payable quarterly in arrears. As of June 30, 2013, the $394.0 million in term loans outstanding were based on the Eurodollar rate floor of 1.0% plus an applicable margin of 4.50%. The applicable margin for commitment fees was 0.50% as of June 30, 2013. As of June 30, 2013 and September 30, 2012, accrued interest, including commitment fees, on the Bank Credit Facility was $217,000 and $211,000, respectively.


11
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

The Authority's obligations under the Bank Credit Facility are fully and unconditionally guaranteed, jointly and severally, by the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming (collectively, the “Guarantors”). The Bank Credit Facility is collateralized by a first priority lien on substantially all of the Authority's property and assets and those of the Guarantors (other than MBC), including the assets that comprise Mohegan Sun at Pocono Downs and a leasehold mortgage on the land and improvements that comprise Mohegan Sun (the Authority and the Guarantors, other than MBC, are collectively referred to herein as the “Grantors”). The Grantors also are required to pledge additional assets as collateral for the Bank Credit Facility as they and future guarantor subsidiaries acquire them. The liens and security interests granted by the Grantors as security for the Authority's obligations under the Bank Credit Facility are senior in priority to the liens on the same collateral securing the Term Loan Facility (as defined below) and the 2009 Second Lien Notes, 2012 Second Lien Notes and 2012 Third Lien Notes (each as defined below and, collectively, the “Secured Notes”). The collateral securing the Bank Credit Facility constitutes substantially all of the Grantors' property and assets that secure the Term Loan Facility and the Secured Notes, but excludes certain excluded assets as defined in the Bank Credit Facility.

The Bank Credit Facility contains negative covenants applicable to the Authority and the Guarantors, including negative covenants governing incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, investments, asset sales, affiliate transactions, mergers or consolidations and capital expenditures. Additionally, the Bank Credit Facility includes financial maintenance covenants pertaining to total leverage, senior leverage and minimum fixed charge coverage.
As of June 30, 2013, the Authority and the Tribe were in compliance with all respective covenant requirements under the Bank Credit Facility.

First Lien, Second Out Term Loan Facility

On March 6, 2012, the Authority entered into a loan agreement providing for a $225.0 million first lien, second out term loan with Wells Fargo Gaming Capital, LLC serving as Administrative Agent (the "Term Loan Facility"). The Term Loan Facility was issued at a price of 98.0% of par, for an initial yield of approximately 9.6% per annum. The Term Loan Facility has no mandatory amortization and is payable in full on March 31, 2016.

Loans under the Term Loan Facility incur interest as follows: (i) for base rate loans, base rate plus 6.50% per annum and (ii) for Eurodollar rate loans, LIBOR plus 7.50% per annum. In all cases, LIBOR is subject to a 1.50% floor. Interest on Eurodollar rate loans is payable at the end of each applicable interest period or every quarter in arrears, if an interest period exceeds three months. Interest on base rate loans is payable quarterly in arrears. As of June 30, 2013, the Authority had a $225.0 million Eurodollar rate loan outstanding, which was based on the Eurodollar rate floor of 1.50% plus an applicable margin of 7.50%. As of June 30, 2013 and September 30, 2012, accrued interest on the Term Loan Facility was $1.1 million and $1.2 million, respectively.

The Term Loan Facility is fully and unconditionally guaranteed, jointly and severally, by each of the Guarantors. The liens and security interests granted by the Grantors as security for the Authority's obligations under the Term Loan Facility are senior in priority to the liens on the same collateral securing any of the Secured Notes. The collateral securing the Term Loan Facility constitutes substantially all of the Grantors' property and assets that secure the Bank Credit Facility and the Secured Notes, but excludes certain excluded assets as defined in the Term Loan Facility.

The Term Loan Facility contains negative covenants and financial maintenance covenants that are substantially the same as those contained in the Bank Credit Facility. The Term Loan Facility also includes a separate first lien leverage ratio covenant.
As of June 30, 2013, the Authority and the Tribe were in compliance with all respective covenant requirements under the Term Loan Facility.

The Authority continues to monitor revenues and expenditures to ensure continued compliance with its financial covenant requirements under both the Bank Credit Facility and the Term Loan Facility. While the Authority anticipates that it will remain in compliance with all covenant requirements under its bank credit facilities for all periods prior to maturity, it may need to increase revenues or offset any future declines in revenues by implementing further cost containment and other initiatives in order to maintain compliance with these financial covenant requirements. If the Authority is unable to satisfy its financial covenant requirements, it would need to obtain waivers or consents under the bank credit facilities; however, the Authority can provide no assurance that it would be able to obtain such waivers or consents. If the Authority is unable to obtain such waivers or consents, it would be in default under its bank credit facilities, which may result in cross-defaults under its other outstanding indebtedness and allow its lenders and creditors to exercise their rights and remedies as defined under their respective agreements, including their right to accelerate the repayment of the Authority's outstanding indebtedness. If such acceleration were to occur, the Authority can provide no assurance that it would be able to obtain the financing necessary to repay such accelerated indebtedness.

12
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Senior Secured Notes
2009 11  1/2% Second Lien Senior Secured Notes
In October 2009, the Authority issued $200.0 million Second Lien Senior Secured Notes with fixed interest payable at a rate of 11.50% per annum (the “2009 Second Lien Notes”). The 2009 Second Lien Notes were issued at a price of 96.234% of par, to yield an effective interest rate of 12.25% per annum. The 2009 Second Lien Notes mature on November 1, 2017. The first call date for the 2009 Second Lien Notes is November 1, 2013. Interest on the 2009 Second Lien Notes is payable semi-annually on May 1st and November 1st.

On March 6, 2012, the Authority completed a private exchange offer and consent solicitation for any or all of its outstanding 2009 Second Lien Notes. As part of the exchange offer, the Authority solicited and received consents from tendering holders to certain amendments to the indentures governing the 2009 Second Lien Notes, which eliminated certain restrictive covenants under the notes and related indenture. The aggregate principal amount of 2009 Second Lien Notes tendered and exchanged was $199.8 million. An aggregate principal amount of $200,000 of 2009 Second Lien Notes remains outstanding as of June 30, 2013. As of June 30, 2013 and September 30, 2012, accrued interest on the 2009 Second Lien Notes was $4,000 and $10,000, respectively.
 
The 2009 Second Lien Notes are collateralized by a second priority lien on substantially all of the Grantors' and future guarantor subsidiaries' properties and assets, and are effectively subordinated to all of the Authority's and its existing and future guarantor subsidiaries' first priority lien secured indebtedness, including borrowings under the Bank Credit Facility and Term Loan Facility, to the extent of the value of the collateral securing such indebtedness. The 2009 Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

The 2009 Second Lien Notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

2012 11 ½% Second Lien Senior Secured Notes

On March 6, 2012, the Authority issued $199.8 million Second Lien Senior Secured Notes with fixed interest payable at a rate of 11.50% per annum (the “2012 Second Lien Notes”) in exchange for an equal amount of 2009 Second Lien Notes. The 2012 Second Lien Notes mature on November 1, 2017. The Authority may redeem the 2012 Second Lien Notes, in whole or in part, at any time prior to November 1, 2014, at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. On or after November 1, 2014, the Authority may redeem the 2012 Second Lien Notes, in whole or in part, at a premium decreasing ratably to zero, plus accrued interest. If a change of control of the Authority occurs, the Authority must offer to repurchase the 2012 Second Lien Notes at a price equal to 101% of the principal amount, plus accrued interest. In addition, if the Authority undertakes certain types of asset sales or suffers events of loss, and the Authority does not use the related sale or insurance proceeds for specified purposes, the Authority may be required to offer to repurchase the 2012 Second Lien Notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2012 Second Lien Notes is payable semi-annually on May 1st and November 1st, commencing November 1, 2012. As of June 30, 2013 and September 30, 2012, accrued interest on the 2012 Second Lien Notes was $3.8 million and 13.1 million, respectively.

The 2012 Second Lien Notes and the related guarantees are secured by second lien security interests in substantially all of the Grantors property and assets. These liens are junior in priority to the liens on the same collateral securing the Authority's Bank Credit Facility and Term Loan Facility (and permitted replacements thereof) and to all other permitted prior liens, including liens securing certain hedging obligations. The collateral securing the 2012 Second Lien Notes constitutes substantially all of the Grantors' property and assets that secure the Bank Credit Facility and Term Loan Facility, the 2009 Second Lien Notes and 2012 Third Lien Notes, but excludes certain excluded assets as defined in the 2012 Second Lien Notes indenture. The 2012 Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

The 2012 Second Lien Notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.






13
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

2012 10 ½% Third Lien Senior Secured Notes

On March 6, 2012, the Authority issued $417.7 million Third Lien Senior Secured Notes with fixed interest payable at a rate of 10.50% per annum (the “2012 Third Lien Notes”) in exchange for $234.2 million of 2005 Senior Unsecured Notes and $183.5 million of 2002 8% Senior Subordinated Notes. The 2012 Third Lien Notes mature on December 15, 2016. The Authority may redeem the 2012 Third Lien Notes, in whole or in part, at any time at a price equal to 100% of the principal amount plus accrued interest. If a change of control of the Authority occurs, the Authority must offer to repurchase the 2012 Third Lien Notes at a price equal to 101% of the principal amount, plus accrued interest. In addition, if the Authority undertakes certain types of asset sales or suffers events of loss, and the Authority does not use the related sale or insurance proceeds for specified purposes, the Authority may be required to offer to repurchase the 2012 Third Lien Notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2012 Third Lien Notes is payable semi-annually on June 15th and December 15th, commencing December 15, 2012. As of June 30, 2013 and September 30, 2012, accrued interest on the 2012 Third Lien Notes was $1.9 million and $25.0 million, respectively.

The 2012 Third Lien Notes and the related guarantees are secured by third lien security interests in substantially all of the Grantors' property and assets. These liens are junior in priority to the liens on the same collateral securing the Authority's Bank Credit Facility and Term Loan Facility, the 2009 Second Lien Notes and 2012 Second Lien Notes (and permitted replacements of each of the foregoing) and to all other permitted prior liens, including liens securing certain hedging obligations. The collateral securing the 2012 Third Lien Notes constitutes substantially all of the Grantors' property and assets that secure the Bank Credit Facility and Term Loan Facility, the 2009 Second Lien Notes and 2012 Second Lien Notes, but excludes certain excluded assets as defined in the 2012 Third Lien Notes indenture. The 2012 Third Lien Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

The 2012 Third Lien Notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

Senior Unsecured Notes

2005 6 1/8% Senior Unsecured Notes
In February 2005, the Authority issued $250.0 million Senior Unsecured Notes with fixed interest payable at a rate of 6.125% per annum (the “2005 Senior Unsecured Notes”). Pursuant to a private exchange offer, which was completed on March 6, 2012, the Authority exchanged $234.2 million in aggregate principal amount of 2005 Senior Unsecured Notes, leaving $15.8 million outstanding, which amount, including accrued interest, was repaid at maturity on February 15, 2013 with cash on hand. As of September 30, 2012, accrued interest on the 2005 Senior Unsecured Notes was $81,000.
Senior Subordinated Notes
2004 7 1/8% Senior Subordinated Notes

In August 2004, the Authority issued $225.0 million Senior Subordinated Notes with fixed interest payable at a rate of 7.125% per annum (the “2004 Senior Subordinated Notes”). The 2004 Senior Subordinated Notes mature on August 15, 2014. The 2004 Senior Subordinated Notes are callable at the Authority's option at par. Interest on the 2004 Senior Subordinated Notes is payable semi-annually on February 15th and August 15th.
On March 6, 2012, the Authority completed a private exchange offer and consent solicitation for any or all of its outstanding 2004 Senior Subordinated Notes. As part of the exchange offer, the Authority solicited and received consents from tendering holders to certain amendments to the indentures governing the 2004 Senior Subordinated Notes, which eliminated certain restrictive covenants under the notes and related indenture. The aggregate principal amount of 2004 Senior Subordinated Notes tendered and exchanged was $203.8 million. An aggregate principal amount of $21.2 million of the 2004 Senior Subordinated Notes remains outstanding as of June 30, 2013. As of June 30, 2013 and September 30, 2012, accrued interest on the 2004 Senior Subordinated Notes was $565,000 and $148,000, respectively.



14
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

2005 6 7/8% Senior Subordinated Notes

In February 2005, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of 6.875% per annum (the “2005 Senior Subordinated Notes”). The 2005 Senior Subordinated Notes mature on February 15, 2015. The 2005 Senior Subordinated Notes are callable at the Authority's option at par. Interest on the 2005 Senior Subordinated Notes is payable semi-annually on February 15th and August 15th.

On March 6, 2012, the Authority completed a private exchange offer and consent solicitation for any or all of its outstanding 2005 Senior Subordinated Notes. As part of the exchange offer, the Authority solicited and received consents from tendering holders to certain amendments to the indentures governing the 2005 Senior Subordinated Notes, which eliminated certain covenants under the notes and related indenture. The aggregate principal amount of 2005 Senior Subordinated Notes tendered and exchanged was $140.3 million. An aggregate principal amount of $9.7 million of the 2005 Senior Subordinated Notes remains outstanding as of June 30, 2013. As of June 30, 2013 and September 30, 2012, accrued interest on the 2005 Senior Subordinated Notes was $249,000 and $56,000, respectively.

2012 11% Senior Subordinated Notes

On March 6, 2012, the Authority issued $344.2 million Senior Subordinated Toggle Notes with fixed interest payable at a rate of 11% per annum (the “2012 Senior Subordinated Notes”) in exchange for $203.8 million of 2004 Senior Subordinated Notes and $140.3 million of 2005 Senior Subordinated Notes. The 2012 Senior Subordinated Notes mature on September 15, 2018. The Authority may redeem the 2012 Senior Subordinated Notes, in whole or in part, at any time, at a price equal to 100% of the principal amount plus accrued interest. If a change of control of the Authority occurs, the Authority must offer to repurchase the 2012 Senior Subordinated Notes at a price equal to 101% of the principal amount, plus accrued interest. In addition, if the Authority undertakes certain types of asset sales or suffers events of loss, and the Authority does not use the related sale or insurance proceeds for specified purposes, the Authority may be required to offer to repurchase the 2012 Senior Subordinated Notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2012 Senior Subordinated Notes is payable semi-annually on March 15th and September 15th, commencing September 15, 2012. The initial interest payment on the 2012 Senior Subordinated Notes was payable entirely in cash. For any subsequent interest payment period through March 15, 2018, the Authority may, at its option, elect to pay interest on the 2012 Senior Subordinated Notes either entirely in cash or by paying up to 2% in 2012 Senior Subordinated Notes (“PIK Interest”). If the Authority elects to pay PIK Interest, such election will increase the principal amount of the 2012 Senior Subordinated Notes in an amount equal to the amount of PIK Interest for the applicable interest payment period to holders of 2012 Senior Subordinated Notes on the relevant record date. As of June 30, 2013 and September 30, 2012, accrued interest on the 2012 Senior Subordinated Notes was $11.1 million and $1.7 million, respectively.

The 2012 Senior Subordinated Notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

The Authority's senior subordinated notes are uncollateralized general obligations of the Authority, and are subordinated to borrowings under the Bank Credit Facility, Term Loan Facility, 2009 Second Lien Notes, 2012 Second Lien Notes and 2012 Third Lien Notes. The senior subordinated notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors. Refer to Note 8 for condensed consolidating financial information of the Authority and its Guarantor and non-guarantor entities.

The senior and senior subordinated note indentures contain certain non-financial and financial covenant requirements with which the Authority and the Tribe must comply. The non-financial covenant requirements include, among other things, reporting obligations, compliance with laws and regulations, maintenance of licenses and insurances and continued existence of the Authority. The financial covenant requirements include, among other things, subject to certain exceptions, limitations on the Authority's and the Guarantors' ability to incur additional indebtedness, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates, merge or consolidate with another company, transfer or sell assets or impair assets constituting collateral.

As of June 30, 2013, the Authority and the Tribe were in compliance with all respective covenant requirements under the senior and senior subordinated note indentures.
The Authority or its affiliates may, from time to time, seek to purchase or otherwise retire outstanding indebtedness for cash in open market purchases, privately negotiated transactions or otherwise. Any such transaction will depend on prevailing market conditions and the Authority's liquidity and covenant requirement restrictions, among other factors.

15
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Line of Credit
As of June 30, 2013, the Authority had a $16.5 million revolving credit facility with Bank of America, N.A. (the “Line of Credit”). The Line of Credit matures on March 31, 2015. Pursuant to provisions of the Bank Credit Facility, the Line of Credit may be replaced by an Autoborrow Loan governed by the terms of an Autoborrow Agreement described in the Bank Credit Facility. Under the Line of Credit, each advance accrues interest on the basis of a one-month LIBOR Rate plus an applicable margin based on the Authority's total leverage ratio, as each term is defined under the Line of Credit. Borrowings under the Line of Credit are uncollateralized obligations. As of June 30, 2013, no amount was drawn on the Line of Credit. The Line of Credit contains negative covenants and financial maintenance covenants that are substantially the same as those contained in the Bank Credit Facility. As of June 30, 2013, the Authority was in compliance with all covenant requirements under the Line of Credit and had $16.5 million of borrowing capacity thereunder. As of June 30, 2013 and September 30, 2012, there was no accrued interest on the Line of Credit.
2009 Mohegan Tribe Promissory Note

In September 2009, the Tribe made a $10.0 million loan to Salishan-Mohegan (the “2009 Mohegan Tribe Promissory Note”). The 2009 Mohegan Tribe Promissory Note matures on September 30, 2014. The 2009 Mohegan Tribe Promissory Note accrues interest at an annual rate of 10.0%. Accrued interest is payable quarterly in the amount of $1.2 million, commencing December 31, 2013 and continuing through June 31, 2014, with the balance of accrued and unpaid interest due at maturity. Principal outstanding under the 2009 Mohegan Tribe Promissory Note amortizes as follows: (i) $1.625 million per quarter, commencing December 31, 2012 and continuing through September 30, 2013 and (ii) $875,000 per quarter, commencing December 31, 2013. As of June 30, 2013 and September 30, 2012, accrued interest on the Mohegan Tribe Promissory Note was $4.5 million and $3.9 million, respectively.
2012 Mohegan Tribe Minor's Trust Promissory Note

In March 2012, Comerica Bank & Trust, N.A., Trustee f/b/o The Mohegan Tribe of Indians of Connecticut Minor's Trust, made a $20.0 million loan to Salishan-Mohegan (the “2012 Mohegan Tribe Minor's Trust Promissory Note”). The 2012 Mohegan Tribe Minor's Trust Promissory Note matures on March 31, 2016. The 2012 Mohegan Tribe Minor's Trust Promissory Note accrues interest at an annual rate of 10.0%. Accrued interest is payable quarterly, commencing June 30, 2012. Principal outstanding under the 2012 Mohegan Tribe Minor's Trust Promissory Note amortizes as follows: (i) $500,000 per quarter, commencing December 31, 2012 and continuing through September 30, 2014 and (ii) $1.5 million per quarter, commencing December 31, 2014 and continuing to maturity. As of June 30, 2013 and September 30, 2012, accrued interest on the 2012 Mohegan Tribe Minor's Trust Promissory Note was $15,000 and $16,000, respectively.
Mohegan Tribe Credit Facility

In March 2012, the Tribe extended a revolving credit facility issued to Salishan-Mohegan with a borrowing capacity of $1.45 million (the “Mohegan Tribe Credit Facility”). The Mohegan Tribe Credit Facility matures on September 30, 2013. The Mohegan Tribe Credit Facility accrues interest at an annual rate of 15.0% payable at maturity. Principal outstanding under the Mohegan Tribe Credit Facility amortizes at a rate of $362,500 per quarter, commencing December 31, 2012. As of June 30, 2013, the Mohegan Tribe Credit Facility was fully drawn. As of June 30, 2013 and September 30, 2012, accrued interest on the Mohegan Tribe Credit Facility was $370,000 and $249,000, respectively.
2013 Mohegan Tribe Promissory Note

On March 29, 2013, MG&H purchased and acquired all of the Tribe's membership interest in MG&H in exchange for a promissory note in the principal amount of $7.4 million (the “2013 Mohegan Tribe Promissory Note”). The 2013 Mohegan Tribe Promissory Note matures on December 31, 2018. The 2013 Mohegan Tribe Promissory Note accrues interest at an annual rate of 4.0% payable quarterly, commencing June 30, 2013. As of June 30, 2013, accrued interest on the 2013 Mohegan Tribe Promissory Note was $2,000.
Downs Lodging Credit Facility

In July 2012, Downs Lodging, a single purpose entity and wholly-owned unrestricted subsidiary of the Authority, entered into a credit agreement providing for a $45.0 million term loan from a third-party lender (the “Downs Lodging Credit Facility”). The proceeds of the Downs Lodging Credit Facility will be used by Downs Lodging to finance Project Sunlight, a hotel and convention center expansion project being developed and built by Downs Lodging at Mohegan Sun at Pocono Downs. The Downs

16
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Lodging Credit Facility matures on July 12, 2016 and accrues interest at an annual rate of 13.0%. Under the terms of the Downs Lodging Credit Facility, accrued interest of 10.0% is payable monthly in cash during the term of the loan, with the remaining 3.0% due at maturity. In addition, a 3.0% exit fee is payable upon repayment of the loan principal. The Downs Lodging Credit Facility is a senior secured obligation of Downs Lodging, collateralized by all existing and future assets of Downs Lodging. The Downs Lodging Credit Facility subjects Downs Lodging to certain covenant requirements customarily found in loan agreements for similar transactions. As of June 30, 2013, Downs Lodging was in compliance with all covenant requirements under the Downs Lodging Credit Facility. As of June 30, 2013 and September 30, 2012, accrued interest on the Downs Lodging Credit Facility was $375,000.
Salishan-Mohegan Promissory Notes
In December 2012, Salishan-Mohegan Two, a wholly-owned subsidiary of Salishan-Mohegan, entered into two promissory notes with third-party lenders to fund the acquisition of certain property related to the Cowlitz Project. The first note, in the original principal amount of $150,000, bears no interest and amortizes as follows: (i) $5,000 per month, commencing December 31, 2012 and continuing through July 31, 2014 and (ii) $10,000 per month, commencing August 31, 2014 until fully paid. The second note, in the original principal amount of $375,000, matures on December 31, 2014 and accrues interest at an annual rate of 7.0%, payable monthly, commencing January 1, 2013. As of June 30, 2013, there was no accrued interest on the promissory notes.


NOTE 4—RELATED PARTY TRANSACTIONS:
Distributions to the Tribe totaled $15.0 million and $12.5 million for the three months ended June 30, 2013 and 2012, and $35.0 million and $40.5 million for the nine months ended June 30, 2013 and 2012, respectively.
The Tribe provides certain governmental and administrative services in connection with the operation of Mohegan Sun. The Authority incurred expenses for such services totaling $7.0 million and $6.8 million for the three months ended June 30, 2013 and 2012, respectively, and $21.0 million and $20.3 million for the nine months ended June 30, 2013 and 2012, respectively.
The Authority purchases most of its utilities, including electricity, gas, water and waste water services, from an instrumentality of the Tribe, the Mohegan Tribal Utility Authority. The Authority incurred costs for such utilities totaling $3.9 million and $4.2 million for the three months ended June 30, 2013 and 2012, respectively, and $12.9 million and $14.2 million for the nine months ended June 30, 2013 and 2012, respectively.
Prior to March 2013, MTGA Gaming and the Tribe held 49% and 51% membership interests in MG&H, respectively. On March 29, 2013, MG&H purchased and acquired all of the Tribe's membership interests in MG&H and retired the membership interests in exchange for a promissory note to the Tribe in the principal amount of $7.4 million.
The Authority incurred interest expense associated with borrowings from the Mohegan Tribe totaling $741,000 and $832,000 for the three months ended June 30, 2013 and 2012, respectively, and $2.3 million and $1.7 million for the nine months ended June 30, 2013 and 2012, respectively.



NOTE 5—COMMITMENTS AND CONTINGENCIES:
Slot Win and Free Promotional Slot Play Contributions
In May 1994, the Tribe and the State of Connecticut entered into a Memorandum of Understanding (“MOU”), which sets forth certain matters regarding implementation of the Mohegan Compact. The MOU stipulates that a portion of revenues from slot machines must be paid to the State of Connecticut (“Slot Win Contribution”). Slot Win Contribution payments are not required if the State of Connecticut legalizes any other gaming operation with slot machines, video facsimiles of games of chance or other commercial casino games within the State of Connecticut, except those consented to by the Tribe and the Mashantucket Pequot Tribe (the “MPT”). For each 12-month period commencing July 1, 1995, Slot Win Contribution payments shall be the lesser of: (1) 30% of gross revenues from slot machines, or (2) the greater of (a) 25% of gross revenues from slot machines or (b) $80.0 million.

In September 2009, the Authority entered into a settlement agreement with the State of Connecticut regarding contribution payments on the Authority's free promotional slot play program. Under the terms of the settlement agreement, effective July 1, 2009, the State of Connecticut agreed that no value shall be attributed to free promotional slot plays utilized by patrons at Mohegan Sun for purposes of calculating monthly contribution payments, provided that the aggregate amount of free promotional slot plays

17
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

during any month does not exceed a certain threshold of gross revenues from slot machines for such month. In the event free promotional slot plays granted by the Authority exceed such threshold, contribution payments are required on such excess face amount of free promotional slot plays at the same rate as Slot Win Contribution payments, or 25%. Effective July 1, 2012, the threshold before contribution payments on free promotional slot plays are required was increased from 5.5% of gross revenues from slot machines to 11%.
The Authority reflected expenses associated with the combined Slot Win Contribution and free promotional slot play contribution totaling $40.2 million and $43.6 million for the three months ended June 30, 2013 and 2012, respectively, and $115.1 million and $130.4 million for the nine months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and September 30, 2012, the combined outstanding Slot Win Contribution and free promotional slot play contribution totaled $13.3 million and $13.7 million, respectively.
Pennsylvania Slot Machine Tax
Downs Racing holds a Category One slot machine license issued by the Pennsylvania Gaming Control Board (the “PGCB”) for the operation of slot machines at Mohegan Sun at Pocono Downs. This license permits Downs Racing to install and operate up to 3,000 slot machines at Mohegan Sun at Pocono Downs, expandable to up to a total of 5,000 slot machines upon request and approval of the PGCB.
The Pennsylvania Race Horse Development and Gaming Act stipulates that holders of Category One slot machine licenses must pay a portion of revenues from slot machines to the PGCB on a daily basis (“Pennsylvania Slot Machine Tax”), which includes local share assessments to be paid to the cities and municipalities hosting Mohegan Sun at Pocono Downs and amounts to be paid to the Pennsylvania Harness Horsemen's Association, Inc. (the “PHHA”). The Pennsylvania Slot Machine Tax is currently 55% of gross revenues from slot machines, 2% of which is subject to a $10.0 million minimum annual threshold to ensure that the host cities and municipalities receive an annual minimum of $10.0 million in local share assessments. Downs Racing maintains a $1.5 million escrow deposit in the name of the Commonwealth of Pennsylvania for Pennsylvania Slot Machine Tax payments, which was included in other assets, net, in the accompanying condensed consolidated balance sheets.

The Authority reflected expenses associated with the Pennsylvania Slot Machine Tax totaling $31.8 million and $33.5 million for the three months ended June 30, 2013 and 2012, respectively, and $93.0 million and $100.8 million for the nine months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and September 30, 2012, outstanding Pennsylvania Slot Machine Tax payments totaled $4.2 million and $5.5 million, respectively.
Pennsylvania Table Game Tax
In January 2010, the Commonwealth of Pennsylvania amended the Pennsylvania Race Horse Development and Gaming Act to allow slot machine operators in the Commonwealth of Pennsylvania to obtain a table game operation certificate and operate certain table games, including poker. On July 13, 2010, Downs Racing opened its table game and poker operations at Mohegan Sun at Pocono Downs. Under the amended law, holders of table game operation certificates must pay a portion of revenues from table games to the PGCB on a weekly basis (“Pennsylvania Table Game Tax”). During the initial two years of operation, the Pennsylvania Table Game Tax was 14%, plus 2% in local share assessments. Following the initial two years of operation, the Pennsylvania Table Game Tax was reduced to 12%, plus the 2% local share assessments. Downs Racing concluded its initial two years of table game and poker operations on July 13, 2012.
The Authority reflected expenses associated with the Pennsylvania Table Game Tax totaling $1.6 million for each of the three months ended June 30, 2013 and 2012, respectively, and $4.5 million and $5.2 million for the nine months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and September 30, 2012, outstanding Pennsylvania Table Game Tax payments totaled $144,000 and $92,000, respectively.
Pennsylvania Regulatory Fee
Slot machine licensees in the Commonwealth of Pennsylvania are required to reimburse state gaming regulatory agencies for various administrative and operating expenses (“Pennsylvania Regulatory Fee”) at a rate of 1.5% of gross revenues from slot machines and table games. The Commonwealth of Pennsylvania temporarily suspended this assessment in May and June 2013.
The Authority reflected expenses associated with the Pennsylvania Regulatory Fee totaling $431,000 and $1.2 million for the three months ended June 30, 2013 and 2012, respectively, and $2.9 million and $3.8 million for the nine months ended

18
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

June 30, 2013 and 2012, respectively. As of June 30, 2013 and September 30, 2012, outstanding Pennsylvania Regulatory Fee payments to the PGCB totaled $55,000 and $129,000, respectively.
Pennsylvania Gaming Control Board Loans
The PGCB was initially granted $36.1 million in loans to fund start-up costs for gaming in the Commonwealth of Pennsylvania, which are to be repaid by slot machine licensees (the "Initial Loans"). The PGCB was subsequently granted an additional $63.8 million in loans to fund ongoing gaming oversight costs, which also are to be repaid by slot machine licensees (the "Subsequent Loans"). Repayment of the Initial Loans will commence when all 14 authorized gaming facilities are opened in the Commonwealth of Pennsylvania. Currently, 12 of the 14 authorized gaming facilities have commenced operations. As of June 30, 2013, the Authority has concluded that a repayment contingency for the Initial Loans is probable but not reasonably estimable since the PGCB has not yet established a method of assessment of repayment for the Initial Loans and, as such, the Authority has not recorded a related accrual for such repayment. In June 2011, the PGCB adopted a method of assessment of repayment for the Subsequent Loans pursuant to which repayment commenced on January 1, 2012 and will continue over a 10-year period in accordance with a formula based on a combination of a single fiscal year and cumulative gross revenues from slot machines for each operating slot machine licensee.
The Authority reflected expenses associated with this repayment schedule totaling $160,000 and $166,000 for the three months ended June 30, 2013 and 2012, respectively, and $484,000 and $504,000 for the nine months ended June 30, 2013 and 2012, respectively.
Horsemen’s Agreement
Downs Racing and the PHHA are parties to an agreement that governs all live harness racing and simulcasting and account wagering at the Pennsylvania Facilities through December 31, 2014. As of June 30, 2013 and September 30, 2012, outstanding payments to the PHHA for purses earned by horsemen, but not yet paid, and other fees totaled $4.1 million and $9.3 million, respectively.
Priority Distribution Agreement
In August 2001, the Authority and the Tribe entered into an agreement (the “Priority Distribution Agreement”), which stipulates that the Authority must make monthly payments to the Tribe to the extent of the Authority's Net Cash Flow, as defined under the Priority Distribution Agreement. The Priority Distribution Agreement, which has a perpetual term, limits the maximum aggregate priority distribution payments in each calendar year to $14.0 million, as adjusted annually in accordance with a formula specified in the Priority Distribution Agreement to reflect the effects of inflation. Payments under the Priority Distribution Agreement: (1) do not reduce the Authority's obligations to reimburse the Tribe for governmental and administrative services provided by the Tribe or to make payments under any other agreements with the Tribe; (2) are limited obligations of the Authority and are payable only to the extent of the Authority's Net Cash Flow, as defined under the Priority Distribution Agreement; and (3) are not secured by a lien or encumbrance on any of the Authority's assets or properties.

The Authority reflected payments associated with the Priority Distribution Agreement totaling $4.8 million and $4.7 million for the three months ended June 30, 2013 and 2012, respectively, and $14.4 million and $14.0 million for the nine months ended June 30, 2013 and 2012, respectively.
Litigation
The Authority is a defendant in various litigation matters resulting from its normal course of business. In management's opinion, the aggregate liability, if any, arising from such litigations will not have a material impact on the Authority's financial position, results of operations or cash flows.


NOTE 6—RELINQUISHMENT AGREEMENT:
In February 1998, the Authority and Trading Cove Associates (“TCA”) entered into a relinquishment agreement (the “Relinquishment Agreement”). Effective January 1, 2000 (the “Relinquishment Date”), the Relinquishment Agreement superseded a then-existing management agreement with TCA. The Relinquishment Agreement provides, among other things, that the Authority make certain payments to TCA out of, and determined as a percentage of, Revenues, as defined under the Relinquishment Agreement, generated by Mohegan Sun over a 15-year period commencing on the Relinquishment Date. The payments (“Senior Relinquishment Payments” and “Junior Relinquishment Payments”) have separate schedules and priorities. Senior Relinquishment

19
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Payments commenced on April 25, 2000, 25 days following the end of the first three-month period after the Relinquishment Date, and continue at the end of each three-month period thereafter until January 25, 2015. Junior Relinquishment Payments commenced on July 25, 2000, 25 days following the end of the first six-month period after the Relinquishment Date, and continue at the end of each six-month period thereafter until January 25, 2015. Each Senior and Junior Relinquishment Payment is 2.5% of Revenues generated by Mohegan Sun over the immediate preceding three-month or six-month payment period, as the case may be. Revenues are defined under the Relinquishment Agreement as gross gaming revenues, other than Class II Gaming revenues, and all other revenues, as defined, including, without limitation, hotel revenues, room service revenues, food and beverage revenues, ticket revenues, fees or receipts from the convention/events center and all rental revenues or other receipts from lessees and concessionaires, but not the gross receipts of such lessees, licenses and concessionaires, derived directly or indirectly from the facilities, as defined. Revenues under the Relinquishment Agreement exclude revenues generated from certain expansion areas of Mohegan Sun, such as Casino of the Wind, as such areas do not constitute facilities as defined under the Relinquishment Agreement.
In the event of any bankruptcy, liquidation, reorganization or similar proceeding relating to the Authority, the Relinquishment Agreement provides that Senior and Junior Relinquishment Payments then due and owing are subordinated in right of payment to the Authority's senior secured indebtedness and capital lease obligations, and that Junior Relinquishment Payments then due and owing are further subordinated in right of payment to all of the Authority's other senior indebtedness. The Relinquishment Agreement also provides that all relinquishment payments are subordinated in right of payment to minimum priority distribution payments, which are required monthly payments made by the Authority to the Tribe under the Priority Distribution Agreement, to the extent then due. The Authority, in accordance with authoritative guidance issued by the FASB pertaining to the accounting for contingencies, recorded a $549.1 million relinquishment liability at September 30, 1998 based on the estimated present value of its obligations under the Relinquishment Agreement.
As of June 30, 2013 and September 30, 2012, the carrying amount of the relinquishment liability was $92.6 million and $120.8 million, respectively. The decrease in the relinquishment liability during the nine months ended June 30, 2013 was due to $31.9 million in relinquishment payments. This reduction in the liability was offset by $3.7 million representing the accretion of discount to the relinquishment liability.
Relinquishment payments consisted of the following (in millions):
 
For the Nine Months Ended
 
June 30, 2013
 
June 30, 2012
Principal
$
28.0

 
$
28.8

Accretion of discount
3.9

 
5.9

Total
$
31.9

 
$
34.7

The accretion of discount to the relinquishment liability reflects the accretion of the discount to the present value of the relinquishment liability for the impact of the time value of money. As of June 30, 2013 and September 30, 2012, relinquishment payments earned but unpaid were $19.3 million and $13.3 million, respectively.





















20
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)


NOTE 7—SEGMENT REPORTING:
As of June 30, 2013, the Authority owns and operates, either directly or through wholly-owned subsidiaries, Mohegan Sun, the Connecticut Sun franchise, and the Mohegan Sun Country Club at Pautipaug (collectively, the “Connecticut Facilities”), and the Pennsylvania Facilities. Substantially all of the Authority's revenues are derived from these operations. The Connecticut Sun franchise and the Mohegan Sun Country Club at Pautipaug are aggregated with the Mohegan Sun operating segment because these operations all share similar economic characteristics, which is to generate gaming and entertainment revenues by attracting patrons to Mohegan Sun. The Authority's executive officers review and assess the performance and operating results and determine the proper allocation of resources to the Connecticut Facilities and the Pennsylvania Facilities on a separate basis. Accordingly, the Authority has two separate reportable segments: (1) Mohegan Sun, which includes the operations of the Connecticut Facilities, and (2) Mohegan Sun at Pocono Downs, which includes the operations of the Pennsylvania Facilities. The Authority's operations related to investments in unconsolidated affiliates and certain other corporate and management operations have not been identified as separate reportable segments, therefore, these operations are included in corporate and other in the following segment disclosures to reconcile to consolidated results.
 
For the Three Months Ended
 
For the Nine Months Ended
(in thousands)
June 30, 2013
 
June 30, 2012
 
June 30, 2013
 
June 30, 2012
Net revenues:
 
 
 
 
 
 
 
Mohegan Sun
$
266,699

 
$
264,876

 
$
772,571

 
$
811,838

Mohegan Sun at Pocono Downs
77,228

 
79,560

 
221,155

 
235,628

Corporate and other
318

 
—

 
969

 
—

Total
344,245

 
344,436

 
994,695

 
1,047,466

Income (loss) from operations:
 
 
 
 
 
 
 
Mohegan Sun
57,396

 
44,801

 
158,654

 
148,424

Mohegan Sun at Pocono Downs
12,435

 
10,716

 
32,441

 
31,660

Corporate and other
(5,644
)
 
(4,681
)
 
(18,743
)
 
(12,748
)
Total
64,187

 
50,836

 
172,352

 
167,336

Accretion of discount to the relinquishment liability
(1,243
)
 
(2,062
)
 
(3,730
)
 
(6,186
)
Interest income
1,533

 
1,842

 
4,421

 
3,559

Interest expense, net of capitalized interest
(42,379
)
 
(41,581
)
 
(128,213
)
 
(103,047
)
Loss on early exchange of debt
—

 
(17
)
 
(403
)
 
(14,323
)
Other income (expense), net
53

 
7

 
(1,732
)
 
(31
)
Net income
22,151

 
9,025

 
42,695

 
47,308

Loss attributable to non-controlling interests
146

 
336

 
2,767

 
1,147

Net income attributable to Mohegan Tribal Gaming Authority
$
22,297

 
$
9,361

 
$
45,462

 
$
48,455


 
For the Nine Months Ended
 
June 30, 2013
 
June 30, 2012
Capital expenditures incurred:
 
 
 
Mohegan Sun
$
16,821

 
$
29,967

Mohegan Sun at Pocono Downs
3,260

 
3,558

Corporate
23,140

 
606

Total
$
43,221

 
$
34,131

 
 
 
 
 
June 30, 2013
 
September 30, 2012
Total assets:
 
 
 
Mohegan Sun
$
1,444,451

 
$
1,484,369

Mohegan Sun at Pocono Downs
561,746

 
570,078

Corporate
168,287

 
199,260

Total
$
2,174,484

 
$
2,253,707







21
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)


NOTE 8—SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION:

As of June 30, 2013, substantially all of the Authority's outstanding debt is fully and unconditionally guaranteed, on a joint and several basis, by the following 100% owned subsidiaries of the Authority: the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming. Separate financial statements and other disclosures concerning the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming are not presented below because the Authority believes that the summarized financial information provided below and in Note 7 are adequate for investor analysis of these subsidiaries. Condensed consolidating financial statement information for the Authority, its 100% owned guarantor subsidiaries and its non-guarantor subsidiaries and entities as of June 30, 2013 and September 30, 2012 and for the three months and nine months ended June 30, 2013 and 2012 is as follows (in thousands):

CONDENSED CONSOLIDATING BALANCE SHEETS
 
June 30, 2013
 
Authority
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Property and equipment, net
$
1,199,479

 
$
226,953

 
$
46,648

 
$
—

 
$
1,473,080

Intercompany receivables
234,313

 
29,162

 
—

 
(263,475
)
 
—

Investment in subsidiaries
333,939

 
153

 
—

 
(334,092
)
 
—

Other intangible assets, net
120,537

 
285,084

 
—

 
—

 
405,621

Other assets, net
159,724

 
71,029

 
65,240

 
(210
)
 
295,783

Total assets
$
2,047,992

 
$
612,381

 
$
111,888

 
$
(597,777
)
 
$
2,174,484

LIABILITIES AND CAPITAL
 
 
 
 
 
 
 
 
 
Current liabilities
$
209,493

 
$
34,246

 
$
14,124

 
$
—

 
$
257,863

Due to Mohegan Tribe
—

 
—

 
31,408

 
—

 
31,408

Long-term debt and capital leases, net of current portions
1,603,573

 
—

 
45,428

 
—

 
1,649,001

Relinquishment liability, net of current portion
22,228

 
—

 
—

 
—

 
22,228

Intercompany payables
—

 
232,765

 
30,710

 
(263,475
)
 
—

Accumulated losses in excess of investment in subsidiaries
—

 
4,066

 
—

 
(4,066
)
 
—

Other long-term liabilities
2,800

 
—

 
1,646

 
—

 
4,446

Total liabilities
1,838,094

 
271,077

 
123,316

 
(267,541
)
 
1,964,946

Mohegan Tribal Gaming Authority capital
209,898

 
341,304

 
(11,428
)
 
(330,402
)
 
209,372

Non-controlling interests
—

 
—

 
—

 
166

 
166

Total liabilities and capital
$
2,047,992

 
$
612,381

 
$
111,888

 
$
(597,777
)
 
$
2,174,484

___________
(1)   Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)   Includes MGA and subsidiaries, Downs Lodging, Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.


22
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
September 30, 2012
 
Authority    
 
Total
Guarantor
Subsidiaries (1) 
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated  
ASSETS
 
 
 
 
 
 
 
 
 
Property and equipment, net
$
1,233,688

 
$
233,202

 
$
23,508

 
$
—

 
$
1,490,398

Intercompany receivables
223,131

 
12,448

 
—

 
(235,579
)
 
—

Investment in subsidiaries
351,703

 
557

 
—

 
(352,260
)
 
—

Other intangible assets, net
120,623

 
285,305

 
—

 
—

 
405,928

Other assets, net
208,576

 
71,673

 
77,342

 
(210
)
 
357,381

Total assets
$
2,137,721

 
$
603,185

 
$
100,850

 
$
(588,049
)
 
$
2,253,707

LIABILITIES AND CAPITAL
 
 
 
 
 
 
 
 
 
Current liabilities
$
261,433

 
$
32,771

 
$
6,359

 
$
—

 
$
300,563

Due to Mohegan Tribe
—

 
—

 
31,450

 
—

 
31,450

Long-term debt and capital leases, net of current portions
1,607,004

 
—

 
45,000

 
—

 
1,652,004

Relinquishment liability, net of current portion
57,470

 
—

 
—

 
—

 
57,470

Intercompany payables
—

 
222,787

 
12,792

 
(235,579
)
 
—

Other long-term liabilities
2,607

 
—

 
350

 
—

 
2,957

Total liabilities
1,928,514

 
255,558

 
95,951

 
(235,579
)
 
2,044,444

Mohegan Tribal Gaming Authority capital
209,207

 
347,627

 
4,899

 
(353,052
)
 
208,681

Non-controlling interests
—

 
—

 
—

 
582

 
582

Total liabilities and capital
$
2,137,721

 
$
603,185

 
$
100,850

 
$
(588,049
)
 
$
2,253,707

___________
(1)
Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes MGA and subsidiaries, Downs Lodging, Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
 
For the Three Months Ended June 30, 2013
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Net revenues
$
264,735

 
$
79,871

 
$
382

 
$
(743
)
 
$
344,245

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Gaming and other operations
150,691

 
55,361

 
—

 
(683
)
 
205,369

Advertising, general and administrative
42,646

 
8,853

 
2,532

 
(60
)
 
53,971

Depreciation and amortization
16,958

 
3,392

 
—

 
—

 
20,350

Loss on disposition of assets
126

 
18

 
—

 
—

 
144

Severance
—

 
51

 
—

 
—

 
51

Pre-opening
—

 
173

 
—

 
—

 
173

Total operating costs and expenses
210,421

 
67,848

 
2,532

 
(743
)
 
280,058

Income (loss) from operations
54,314

 
12,023

 
(2,150
)
 
—

 
64,187

Accretion of discount to the relinquishment liability
(1,243
)
 
—

 
—

 
—

 
(1,243
)
Interest expense, net of capitalized interest
(29,338
)
 
(11,092
)
 
(2,579
)
 
630

 
(42,379
)
Loss on interests in subsidiaries
(1,462
)
 
(1,747
)
 
—

 
3,209

 
—

Other income, net
26

 
683

 
1,507

 
(630
)
 
1,586

Net income (loss)
22,297

 
(133
)
 
(3,222
)
 
3,209

 
22,151

Loss attributable to non-controlling interests
—

 
—

 
—

 
146

 
146

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
22,297

 
$
(133
)
 
$
(3,222
)
 
$
3,355

 
$
22,297

___________
(1)
Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes MGA and subsidiaries, Downs Lodging, Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.


23
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
 
For the Three Months Ended June 30, 2012
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Net revenues
$
263,090

 
$
82,271

 
$
—

 
$
(925
)
 
$
344,436

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Gaming and other operations
160,866

 
58,554

 
—

 
(925
)
 
218,495

Advertising, general and administrative
43,189

 
8,823

 
1,369

 
—

 
53,381

Depreciation and amortization
17,384

 
4,309

 
—

 
—

 
21,693

Loss on disposition of assets
18

 
13

 
—

 
—

 
31

Total operating costs and expenses
221,457

 
71,699

 
1,369

 
(925
)
 
293,600

Income (loss) from operations
41,633

 
10,572

 
(1,369
)
 
—

 
50,836

Accretion of discount to the relinquishment liability
(2,062
)
 
—

 
—

 
—

 
(2,062
)
Interest expense
(20,775
)
 
(19,974
)
 
(977
)
 
145

 
(41,581
)
Loss on early exchange of debt
(17
)
 
—

 
—

 
—

 
(17
)
Loss on interests in subsidiaries
(9,451
)
 
(226
)
 
—

 
9,677

 
—

Other income, net
33

 
177

 
1,784

 
(145
)
 
1,849

Net income (loss)
9,361

 
(9,451
)
 
(562
)
 
9,677

 
9,025

Loss attributable to non-controlling interests
—

 
—

 
—

 
336

 
336

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
9,361

 
$
(9,451
)
 
$
(562
)
 
$
10,013

 
$
9,361

___________
(1)
Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.

 
For the Nine Months Ended June 30, 2013
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Net revenues
$
770,316

 
$
224,324

 
$
1,163

 
$
(1,108
)
 
$
994,695

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Gaming and other operations
439,040

 
160,320

 
—

 
(928
)
 
598,432

Advertising, general and administrative
129,361

 
24,091

 
9,623

 
(180
)
 
162,895

Depreciation and amortization
50,444

 
10,021

 
—

 
—

 
60,465

Loss on disposition of assets
259

 
18

 
—

 
—

 
277

Severance
(146
)
 
175

 
—

 
—

 
29

Pre-opening
—

 
245

 
—

 
—

 
245

Total operating costs and expenses
618,958

 
194,870

 
9,623

 
(1,108
)
 
822,343

Income (loss) from operations
151,358

 
29,454

 
(8,460
)
 
—

 
172,352

Accretion of discount to the relinquishment liability
(3,730
)
 
—

 
—

 
—

 
(3,730
)
Interest expense, net of capitalized interest
(88,942
)
 
(32,999
)
 
(7,745
)
 
1,473

 
(128,213
)
Loss on early exchange of debt
(403
)
 
—

 
—

 
—

 
(403
)
Loss on interests in subsidiaries
(12,949
)
 
(4,469
)
 
—

 
17,418

 
—

Other income, net
128

 
1,536

 
2,498

 
(1,473
)
 
2,689

Net income (loss)
45,462

 
(6,478
)
 
(13,707
)
 
17,418

 
42,695

Loss attributable to non-controlling interests
—

 
—

 
—

 
2,767

 
2,767

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
45,462

 
$
(6,478
)
 
$
(13,707
)
 
$
20,185

 
$
45,462

___________
(1)
Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes MGA and subsidiaries, Downs Lodging, Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.


24
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
For the Nine Months Ended June 30, 2012
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Net revenues
$
809,936

 
$
238,457

 
$
—

 
$
(927
)
 
$
1,047,466

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Gaming and other operations
485,354

 
171,467

 
—

 
(927
)
 
655,894

Advertising, general and administrative
132,123

 
24,761

 
2,955

 
—

 
159,839

Depreciation and amortization
51,335

 
12,742

 
—

 
—

 
64,077

Loss on disposition of assets
36

 
284

 
—

 
—

 
320

Total operating costs and expenses
668,848

 
209,254

 
2,955

 
(927
)
 
880,130

Income (loss) from operations
141,088

 
29,203

 
(2,955
)
 
—

 
167,336

Accretion of discount to the relinquishment liability
(6,186
)
 
—

 
—

 
—

 
(6,186
)
Interest expense
(51,767
)
 
(49,379
)
 
(2,480
)
 
579

 
(103,047
)
Loss on early exchange of debt
(14,323
)
 
—

 
—

 
—

 
(14,323
)
Loss on interests in subsidiaries
(20,640
)
 
(1,103
)
 
—

 
21,743

 
—

Other income, net
283

 
639

 
3,185

 
(579
)
 
3,528

Net income (loss)
48,455

 
(20,640
)
 
(2,250
)
 
21,743

 
47,308

Loss attributable to non-controlling interests
—

 
—

 
—

 
1,147

 
1,147

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
48,455

 
$
(20,640
)
 
$
(2,250
)
 
$
22,890

 
$
48,455

___________
(1)
Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.














25
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
 
For the Nine Months Ended June 30, 2013
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Net cash flows provided by (used in) operating activities
$
56,345

 
$
38,754

 
$
(9,490
)
 
$
—

 
$
85,609

Cash flows provided by (used in) investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
(19,298
)
 
(3,570
)
 
(16,317
)
 
—

 
(39,185
)
Decrease in restricted cash, net
—

 
2,727

 
18,942

 
—

 
21,669

Investments in unconsolidated affiliates
—

 
—

 
(4,965
)
 
—

 
(4,965
)
Other cash flows provided by (used in) investing activities
53,662

 
(15,257
)
 
(1,655
)
 
(38,131
)
 
(1,381
)
Net cash flows provided by (used in) investing activities
34,364

 
(16,100
)
 
(3,995
)
 
(38,131
)
 
(23,862
)
Cash flows provided by (used in) financing activities:
 
 
 
 
 
 
 
 
 
Bank Credit Facility borrowings - revolving loan
3,000

 
—

 
—

 
—

 
3,000

Bank Credit Facility repayments - revolving loan
(3,000
)
 
—

 
—

 
—

 
(3,000
)
Bank Credit Facility repayments - term loan
(3,000
)
 
—

 
—

 
—

 
(3,000
)
Repayments to Mohegan Tribe
—

 
—

 
(7,462
)
 
—

 
(7,462
)
Repayments of other long-term debt
(15,775
)
 
—

 
(23
)
 
—

 
(15,798
)
Principal portion of relinquishment liability payments
(27,951
)
 
—

 
—

 
—

 
(27,951
)
Distributions to Mohegan Tribe
(35,000
)
 
—

 
—

 
—

 
(35,000
)
Payments of financing fees
(3,291
)
 
—

 
(200
)
 
—

 
(3,491
)
Other cash flows provided by (used in) financing activities
(39,371
)
 
(22,866
)
 
21,268

 
38,131

 
(2,838
)
Net cash flows provided by (used in) financing activities
(124,388
)
 
(22,866
)
 
13,583

 
38,131

 
(95,540
)
Net increase (decrease) in cash and cash equivalents
(33,679
)
 
(212
)
 
98

 
—

 
(33,793
)
Cash and cash equivalents at beginning of period
91,836

 
21,757

 
491

 
—

 
114,084

Cash and cash equivalents at end of period
$
58,157

 
$
21,545

 
$
589

 
$
—

 
$
80,291

___________
(1)
Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes MGA and subsidiaries, Downs Lodging, Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.



26
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
For the Nine Months Ended June 30, 2012
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor Subsidiaries
and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Net cash flows provided by (used in) operating activities
$
103,561

 
$
43,100

 
$
(2,370
)
 
$
—

 
$
144,291

Cash flows provided by (used in) investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
(34,536
)
 
(6,102
)
 
—

 
—

 
(40,638
)
Other cash flows provided by (used in) investing activities
34,702

 
5,182

 
(562
)
 
(37,384
)
 
1,938

Net cash flows provided by (used in) investing activities
166

 
(920
)
 
(562
)
 
(37,384
)
 
(38,700
)
Cash flows provided by (used in) financing activities:
 
 
 
 
 
 
 
 
 
Bank Credit Facility borrowings - revolving loan
154,000

 
—

 
—

 
—

 
154,000

Bank Credit Facility repayments - revolving loan
(289,000
)
 
—

 
—

 
—

 
(289,000
)
Bank Credit Facility repayments - term loan
(2,000
)
 
—

 
—

 
—

 
(2,000
)
Term Loan Facility borrowings, net of discount
220,500

 
—

 
—

 
—

 
220,500

Line of Credit borrowings
225,215

 
—

 
—

 
—

 
225,215

Line of Credit repayments
(225,215
)
 
—

 
—

 
—

 
(225,215
)
Borrowings from Mohegan Tribe
—

 
—

 
20,600

 
—

 
20,600

Repayments of other long-term debt
(66,454
)
 
—

 
—

 
—

 
(66,454
)
Salishan-Mohegan Bank Credit Facility repayments - revolving loan
—

 
—

 
(15,250
)
 
—

 
(15,250
)
Principal portion of relinquishment liability payments
(28,756
)
 
—

 
—

 
—

 
(28,756
)
Distributions to Mohegan Tribe
(40,450
)
 
—

 
—

 
—

 
(40,450
)
Payments of financing fees
(50,178
)
 
—

 
—

 
—

 
(50,178
)
Other cash flows provided by (used in) financing activities
5,495

 
(40,754
)
 
(2,372
)
 
37,384

 
(247
)
Net cash flows provided by (used in) financing activities
(96,843
)
 
(40,754
)
 
2,978

 
37,384

 
(97,235
)
Net increase in cash and cash equivalents
6,884

 
1,426

 
46

 
—

 
8,356

Cash and cash equivalents at beginning of period
89,018

 
22,931

 
225

 
—

 
112,174

Cash and cash equivalents at end of period
$
95,902

 
$
24,357

 
$
271

 
$
—

 
$
120,530

___________
(1)
Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.




NOTE 9—SUBSEQUENT EVENTS:
In late July and early August 2013, the Authority engaged in several transactions relating to the refinancing of certain of its outstanding indebtedness, as set forth below.
Consent Solicitation to Amend the 2012 Second Lien Notes Indenture
On July 22, 2013, the Authority commenced a solicitation of consents to amend the indenture governing the 2012 Second Lien Notes to permit the Authority to refinance its outstanding subordinated notes with senior unsecured indebtedness and to enter into certain transactions with the Tribe in the event that the Tribe constructs a hotel on Tribal land currently leased by the Authority. On July 30, 2013, the Authority received the consents required to make the requested changes to the 2012 Second Lien Notes indenture and entered into a supplemental indenture incorporating the proposed amendments. While the supplemental indenture became effective upon execution, the proposed amendments will not become operative until such time, if any, that the conditions of the consent solicitation, including, among other things, a financing condition, are satisfied or waived and the consent payment (which consists of $2.50 per $1,000 principal amount of the 2012 Second Lien Notes) is paid to holders who validly delivered (and did not validly revoke) their consent to the proposed amendments. If any of the conditions are not satisfied, the Authority is under no obligation to make the consent payment. The Authority has the right to waive any of the conditions to the consent solicitation.


27
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)


Tender Offer
On July 30, 2013, the Authority commenced a tender offer to purchase for cash any and all of its 2012 Third Lien Notes. Concurrently with this tender offer, the Authority is soliciting consents to proposed amendments to the indenture governing the 2012 Third Lien Notes, providing for the elimination of substantially all of the indenture's restrictive covenants and elimination or modification of certain events of default and related provisions contained in the indenture. Holders that tender the 2012 Third Lien Notes must also consent to such proposed amendments to the indenture. The tender offer will expire at 12:00 midnight, New York City time, on August 28, 2013, unless extended or earlier terminated.
Senior Unsecured Notes Offering
On July 30, 2013, the Authority announced a proposed offering of senior unsecured notes due 2021 (the “2013 Senior Unsecured Notes”) and, on August 6, 2013, the Authority announced that it will issue at par $500.0 million in aggregate principal amount of the 2013 Senior Unsecured Notes. The 2013 Senior Unsecured Notes will bear interest at a fixed rate of 9.75% per annum, payable semi-annually, in cash and in arrears on March 1st and September 1st, commencing March 1, 2014. The 2013 Senior Unsecured Notes will mature on September 1, 2021. The Authority anticipates using the net proceeds from the issuance of the 2013 Senior Unsecured Notes, together with borrowings under its Bank Credit Facility, to finance the repurchase or redemption of all of its outstanding 2012 Third Lien Notes, to repurchase other of its outstanding indebtedness and to pay related fees and expenses.

The 2013 Senior Unsecured Notes will be senior unsecured obligations of the Authority and will be fully and unconditionally guaranteed, jointly and severally, by the Guarantors. The offering is expected to close on August 15, 2013, subject to customary conditions.


 
 




 


28

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Some information included in this Quarterly Report on Form 10-Q and other materials filed by us with the Securities and Exchange Commission, or the SEC, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Such statements include information relating to business development activities, as well as capital spending, financing sources and the effects of regulation, including gaming and tax regulation, and increased competition. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect” or “intend” and similar expressions. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated future results, and accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on our behalf. These risks and uncertainties include, but are not limited to, those relating to the following:
•
the financial performance of Mohegan Sun and Mohegan Sun at Pocono Downs and the Pennsylvania off-track wagering facilities;
•
the local, regional, national or global economic climate, including the lingering effects of the economic recession, which has affected our revenues and earnings;
•
increased competition, including the expansion of gaming in New England, New York, New Jersey or Pennsylvania;
•
our leverage and ability to meet our debt service obligations and maintain compliance with financial debt covenants;
•
the continued availability of financing;
•
our dependence on existing management;
•
our ability to integrate new amenities from expansions to our facilities into our current operations and manage the expanded facilities;
•
changes in federal or state tax laws or the administration of such laws;
•
changes in gaming laws or regulations, including the limitation, denial or suspension of licenses required under gaming laws and regulations;
•
changes in applicable laws pertaining to the service of alcohol, smoking or other amenities offered at our facilities;
•
our ability to successfully implement our diversification strategy;
•
an act of terrorism on the United States;
•
our customers' access to inexpensive transportation to our facilities and changes in oil, fuel or other transportation-related expenses; and
•
unfavorable weather conditions.
Additional information concerning potential factors that could affect our financial results is included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012, as well as our other reports and filings with the SEC. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances, except as required by law. We cannot assure you that projected results or events will be achieved or will occur.
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes beginning on page 3 of this Quarterly Report on Form 10-Q.

Overview
The Tribe and the Authority
The Mohegan Tribe of Indians of Connecticut, or the Mohegan Tribe or the Tribe, is a federally-recognized Indian tribe with an approximately 544-acre reservation situated in Southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, federally-recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal lands, subject to, among other things, the negotiation of a compact with the affected state. The Tribe and the State of Connecticut entered into a compact, the Mohegan Compact, which was approved by the United States Secretary of the Interior. We were established as an instrumentality of the Tribe, with the exclusive authority to conduct and regulate gaming activities for the Tribe on Tribal lands and the non-exclusive authority to conduct such activities elsewhere. Our gaming operation at Mohegan Sun is one of only two legally authorized gaming operations in southern New England offering traditional slot machines and table games. Through our subsidiary, Downs Racing, L.P., or Downs Racing, we also own and operate Mohegan Sun at Pocono Downs, a gaming and entertainment facility located in Plains Township, Pennsylvania, and several off-track wagering facilities, or OTW facilities, located elsewhere in Pennsylvania, collectively the Pennsylvania facilities. We are governed by a nine-member

29

Management Board, whose members also comprise the Mohegan Tribal Council, the governing body of the Tribe. Any change in the composition of the Mohegan Tribal Council results in a corresponding change in our Management Board.
Mohegan Sun
In October 1996, we opened a gaming and entertainment complex known as Mohegan Sun. Mohegan Sun is located on a 185-acre site on the Tribe's reservation overlooking the Thames River with direct access from Interstate 395 and Connecticut Route 2A. Mohegan Sun is approximately 125 miles from New York City, New York, and approximately 100 miles from Boston, Massachusetts. In 2002, we completed a major expansion of Mohegan Sun known as Project Sunburst, which included increased gaming, restaurant and retail space, an entertainment arena, an approximately 1,200-room luxury Sky Hotel Tower and approximately 100,000 square feet of convention space. In 2007, we opened Sunrise Square, and, in 2008, we opened Casino of the Wind, both components of Mohegan Sun's Project Horizon expansion.
Mohegan Sun currently operates in an approximately 3.1 million square-foot facility, which includes the following:
Casino of the Earth
As of June 30, 2013, Casino of the Earth offered:
•
approximately 188,000 square feet of gaming space;
•
approximately 2,925 slot machines and 160 table games, including blackjack, roulette and craps;
•
Sunrise Square, a 9,800-square-foot Asian-themed gaming area;
•
an approximately 9,000-square-foot simulcasting Racebook facility;
•
food and beverage amenities, including: Seasons Buffet, a 784-seat multi-station buffet with live cooking stations, a Hong Kong-style food outlet offering authentic Southeast Asian cuisine, Bobby Flay's Bobby's Burger Palace, Bow & Arrow Sports Bar and multiple service bars, all operated by us, as well as Ballo Italian Restaurant & Social Club, Frank Pepe Pizzeria Napoletana, Hash House a Go Go and Fidelia's Market, an approximately 290-seat multi-station food court, operated by third-parties, for a total restaurant seating of approximately 2,075;
•
four Mohegan Sun-owned retail shops, offering products ranging from Mohegan Sun logo souvenirs to cigars; and
•
the Wolf Den, an approximately 10,000-square-foot, 400-seat lounge featuring live entertainment seven days a week.
Casino of the Sky
As of June 30, 2013, Casino of the Sky offered:
•
approximately 119,000 square feet of gaming space;
•
approximately 2,045 slot machines and 100 table games, including blackjack, roulette and craps;
•
food and beverage amenities, including: Todd English's Tuscany, Bobby Flay's Bar Americain, a 24-hour coffee shop and three lounges and bars, all operated by us, as well as five full-service restaurants, three quick-service restaurants and a multi-station food court operated by third-parties, for a total restaurant seating of approximately 2,285;
•
The Shops at Mohegan Sun containing 31 retail shops, seven of which we own;
•
the Mohegan Sun Arena with seating for up to 10,000;
•
an approximately 1,200-room luxury Sky Hotel Tower, including a private high-limit table games suite;
•
Landsdowne Irish Pub and Music House, Ultra 88 nightclub and Vista Lounge, operated by a third-party;
•
an approximately 20,000-square-foot spa operated by a third-party;
•
Glo at the Pool, a nightlife entertainment venue operated by us;
•
approximately 100,000 square feet of convention space; and
•
a child care facility and an arcade-style entertainment area operated by a third-party.
Casino of the Wind
As of June 30, 2013, Casino of the Wind offered:
•
approximately 45,000 square feet of gaming space;
•
approximately 560 slot machines, 25 table games, including blackjack, roulette and craps, and a 42-table themed poker room;

30

•
food and beverage amenities, including: a two-level, 16,000-square-foot Jimmy Buffett's Margaritaville Restaurant and a casual dining restaurant operated by third-parties, for a total restaurant seating of approximately 475;
•
Mist, a nightlife entertainment venue operated by us; and
•
a retail shop operated by a third-party.
Mohegan Sun offers parking for approximately 13,000 patrons and 3,900 employees. We also operate an approximately 3,600-square-foot, 20-pump gasoline and convenience center for patrons, as well as a 10-pump gasoline center for employees, both located adjacent to Mohegan Sun. In addition, Mohegan Sun is a CT Lottery retailer.
Connecticut Sun
Through Mohegan Basketball Club, LLC, or MBC, we own and operate the Connecticut Sun franchise, a professional basketball team in the Women's National Basketball Association. The team plays its home games in the Mohegan Sun Arena.
Mohegan Sun Country Club at Pautipaug
Through Mohegan Golf, LLC, or Mohegan Golf, we own and operate the Mohegan Sun Country Club at Pautipaug, a private 18-hole championship golf course located in Sprague and Franklin, Connecticut.
Mohegan Sun at Pocono Downs
Through Downs Racing, we own and operate a gaming and entertainment facility known as Mohegan Sun at Pocono Downs located on a 400-acre site in Plains Township, Pennsylvania, and OTW facilities located in Carbondale, East Stroudsburg and Lehigh Valley, Pennsylvania. In November 2006, Mohegan Sun at Pocono Downs became the first location to offer slot machine gaming in the Commonwealth of Pennsylvania when Phase I of its gaming and entertainment facility opened. In July 2008, we completed a major expansion of Mohegan Sun at Pocono Downs known as Project Sunrise, which included increased gaming, restaurant and retail space. In July 2010, Mohegan Sun at Pocono Downs opened its table game and poker operations, including additional non-smoking sections and a high-limit gaming area.
Mohegan Sun at Pocono Downs currently operates in an approximately 400,000-square-foot facility, which includes the following as of June 30, 2013:
•
approximately 82,000 square feet of gaming space;
•
approximately 2,330 slot machines, 66 table games, including blackjack, roulette and craps, and an 18-table poker room;
•
live harness racing and simulcast and off-track wagering;
•
food and beverage amenities, including: Ruth's Chris Steakhouse, Rustic Kitchen Bistro and Bar, which features dining and a live cooking show, Bar Louie, a casual bar and restaurant, Timbers Buffet, a 300-seat Mohegan Indian cultural heritage themed multi-station buffet, and a food court, including: Johnny Rockets, Wok 8, Puck Express by Wolfgang Puck and Ben & Jerry's Ice Cream, for a total seating of approximately 1,800;
•
five retail shops, one of which we own, offering products ranging from Mohegan Sun at Pocono Downs logo souvenirs to fine apparel; and
•
three bars/lounges: Sunburst Bar, featured in the center of the gaming floor, Breakers Night Club and Pearl Sushi Bar.
Project Sunlight

In July 2012, Mohegan Sun at Pocono Downs broke ground on Project Sunlight, an estimated $50 million hotel expansion project to be located adjacent to the Mohegan Sun at Pocono Downs casino. This expansion will include a 238-room hotel and an approximately 20,000-square-foot convention center. The hotel will include a combination of standard guest rooms and suites and feature rooms with exclusive views of the race track, as well as a fitness center, an indoor pool and spa and a bistro serving breakfast and light fare. A new porte-cochere also is being added for additional guest convenience. The convention center will be located adjacent to the hotel and will be able to accommodate a number of different sized groups up to 800 for seated banquets. This space also can be converted into a 1,500-seat concert venue. The hotel and convention center is being developed and built by Downs Lodging, LLC, or Downs Lodging, our wholly-owned unrestricted subsidiary. Project Sunlight is being funded through a combination of a $45 million non-recourse term loan obtained by Downs Lodging and a $5 million investment by us. Project Sunlight is expected to be completed by the end of 2013.


31

Market and Competition from Other Gaming Operations

Our gaming operation at Mohegan Sun is one of only two current gaming operations in southern New England offering traditional slot machines and table games, with the other operation being our sole gaming competitor in the State of Connecticut, Foxwoods Resort Casino, or Foxwoods, owned by the Mashantucket Pequot Tribe and located approximately 10 miles from Mohegan Sun. We also face competition from racino and video lottery terminal facilities in the states of Rhode Island and New York and gaming facilities in the states of New York and New Jersey. In addition, we face competition in and from the Northeastern Pennsylvania gaming market, both in the immediate market for Mohegan Sun at Pocono Downs, and for Mohegan Sun, in marketing and attracting patrons from the New York City metropolitan region. Please refer to “Part I. Item 1. Business-Market and Competition from Other Gaming Operations” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 and our other reports and filings with the SEC for further details regarding current and potential competition from other gaming operations.
Explanation of Key Financial Statement Captions
There has been no material change from the explanation of key financial statement captions previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

Results of Operations
Summary Operating Results
As of June 30, 2013, we own and operate, either directly or through wholly-owned subsidiaries, Mohegan Sun, the Connecticut Sun franchise, and the Mohegan Sun Country Club at Pautipaug, or collectively, the Connecticut facilities, and the Pennsylvania facilities. Substantially all of our revenues are derived from these operations. The Connecticut Sun franchise and the Mohegan Sun Country Club at Pautipaug are aggregated with the Mohegan Sun operating segment because these operations all share similar economic characteristics, which is to generate gaming and entertainment revenues by attracting patrons to Mohegan Sun. Our executive officers review and assess the performance and operating results and determine the proper allocation of resources to the Connecticut facilities and the Pennsylvania facilities on a separate basis. Accordingly, we have two separate reportable segments: (1) Mohegan Sun, which includes the operations of the Connecticut facilities, and (2) Mohegan Sun at Pocono Downs, which includes the operations of the Pennsylvania facilities.
The following table summarizes our results on a property basis (in thousands, except where noted):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance    
 
Percentage
Variance    
 
2013
 
2012
 
Variance    
 
Percentage
Variance    
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mohegan Sun
$
266,699

 
$
264,876

 
$
1,823

 
0.7
 %
 
$
772,571

 
$
811,838

 
$
(39,267
)
 
(4.8
)%
Mohegan Sun at Pocono Downs
77,228

 
79,560

 
(2,332
)
 
(2.9
)%
 
221,155

 
235,628

 
(14,473
)
 
(6.1
)%
Corporate and other
318

 
—

 
318

 
100.0
 %
 
969

 
—

 
969

 
100.0
 %
Total
$
344,245

 
$
344,436

 
$
(191
)
 
(0.1
)%
 
$
994,695

 
$
1,047,466

 
$
(52,771
)
 
(5.0
)%
Income (loss) from operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mohegan Sun
$
57,396

 
$
44,801

 
$
12,595

 
28.1
 %
 
$
158,654

 
$
148,424

 
$
10,230

 
6.9
 %
Mohegan Sun at Pocono Downs
12,435

 
10,716

 
1,719

 
16.0
 %
 
32,441

 
31,660

 
781

 
2.5
 %
Corporate and other
(5,644
)
 
(4,681
)
 
(963
)
 
20.6
 %
 
(18,743
)
 
(12,748
)
 
(5,995
)
 
47.0
 %
Total
$
64,187

 
$
50,836

 
$
13,351

 
26.3
 %
 
$
172,352

 
$
167,336

 
$
5,016

 
3.0
 %
Net income attributable to Mohegan Tribal Gaming Authority
$
22,297

 
$
9,361

 
$
12,936

 
138.2
 %
 
$
45,462

 
$
48,455

 
$
(2,993
)
 
(6.2
)%
Operating margin:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mohegan Sun
21.5
%
 
16.9
%
 
4.6
%
 
27.2
 %
 
20.5
%
 
18.3
%
 
2.2
%
 
12.0
 %
Mohegan Sun at Pocono Downs
16.1
%
 
13.5
%
 
2.6
%
 
19.3
 %
 
14.7
%
 
13.4
%
 
1.3
%
 
9.7
 %
Total
18.6
%
 
14.8
%
 
3.8
%
 
25.7
 %
 
17.3
%
 
16.0
%
 
1.3
%
 
8.1
 %

The most significant factors and trends that we believe impacted our operating performance were as follows:
•
a weak regional economic environment and its related impact on consumer discretionary spending;
•
an increasingly competitive environment;
•
workforce reductions and other cost saving initiatives implemented in September 2012 at Mohegan Sun and March 2013 at Mohegan Sun at Pocono Downs;
•
continued changes in operations designed to improve profitability;
•
continued focus on managing expenses and enhancing operating efficiencies;

32

•
higher table games hold percentage;
•
unfavorable weather conditions in the nine months ended June 30, 2013;
•
higher interest expense in the nine months ended June 30, 2013; and
•
a $14.3 million non-operating loss on early exchange of debt in March 2012.

Net revenues for the three months ended June 30, 2013 compared to the same period in the prior year were relatively flat reflecting lower slot revenues, partially offset by higher table game revenues and improved non-gaming results. Net revenues for the nine months ended June 30, 2013 compared to the same period in the prior year declined primarily due to lower slot revenues.
Income from operations for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased primarily as a result of lower operating costs and expenses resulting, in part, from our workforce reductions and other cost saving initiatives, as well as overall changes in our operations designed to improve profitability and our continued focus on managing expenses and enhancing operating efficiencies. These results were partially offset by the reductions in net revenues and higher Corporate expenses.
Net income attributable to the Authority for the three months ended June 30, 2013 compared to the same period in the prior year increased primarily due to the growth in income from operations. Net income attributable to the Authority for the nine months ended June 30, 2013 compared to the same period in the prior year declined primarily as a result of higher interest expense. These results were partially offset by the non-recurring loss on early exchange of debt and the increase in income from operations.
Mohegan Sun
Gross Revenues
Gross revenues consisted of the following (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance    
 
Percentage
Variance
 
2013
 
2012
 
Variance    
 
Percentage
Variance
Gaming
$
232,161

 
$
232,346

 
$
(185
)
 
(0.1
)%
 
$
677,280

 
$
718,109

 
$
(40,829
)
 
(5.7
)%
Food and beverage
15,341

 
16,163

 
(822
)
 
(5.1
)%
 
44,288

 
49,827

 
(5,539
)
 
(11.1
)%
Hotel
10,318

 
10,152

 
166

 
1.6
 %
 
30,363

 
29,524

 
839

 
2.8
 %
Retail, entertainment and other
29,615

 
27,620

 
1,995

 
7.2
 %
 
77,137

 
76,265

 
872

 
1.1
 %
Total
$
287,435

 
$
286,281

 
$
1,154

 
0.4
 %
 
$
829,068

 
$
873,725

 
$
(44,657
)
 
(5.1
)%
The following table summarizes the percentage of gross revenues from each of the four revenue sources:
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Gaming
80.8
%
 
81.2
%
 
81.7
%
 
82.2
%
Food and beverage
5.3
%
 
5.6
%
 
5.3
%
 
5.7
%
Hotel
3.6
%
 
3.5
%
 
3.7
%
 
3.4
%
Retail, entertainment and other
10.3
%
 
9.7
%
 
9.3
%
 
8.7
%
Total
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%

















33



The following table presents data related to gaming operations (in thousands, except where noted):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage Variance
 
2013
 
2012
 
Variance
 
Percentage Variance
Slots:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Handle
$
1,923,281

 
$
2,010,037

 
$
(86,756
)
 
(4.3
)%
 
$
5,532,262

 
$
6,086,090

 
$
(553,828
)
 
(9.1
)%
Gross revenues
$
158,129

 
$
165,224

 
$
(7,095
)
 
(4.3
)%
 
$
457,779

 
$
504,095

 
$
(46,316
)
 
(9.2
)%
Net revenues
$
152,086

 
$
158,761

 
$
(6,675
)
 
(4.2
)%
 
$
439,721

 
$
484,002

 
$
(44,281
)
 
(9.1
)%
Free promotional slot plays (1)
$
17,624

 
$
18,236

 
$
(612
)
 
(3.4
)%
 
$
46,419

 
$
46,476

 
$
(57
)
 
(0.1
)%
Weighted average number of machines (in units)
5,530

 
5,953

 
(423
)
 
(7.1
)%
 
5,560

 
6,085

 
(525
)
 
(8.6
)%
Hold percentage (gross)
8.2
%
 
8.2
%
 
—

 
—

 
8.3
%
 
8.3
%
 
—

 
—

Win per unit per day (gross) (in dollars)
$
314

 
$
305

 
$
9

 
3.0
 %
 
$
302

 
$
302

 
—

 
—

Table games:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Drop
$
467,768

 
$
469,276

 
$
(1,508
)
 
(0.3
)%
 
$
1,369,217

 
$
1,448,202

 
$
(78,985
)
 
(5.5
)%
Revenues
$
76,176

 
$
69,150

 
$
7,026

 
10.2
 %
 
$
225,573

 
$
220,047

 
$
5,526

 
2.5
 %
Weighted average number of games (in units)
284

 
314

 
(30
)
 
(9.6
)%
 
286

 
314

 
(28
)
 
(8.9
)%
Hold percentage (2)
16.3
%
 
14.7
%
 
1.6
%
 
10.9
 %
 
16.5
%
 
15.2
%
 
1.3
%
 
8.6
 %
Win per unit per day (in dollars)
$
2,944

 
$
2,421

 
$
523

 
21.6
 %
 
$
2,893

 
$
2,560

 
$
333

 
13.0
 %
Poker:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
2,314

 
$
2,627

 
$
(313
)
 
(11.9
)%
 
$
7,459

 
$
8,705

 
$
(1,246
)
 
(14.3
)%
Weighted average number of tables (in units)
42

 
42

 
—

 
—

 
42

 
42

 
—

 
—

Revenue per unit per day (in dollars)
$
606

 
$
687

 
$
(81
)
 
(11.8
)%
 
$
651

 
$
756

 
$
(105
)
 
(13.9
)%
__________
(1)
Free promotional slot plays are included in slot handle, but not reflected in slot revenues.
(2)
Table game hold percentage is relatively predictable over longer periods of time, but can significantly fluctuate over shorter periods.

Gaming revenues for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year declined primarily as a result of lower slot revenues. The reductions in slot revenues were due to lower business volumes which we believe was primarily driven by a weak regional economic environment and its related impact on consumer discretionary spending, combined with the impact of competition. We believe the decline in business volumes for the nine months ended June 30, 2013 also reflected changes in our operations designed to improve profitability and unfavorable weather conditions. The reductions in slot revenues were partially offset by increased table game revenues which benefited from higher table games hold percentage.
The following table presents data related to food and beverage operations (in thousands, except where noted):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Meals served
708

 
809

 
(101
)
 
(12.5
)%
 
2,047

 
2,413

 
(366
)
 
(15.2
)%
Average price per meal served (in dollars)
$
16.38

 
$
16.08

 
$
0.30

 
1.9
 %
 
$
16.26

 
$
16.37

 
$
(0.11
)
 
(0.7
)%

Food and beverage revenues for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year decreased primarily due to the declines in meals served. The declines in meals served reflected changes in our operations designed to improve profitability, including the replacement of a Mohegan Sun-owned food and beverage outlet with a third-party operator.




34


The following table presents data related to hotel operations (in thousands, except where noted): 
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Rooms occupied
104

 
103

 
1

 
1.0
%
 
310

 
308

 
2

 
0.6
%
Occupancy rate
96.7
%
 
96.3
%
 
0.4
%
 
0.4
%
 
96.5
%
 
95.8
%
 
0.7
%
 
0.7
%
Average daily room rate (in dollars)
$
95

 
$
93

 
2

 
2.2
%
 
$
94

 
$
91

 
$
3

 
3.3
%
Revenue per available room (in dollars)
$
92

 
$
89

 
3

 
3.4
%
 
$
90

 
$
87

 
$
3

 
3.4
%

Hotel revenues for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased primarily as a result of an increase in hotel occupancy by higher paying transient guests.
The following table presents data related to entertainment operations (in thousands, except where noted):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Arena events (in events)
26

 
38

 
(12
)
 
(31.6
)%
 
71

 
91

 
(20
)
 
(22.0
)%
Arena tickets
174

 
229

 
(55
)
 
(24.0
)%
 
451

 
529

 
(78
)
 
(14.7
)%
Average price per Arena ticket (in dollars)
$
61.45

 
$
42.23

 
$
19.22

 
45.5
 %
 
$
56.20

 
$
45.12

 
$
11.08

 
24.6
 %

Retail, entertainment and other revenues for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased primarily due to higher entertainment revenues resulting from the increases in average price per Arena ticket. The increases in average price per Arena ticket reflected an increase in the number of headliner shows held at the Mohegan Sun Arena.

Promotional Allowances
The retail value of providing promotional allowances was included in revenues as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Food and beverage
$
6,008

 
$
6,498

 
$
(490
)
 
(7.5
)%
 
$
16,452

 
$
19,988

 
$
(3,536
)
 
(17.7
)%
Hotel
3,305

 
3,411

 
(106
)
 
(3.1
)%
 
10,238

 
10,434

 
(196
)
 
(1.9
)%
Retail, entertainment and other
11,423

 
11,496

 
(73
)
 
(0.6
)%
 
29,807

 
31,465

 
(1,658
)
 
(5.3
)%
Total
$
20,736

 
$
21,405

 
$
(669
)
 
(3.1
)%
 
$
56,497

 
$
61,887

 
$
(5,390
)
 
(8.7
)%
The estimated cost of providing promotional allowances was included in gaming costs and expenses as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Food and beverage
$
5,926

 
$
6,350

 
$
(424
)
 
(6.7
)%
 
$
16,575

 
$
19,679

 
$
(3,104
)
 
(15.8
)%
Hotel
1,735

 
1,811

 
(76
)
 
(4.2
)%
 
5,361

 
5,716

 
(355
)
 
(6.2
)%
Retail, entertainment and other
10,038

 
10,267

 
(229
)
 
(2.2
)%
 
27,734

 
28,844

 
(1,110
)
 
(3.8
)%
Total
$
17,699

 
$
18,428

 
$
(729
)
 
(4.0
)%
 
$
49,670

 
$
54,239

 
$
(4,569
)
 
(8.4
)%

Promotional allowances for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year decreased primarily due to the declines in gaming revenues resulting in lower redemptions under the Player's Club program.




35

Operating Costs and Expenses
Operating costs and expenses consisted of the following (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Gaming
$
127,898

 
$
138,387

 
$
(10,489
)
 
(7.6
)%
 
$
374,426

 
$
419,690

 
$
(45,264
)
 
(10.8
)%
Food and beverage
8,229

 
8,970

 
(741
)
 
(8.3
)%
 
25,226

 
27,139

 
(1,913
)
 
(7.0
)%
Hotel
3,743

 
3,658

 
85

 
2.3
 %
 
10,674

 
10,703

 
(29
)
 
(0.3
)%
Retail, entertainment and other
11,550

 
10,291

 
1,259

 
12.2
 %
 
30,447

 
28,957

 
1,490

 
5.1
 %
Advertising, general and administrative
40,489

 
41,045

 
(556
)
 
(1.4
)%
 
121,651

 
124,623

 
(2,972
)
 
(2.4
)%
Depreciation and amortization
17,268

 
17,706

 
(438
)
 
(2.5
)%
 
51,380

 
52,266

 
(886
)
 
(1.7
)%
Loss on disposition of assets
126

 
18

 
108

 
600.0
 %
 
259

 
36

 
223

 
619.4
 %
Severance (1)
—

 
—

 
—

 
—

 
(146
)
 
—

 
(146
)
 
(100.0
)%
Total
$
209,303

 
$
220,075

 
$
(10,772
)
 
(4.9
)%
 
$
613,917

 
$
663,414

 
$
(49,497
)
 
(7.5
)%
__________
(1)
Workforce reduction severance.

Gaming costs and expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year decreased primarily as a result of lower combined slot win and free promotional slot play contribution expenses commensurate with the declines in slot revenues, combined with reduced payroll costs resulting from our September 2012 workforce reduction. The reductions in gaming costs and expenses also resulted from changes in our operations designed to improve profitability, including lower casino marketing and promotional expenditures. In addition, the decline in gaming costs and expenses for the nine months ended June 30, 2013 reflected lower costs related to Player's Club point redemptions at Mohegan Sun-owned facilities. Expenses associated with the combined slot win and free promotional slot play contributions totaled $40.2 million and $115.1 million for the three months and nine months ended June 30, 2013, respectively, and $43.6 million and $130.4 million for the three months and nine months ended June 30, 2012, respectively. Gaming costs and expenses as a percentage of gaming revenues were 55.1% and 55.3% for the three months and nine months ended June 30, 2013, respectively, and 59.6% and 58.4% for the three months and nine months ended June 30, 2012, respectively.
Food and beverage costs and expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year declined primarily due to lower payroll costs and cost of goods sold reflecting our workforce reduction and other cost saving initiatives implemented in September 2012, including the replacement of a Mohegan Sun-owned food and beverage outlet with a third-party operator. These results were partially offset by reduced use of food and beverage complimentaries, resulting in lower amounts of food and beverage costs being allocated to gaming costs and expenses.
Hotel costs and expenses for the three months ended June 30, 2013 compared to the same period in the prior year increased slightly as a result of reduced use of hotel complimentaries, resulting in lower amounts of hotel costs being allocated to gaming costs and expenses. Hotel costs and expenses for the nine months ended June 30, 2013 compared to the same period in the prior year were relatively flat.
Retail, entertainment and other costs and expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased primarily due to higher direct entertainment costs reflecting an increase in the number of headliner shows held at the Mohegan Sun Arena, combined with increased cost of goods sold for gasoline as a result of an increase in patronage at the Mohegan Sun gasoline and convenience center. These results were partially offset by lower Arena expenses due to the reduction in the overall number of events held at the Mohegan Sun Arena. The increase in retail, entertainment and other costs and expenses for the nine months ended June 30, 2013 also resulted from reduced use of retail, entertainment and other complimentaries, resulting in lower amounts of retail, entertainment and other costs being allocated to gaming costs and expenses.
Advertising, general and administrative costs and expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year declined primarily as a result of lower payroll costs and certain other expenditures, reflecting, in part, our workforce reduction and other cost saving initiatives implemented in September 2012. The decline in advertising, general and administrative costs and expenses for the nine months ended June 30, 2013 also reflected non-recurring costs related to Mohegan Sun's 15th anniversary festivities for casino patrons in the first quarter of fiscal 2012.



36


Mohegan Sun at Pocono Downs
Gross Revenues
Gross revenues consisted of the following (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Gaming
$
72,421

 
$
74,747

 
$
(2,326
)
 
(3.1
)%
 
$
208,322

 
$
222,644

 
$
(14,322
)
 
(6.4
)%
Food and beverage
7,059

 
6,537

 
522

 
8.0
 %
 
19,116

 
18,800

 
316

 
1.7
 %
Retail, entertainment and other
2,398

 
2,326

 
72

 
3.1
 %
 
6,356

 
6,193

 
163

 
2.6
 %
Total
$
81,878

 
$
83,610

 
$
(1,732
)
 
(2.1
)%
 
$
233,794

 
$
247,637

 
$
(13,843
)
 
(5.6
)%

The following table summarizes the percentage of gross revenues from each of the three revenue sources:
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Gaming
88.5
%
 
89.4
%
 
89.1
%
 
89.9
%
Food and beverage
8.6
%
 
7.8
%
 
8.2
%
 
7.6
%
Retail, entertainment and other
2.9
%
 
2.8
%
 
2.7
%
 
2.5
%
Total
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%

The following table presents data related to gaming operations (in thousands, except where noted):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Slots:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Handle
$
774,897

 
$
743,645

 
$
31,252

 
4.2
 %
 
$
2,181,982

 
$
2,235,962

 
$
(53,980
)
 
(2.4
)%
Gross revenues
$
56,600

 
$
59,696

 
$
(3,096
)
 
(5.2
)%
 
$
165,101

 
$
178,653

 
$
(13,552
)
 
(7.6
)%
Net revenues
$
56,575

 
$
59,667

 
$
(3,092
)
 
(5.2
)%
 
$
165,068

 
$
178,618

 
$
(13,550
)
 
(7.6
)%
Free promotional slot plays (1)
$
23,327

 
$
15,324

 
$
8,003

 
52.2
 %
 
$
58,243

 
$
46,508

 
$
11,735

 
25.2
 %
Weighted average number of machines (in units)
2,332

 
2,332

 
—

 
—

 
2,332

 
2,332

 
—

 
—

Hold percentage (gross)
7.3
%
 
8.0
%
 
(0.7
)%
 
(8.8
)%
 
7.6
%
 
8.0
%
 
(0.4
)%
 
(5.0
)%
Win per unit per day (gross) (in dollars)
$
267

 
$
281

 
$
(14
)
 
(5.0
)%
 
$
259

 
$
280

 
$
(21
)
 
(7.5
)%
Table games:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Drop
$
51,437

 
$
50,927

 
$
510

 
1.0
 %
 
$
144,576

 
$
161,480

 
$
(16,904
)
 
(10.5
)%
Revenues
$
10,048

 
$
9,246

 
$
802

 
8.7
 %
 
$
28,855

 
$
29,216

 
$
(361
)
 
(1.2
)%
Weighted average number of games (in units)
66

 
66

 
—

 
—

 
66

 
66

 
—

 
—

Hold percentage (2)
19.5
%
 
18.2
%
 
1.3
 %
 
7.1
 %
 
20.0
%
 
18.1
%
 
1.9
 %
 
10.5
 %
Win per unit per day (in dollars)
$
1,673

 
$
1,540

 
$
133

 
8.6
 %
 
$
1,601

 
$
1,615

 
$
(14
)
 
(0.9
)%
Poker:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
900

 
$
871

 
$
29

 
3.3
 %
 
$
3,102

 
$
2,891

 
$
211

 
7.3
 %
Weighted average number of tables (in units)
18

 
18

 
—

 
—

 
18

 
18

 
—

 
—

Revenue per unit per day (in dollars)
$
549

 
$
531

 
$
18

 
3.4
 %
 
$
631

 
$
586

 
$
45

 
7.7
 %
_______
(1)
Free promotional slot plays are included in slot handle, but not reflected in slot revenues.
(2)
Table games hold percentage is relatively predictable over longer periods of time, but can significantly fluctuate over shorter periods.

Gaming revenues for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year declined primarily as a result of lower slot revenues. We believe the reductions in slot revenues reflected a weak regional economic environment due, in part, to recent increases in payroll and local property taxes, combined with construction disruptions associated with our hotel and convention center expansion. In addition, we believe the decline in gaming revenues for the nine months ended June 30, 2013 reflected changes in our operations designed to improve profitability and unfavorable weather

37

conditions. Gaming revenues for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year benefited from higher table games hold percentage.
The following table presents data related to food and beverage operations (in thousands, except where noted):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Meals served
209

 
186

 
23

 
12.4
 %
 
534

 
546

 
(12
)
 
(2.2
)%
Average price per meal served (in dollars)
$
15.84

 
$
15.98

 
$
(0.14
)
 
(0.9
)%
 
$
16.49

 
$
15.67

 
$
0.82

 
5.2
 %
Food and beverage revenues for the three months ended June 30, 2013 compared to the same period in the prior year increased as a result of strong patron response to our promotional offers. Food and beverage revenues for the nine months ended June 30, 2013 compared to the same period in the prior year increased primarily due to changes in our operations designed to improve profitability.
Retail, entertainment and other revenues for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased primarily as a result of higher sponsorship revenues and ATM commissions.
Promotional Allowances
The retail value of providing promotional allowances was included in revenues as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Food and beverage
$
4,245

 
$
3,608

 
$
637

 
17.7
 %
 
$
11,351

 
$
10,729

 
$
622

 
5.8
%
Retail and entertainment
405

 
442

 
(37
)
 
(8.4
)%
 
1,288

 
1,280

 
8

 
0.6
%
Total
$
4,650

 
$
4,050

 
$
600

 
14.8
 %
 
$
12,639

 
$
12,009

 
$
630

 
5.2
%

The estimated cost of providing promotional allowances was included in gaming costs and expenses as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Food and beverage
$
2,917

 
$
2,786

 
$
131

 
4.7
 %
 
$
8,225

 
$
8,165

 
$
60

 
0.7
 %
Retail and entertainment
404

 
533

 
(129
)
 
(24.2
)%
 
1,388

 
1,492

 
(104
)
 
(7.0
)%
Total
$
3,321

 
$
3,319

 
$
2

 
0.1
 %
 
$
9,613

 
$
9,657

 
$
(44
)
 
(0.5
)%

Promotional allowances for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased due to higher food and beverage promotional offers designed to drive increased patron visitation.
Operating Costs and Expenses
Operating costs and expenses consisted of the following (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
  Variance  
 
2013
 
2012
 
Variance
 
Percentage
  Variance  
Gaming
$
51,639

 
$
54,632

 
$
(2,993
)
 
(5.5
)%
 
$
150,983

 
$
162,327

 
$
(11,344
)
 
(7.0
)%
Food and beverage
2,002

 
2,270

 
(268
)
 
(11.8
)%
 
5,809

 
6,216

 
(407
)
 
(6.5
)%
Retail, entertainment and other
308

 
287

 
21

 
7.3
 %
 
867

 
862

 
5

 
0.6
 %
Advertising, general and administrative
7,549

 
7,685

 
(136
)
 
(1.8
)%
 
21,620

 
22,563

 
(943
)
 
(4.2
)%
Depreciation and amortization
3,053

 
3,957

 
(904
)
 
(22.8
)%
 
8,997

 
11,716

 
(2,719
)
 
(23.2
)%
Loss on disposition of assets
18

 
13

 
5

 
38.5
 %
 
18

 
284

 
(266
)
 
(93.7
)%
Severance (1)
51

 
—

 
51

 
100.0
 %
 
175

 
—

 
175

 
100.0
 %
Pre-opening
173

 
—

 
173

 
100.0
 %
 
245

 
—

 
245

 
100.0
 %
Total
$
64,793

 
$
68,844

 
$
(4,051
)
 
(5.9
)%
 
$
188,714

 
$
203,968

 
$
(15,254
)
 
(7.5
)%
__________

38

(1)
Workforce reduction severance.
Gaming costs and expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year declined primarily due to lower Pennsylvania slot machine tax expenses commensurate with the reductions in slot revenues. The declines in gaming costs and expenses also reflected lower Pennsylvania regulatory fees resulting from a temporary suspension of this assessment in May and June 2013, as well as reduced Pennsylvania table game tax expenses primarily due to a reduction in the Pennsylvania table game tax rate. During the initial two years of operation, the Pennsylvania table game tax was 14%, plus 2% in local share assessments. Following the initial two years of operation, the Pennsylvania table game tax was reduced to 12%, plus the 2% local share assessments. Mohegan Sun at Pocono Downs concluded its initial two years of table game operations on July 13, 2012. In addition, the reductions in gaming costs and expenses resulted from changes in our operations designed to improve profitability. Expenses associated with the Pennsylvania slot machine tax totaled $31.8 million and $93.0 million for the three months and nine months ended June 30, 2013, respectively, and $33.5 million and $100.8 million for the three months and nine months ended June 30, 2012, respectively. Expenses associated with the Pennsylvania table game tax totaled $1.6 million and $4.5 million for the three months and nine months ended June 30, 2013, respectively, and $1.6 million and $5.2 million for the three months and nine months ended June 30, 2012, respectively. Gaming costs and expenses as a percentage of gaming revenues were 71.3% and 72.5% for the three months and nine months ended June 30, 2013, respectively, and 73.1% and 72.9% for the three months and nine months ended June 30, 2012, respectively.
Food and beverage costs and expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year decreased primarily as a result of lower payroll costs, combined with increased use of food and beverage complimentaries, resulting in higher amounts of food and beverage costs being allocated to gaming costs and expenses.
Retail, entertainment and other costs and expenses for the three months ended June 30, 2013 compared to the same period in the prior year increased primarily due to reduced use of retail, entertainment and other complimentaries, resulting in lower amounts of retail, entertainment and other costs being allocated to gaming costs and expenses. Retail, entertainment and other costs and expenses for the nine months ended June 30, 2013 compared to the same period in the prior year were relatively flat.
Advertising, general and administrative costs and expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year declined primarily due to lower insurance costs, combined with our continued focus on managing expenses.
Depreciation and amortization expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year decreased primarily as a result of fully depreciated assets related to the Phase II facility.
Severance for the three months and nine months ended June 30, 2013 resulted from the charges related to our March 2013 workforce reduction plan. We do not anticipate incurring any additional severance charges in connection with this workforce reduction, other than charges that may arise from adjustments to the initial estimates utilized under the plan. Cash payments commenced in March 2013 and are anticipated to be completed in August 2013.
Pre-opening costs and expenses for the three months and nine months ended June 30, 2013 were comprised of personnel costs associated with the introduction of our hotel and convention center operations which are expected to commence by the end of 2013.
Corporate and Other
Corporate and other consisted of the following (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013

 
2012

 
Variance
 
Percentage  Variance
 
2013
 
2012
 
Variance
 
Percentage  Variance
Corporate and other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross revenues
$
333

  
$
—

 
$
333

 
100.0
 %
 
$
1,028

  
$
—

 
$
1,028

 
100.0
 %
Less-Promotional allowances
15

 
—

 
15

 
100.0
 %
 
59

 
—

 
59

 
100.0
 %
            Net revenues
$
318

 
$
—

 
$
318

 
100.0
 %
 
$
969

 
$
—

 
$
969

 
100.0
 %

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses
$
5,933

  
$
4,651

 
$
1,282

 
27.6
 %
 
$
19,624

  
$
12,653

 
$
6,971

 
55.1
 %
Depreciation
29

  
30

 
(1
)
 
(3.3
)%
 
88

  
95

 
(7
)
 
(7.4
)%
Total expenses
$
5,962

  
$
4,681

  
$
1,281

 
27.4
 %
 
$
19,712

  
$
12,748

  
$
6,964

 
54.6
 %
Corporate and other revenues for the three months and nine months ended June 30, 2013 primarily represent management fees earned and reimbursable expenses incurred by Mohegan Gaming Advisors, LLC, our wholly-owned unrestricted subsidiary,

39

and its subsidiaries, which entered into a joint venture and management arrangement with the owner of Resorts Casino Hotel in July 2012.
Corporate and other expenses for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased primarily as a result of higher professional and development related expenditures, including expenditures associated with our pursuit of a Massachusetts casino license.
Other Income (Expense)
Other income (expense) consisted of the following (in thousands):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance
 
Percentage
Variance
 
2013
 
2012
 
Variance
 
Percentage
Variance
Accretion of discount to the relinquishment liability (1)
$
(1,243
)
 
$
(2,062
)
 
$
819

 
(39.7
)%
 
$
(3,730
)
 
$
(6,186
)
 
$
2,456

 
(39.7
)%
Interest income (2)
1,533

 
1,842

 
(309
)
 
(16.8
)%
 
4,421

 
3,559

 
862

 
24.2
 %
Interest expense, net of capitalized interest
(42,379
)
 
(41,581
)
 
(798
)
 
1.9
 %
 
(128,213
)
 
(103,047
)
 
(25,166
)
 
24.4
 %
Loss on early exchange of debt (3)
—

 
(17
)
 
17

 
(100.0
)%
 
(403
)
 
(14,323
)
 
13,920

 
(97.2
)%
Other income (expense), net (4)
53

 
7

 
46

 
657.1
 %
 
(1,732
)
 
(31
)
 
(1,701
)
 
5,487.1
 %
Total other expense
$
(42,036
)
 
$
(41,811
)
 
$
(225
)
 
0.5
 %
 
$
(129,657
)
 
$
(120,028
)
 
$
(9,629
)
 
8.0
 %
___________
(1)
Reflects accretion of the discount to the present value of the relinquishment liability for the impact of the time value of money.
(2)
Primarily represents interest earned on long-term receivables.
(3)
Represents financing fees written-off in connection with our March 2012 refinancing transactions.
(4)
Primarily represents loss from unconsolidated affiliates.

Interest expense for the three months and nine months ended June 30, 2013 compared to the same periods in the prior year increased primarily as a result of higher weighted average interest rate. Weighted average interest rate was 10.1% for each of the three months and nine months ended June 30, 2013, compared to 9.9% and 8.4% for the three months and nine months ended June 30, 2012, respectively. Weighted average outstanding debt was $1.70 billion and $1.71 billion for the three months and nine months ended June 30, 2013, respectively, compared to $1.67 billion and $1.65 billion for the three months and nine months ended June 30, 2012, respectively.

Seasonality
The gaming market in the Northeastern United States is seasonal in nature, with peak gaming activities often occurring at Mohegan Sun and Mohegan Sun at Pocono Downs during the months of May through August. Accordingly, our results of operations for the three months and nine months ended June 30, 2013 are not necessarily indicative of operating results for other interim periods or an entire fiscal year.


Liquidity and Capital Resources
Our cash flows consisted of the following (in thousands):
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
Variance    
 
Percentage
    Variance    
Net cash provided by operating activities
$
85,609

 
$
144,291

 
$
(58,682
)
 
(40.7
)%
Net cash used in investing activities
(23,862
)
 
(38,700
)
 
14,838

 
(38.3
)%
Net cash used in financing activities
(95,540
)
 
(97,235
)
 
1,695

 
(1.7
)%
Net increase (decrease) in cash and cash equivalents
$
(33,793
)
 
$
8,356

 
$
(42,149
)
 
(504.4
)%
As of June 30, 2013 and September 30, 2012, we held cash and cash equivalents of $80.3 million and $114.1 million, respectively. As a result of the cash-based nature of our business, operating cash flow levels tend to follow trends in our operating income, excluding the effects of non-cash charges, such as depreciation and amortization, accretion of discounts and relinquishment liability reassessments. The decline in cash provided by operating activities for the nine months ended June 30, 2013 compared to the same period in the prior year resulted from higher working capital requirements, including interest and workforce reduction related severance payments, combined with lower net income after adjustments for non-cash items.

40

Operating activities are a significant source of our cash flows. We utilize cash flows from operations for scheduled interest payments, relinquishment payments, planned capital expenditures other than Project Sunlight, distributions to the Tribe, projected working capital needs and debt reduction, as well as to make investments, from time to time. There are numerous potential factors which may cause a substantial reduction in the amount of such cash flows, including, but not limited to, the following:
•
reduced discretionary spending by patrons on activities such as gaming, leisure and hospitality;
•
increased competition, including the legalization or expansion of gaming in New England, New York, New Jersey, Pennsylvania or other states in the mid-Atlantic region, or the expansion of on-line gaming in the United States;
•
unfavorable weather conditions;
•
changes in applicable laws or policies regarding smoking or alcohol service at Mohegan Sun or Mohegan Sun at Pocono Downs;
•
an infrastructure or transportation disruption, such as the closure of a major highway near Mohegan Sun or Mohegan Sun at Pocono Downs, for an extended period of time; and
•
an act of terrorism on the United States.
The decline in cash used in investing activities for the nine months ended June 30, 2013 compared to the same period in the prior year was primarily attributable to lower capital expenditures after factoring in the decease in restricted cash. The decrease in cash used in financing activities for the nine months ended June 30, 2013 compared to the same period in the prior year was primarily driven by lower payments of financing fees and distributions to the Tribe. These results were partially offset by a reduction in net borrowings.
Cost Saving Initiatives

In September 2012, we implemented a workforce reduction and other cost saving initiatives at Mohegan Sun, including changes to the slot mix on the gaming floor, modifications to employee medical benefits and the replacement of a Mohegan Sun-owned food and beverage outlet with a third-party operator. The resulting labor and operating cost savings for fiscal 2013 are forecasted to be at least $25.0 million. In addition, in March 2013, we implemented a number of cost saving initiatives at Mohegan Sun at Pocono Downs. The resulting labor and operating cost savings for fiscal 2013 are currently forecasted to be at least $4 million, while annual labor and operating cost savings are forecasted to be at least $7 million. We estimated that these cost saving initiatives yielded consolidated labor and operating cost savings totaling approximately $21 million for the nine months ended June 30, 2013.
External Sources of Liquidity

Bank Credit Facilities

First Lien, First Out Credit Facility

On March 6, 2012, we entered into a fourth amended and restated bank credit facility providing for a $400.0 million term loan and a revolving loan with letter of credit and borrowing capacity of up to $75.0 million from a syndicate of financial institutions and commercial banks, with Bank of America, N.A. serving as administrative agent, or the bank credit facility. Principal outstanding on the term loan under the bank credit facility is to be repaid at a rate of $1.0 million per quarter. The bank credit facility matures on March 31, 2015, upon which date all outstanding balances are payable in full. As of June 30, 2013, there were $394.0 million in term loans and no revolving loans outstanding under the bank credit facility. As of June 30, 2013, letters of credit issued under the bank credit facility totaled $3.4 million, of which no amount was drawn. Inclusive of letters of credit, which reduce borrowing availability under the bank credit facility, and after taking into account restrictive financial covenant requirements, we had approximately $71.6 million of borrowing capacity under the bank credit facility as of June 30, 2013.
Borrowings under the bank credit facility incur interest as follows: (i) for base rate revolving loans, base rate plus an applicable margin based on a leverage-based pricing grid between 2.25% and 3.25%; (ii) for Eurodollar rate revolving loans, the applicable LIBOR rate plus an applicable margin based on a leverage-based pricing grid between 3.50% and 4.50%; (iii) for base rate term loans, base rate plus an applicable margin equal to 3.25%; and (iv) for Eurodollar rate term loans, the applicable LIBOR rate plus 4.50%. For Eurodollar rate term loans, LIBOR is subject to a 1.0% floor. There also is a fee of between 0.25% and 0.50%, based on a leverage-based pricing grid, charged on unused revolving commitments. Interest on Eurodollar rate loans is payable at the end of each applicable interest period for periods of three months or less and for loans of more than three months, each March, June, September or December that occurs after the beginning of such interest period. Interest on base rate loans is payable quarterly in arrears. As of June 30, 2013, the $394.0 million in term loans outstanding were based on the Eurodollar rate floor of 1.0% plus an applicable margin of 4.50%. The applicable margin for commitment fees was 0.50% as of June 30, 2013.


41

Our obligations under the bank credit facility are fully and unconditionally guaranteed, jointly and severally, by the Pocono Downs subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming, collectively, the guarantors. The bank credit facility is collateralized by a first priority lien on substantially all of our property and assets and those of the guarantors (other than MBC), including the assets that comprise Mohegan Sun at Pocono Downs and a leasehold mortgage on the land and improvements that comprise Mohegan Sun (we and the guarantors, other than MBC, are collectively referred to herein as the grantors). The grantors also are required to pledge additional assets as collateral for the bank credit facility as they and future guarantor subsidiaries acquire them. The liens and security interests granted by the grantors as security for our obligations under the bank credit facility are senior in priority to the liens on the same collateral securing the term loan facility (as defined below) and the 2009 second lien notes, 2012 second lien notes and 2012 third lien notes (each as defined below and, collectively, the secured notes). The collateral securing the bank credit facility constitutes substantially all of the grantors' property and assets that secure the term loan facility and the secured notes, but excludes certain excluded assets as defined in the bank credit facility.

The bank credit facility contains negative covenants applicable to us and the guarantors, including negative covenants governing incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, investments, asset sales, affiliate transactions, mergers or consolidations and capital expenditures. Additionally, the bank credit facility includes financial maintenance covenants pertaining to total leverage, senior leverage and minimum fixed charge coverage. The levels of these covenants as of June 30, 2013 through the remaining term of the bank credit facility are as follows:

Maximum total leverage ratio covenant, or ratio of total debt to annualized EBITDA, as such terms are defined under the bank credit facility:
Fiscal Quarters Ending:
 
June 30, 2013 through December 31, 2013
6.75:1.00
March 31, 2014 through June 30, 2014
6.50:1.00
September 30, 2014 and thereafter
6.25:1.00

Maximum senior leverage ratio covenant, or ratio of total debt outstanding under the bank credit facility to annualized EBITDA, as such terms are defined under the bank credit facility:
Fiscal Quarters Ending:
 
June 30, 2013 and thereafter
1.75:1.00
Minimum fixed charge coverage ratio covenant, as defined under the bank credit facility:
Fiscal Quarters Ending:
 
June 30, 2013 and thereafter
1.05:1.00
As of June 30, 2013, we and the Tribe were in compliance with all respective covenant requirements under the bank credit facility.

First Lien, Second Out Term Loan Facility

On March 6, 2012, we entered into a loan agreement providing for a $225.0 million first lien, second out term loan with Wells Fargo Gaming Capital, LLC serving as Administrative Agent, or the term loan facility. The term loan facility was issued at a price of 98.0% of par, for an initial yield of approximately 9.6% per annum. The term loan facility has no mandatory amortization and is payable in full on March 31, 2016.

Loans under the term loan facility incur interest as follows: (i) for base rate loans, base rate plus 6.50% per annum and (ii) for Eurodollar rate loans, LIBOR plus 7.50% per annum. In all cases, LIBOR is subject to a 1.50% floor. Interest on Eurodollar rate loans is payable at the end of each applicable interest period or every quarter in arrears, if an interest period exceeds three months. Interest on base rate loans is payable quarterly in arrears. As of June 30, 2013, we had a $225.0 million Eurodollar rate loan outstanding, which was based on the Eurodollar rate floor of 1.50% plus an applicable margin of 7.50%.

Our term loan facility is fully and unconditionally guaranteed, jointly and severally, by each of the guarantors. The liens and security interests granted by the grantors as security for our obligations under the term loan facility are senior in priority to the liens on the same collateral securing any of the secured notes. The collateral securing the term loan facility constitutes substantially all of the grantors' property and assets that secure the bank credit facility and the secured notes, but excludes certain excluded assets as defined in the term loan facility.


42

The term loan facility contains negative covenants and financial maintenance covenants that are substantially the same as those contained in the bank credit facility. The term loan facility also includes a separate first lien leverage ratio covenant.
As of June 30, 2013, we and the Tribe were in compliance with all respective covenant requirements under the term loan facility.
We continue to monitor revenues and expenditures to ensure continued compliance with our financial covenant requirements under both the bank credit facility and the term loan facility. While we anticipate that we will remain in compliance with all covenant requirements under our bank credit facilities for all periods prior to maturity, we may need to increase revenues or offset any future declines in revenues by implementing further cost containment and other initiatives in order to maintain compliance with these financial covenant requirements. If we are unable to satisfy our financial covenant requirements, we would need to obtain waivers or consents under the bank credit facilities; however, we can provide no assurance that we would be able to obtain such waivers or consents. If we are unable to obtain such waivers or consents, we would be in default under our bank credit facilities, which may result in cross-defaults under our other outstanding indebtedness and allow our lenders and creditors to exercise their rights and remedies as defined under their respective agreements, including their right to accelerate the repayment of our outstanding indebtedness. If such acceleration were to occur, we can provide no assurance that we would be able to obtain the financing necessary to repay such accelerated indebtedness.
Senior Secured Notes
2009 11  1/2% Second Lien Senior Secured Notes
In October 2009, we issued $200.0 million second lien senior secured notes with fixed interest payable at a rate of 11.50% per annum, or the 2009 second lien notes. The 2009 second lien notes were issued at a price of 96.234% of par, to yield an effective interest rate of 12.25% per annum. The 2009 second lien notes mature on November 1, 2017. The first call date for the 2009 second lien notes is November 1, 2013. Interest on the 2009 second lien notes is payable semi-annually on May 1st and November 1st.

On March 6, 2012, we completed a private exchange offer and consent solicitation for any or all of our outstanding 2009 second lien notes. As part of the exchange offer, we solicited and received consents from tendering holders to certain amendments to the indentures governing the 2009 second lien notes, which eliminated certain restrictive covenants under the notes and related indenture. The aggregate principal amount of 2009 second lien notes tendered and exchanged was $199.8 million. An aggregate principal amount of $200,000 of 2009 second lien notes remains outstanding as of June 30, 2013.
 
Our 2009 second lien notes are collateralized by a second priority lien on substantially all of the grantors' and future guarantor subsidiaries' properties and assets, and are effectively subordinated to all of our and our existing and future guarantor subsidiaries' first priority lien secured indebtedness, including borrowings under the bank credit facility and term loan facility, to the extent of the value of the collateral securing such indebtedness. The 2009 second lien notes are fully and unconditionally guaranteed, jointly and severally, by the guarantors.

The 2009 second lien notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

2012 11 ½% Second Lien Senior Secured Notes

On March 6, 2012, we issued $199.8 million second lien senior secured notes with fixed interest payable at a rate of 11.50% per annum, or the 2012 second lien notes, in exchange for an equal amount of 2009 second lien notes. The 2012 second lien notes mature on November 1, 2017. We may redeem the 2012 second lien notes, in whole or in part, at any time prior to November 1, 2014, at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. On or after November 1, 2014, we may redeem the 2012 second lien notes, in whole or in part, at a premium decreasing ratably to zero, plus accrued interest. If a change of control of us occurs, we must offer to repurchase the 2012 second lien notes at a price equal to 101% of the principal amount, plus accrued interest. In addition, if we undertake certain types of asset sales or suffers events of loss, and we do not use the related sale or insurance proceeds for specified purposes, we may be required to offer to repurchase the 2012 second lien notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2012 second lien notes is payable semi-annually on May 1st and November 1st, commencing November 1, 2012.

Our 2012 second lien notes and the related guarantees are secured by second lien security interests in substantially all of the grantors property and assets. These liens are junior in priority to the liens on the same collateral securing our bank credit facility and term loan facility (and permitted replacements thereof) and to all other permitted prior liens, including liens securing certain hedging obligations. The collateral securing the 2012 second lien notes constitutes substantially all of the grantors' property and

43

assets that secure the bank credit facility and term loan facility, the 2009 second lien notes and 2012 third lien notes, but excludes certain excluded assets as defined in the 2012 second lien notes indenture. The 2012 second lien notes are fully and unconditionally guaranteed, jointly and severally, by the guarantors.

The 2012 second lien notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.


2012 10 ½% Third Lien Senior Secured Notes

On March 6, 2012, we issued $417.7 million third lien senior secured notes with fixed interest payable at a rate of 10.50% per annum, or the 2012 third lien notes, in exchange for $234.2 million of 2005 senior unsecured notes and $183.5 million of 2002 8% senior subordinated notes. The 2012 third lien notes mature on December 15, 2016. We may redeem the 2012 third lien notes, in whole or in part, at any time at a price equal to 100% of the principal amount plus accrued interest. If a change of control of us occurs, we must offer to repurchase the 2012 third lien notes at a price equal to 101% of the principal amount, plus accrued interest. In addition, if we undertake certain types of asset sales or suffers events of loss, and we do not use the related sale or insurance proceeds for specified purposes, we may be required to offer to repurchase the 2012 third lien notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2012 third lien notes is payable semi-annually on June 15th and December 15th, commencing December 15, 2012.

Our 2012 third lien notes and the related guarantees are secured by third lien security interests in substantially all of the grantors' property and assets. These liens are junior in priority to the liens on the same collateral securing our bank credit facility and term loan facility, the 2009 second lien notes and 2012 second lien notes (and permitted replacements of each of the foregoing) and to all other permitted prior liens, including liens securing certain hedging obligations. The collateral securing the 2012 third lien notes constitutes substantially all of the grantors' property and assets that secure the bank credit facility and term loan facility, the 2009 second lien notes and 2012 second lien notes, but excludes certain excluded assets as defined in the 2012 third lien notes indenture. The 2012 third lien notes are fully and unconditionally guaranteed, jointly and severally, by the guarantors.

The 2012 third lien notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

Senior Unsecured Notes

2005 6 1/8% Senior Unsecured Notes
In February 2005,we issued $250.0 million senior unsecured notes with fixed interest payable at a rate of 6.125% per annum, or the 2005 senior unsecured notes. Pursuant to a private exchange offer, which was completed on March 6, 2012, we exchanged $234.2 million in aggregate principal amount of 2005 senior unsecured notes, leaving $15.8 million outstanding, which amount, including accrued interest, was repaid at maturity on February 15, 2013 with cash on hand.
Senior Subordinated Notes
2004 7 1/8% Senior Subordinated Notes

In August 2004, we issued $225.0 million senior subordinated notes with fixed interest payable at a rate of 7.125% per annum, or the 2004 senior subordinated notes. The 2004 senior subordinated notes mature on August 15, 2014. The 2004 senior subordinated notes are callable at our option at par. Interest on the 2004 senior subordinated notes is payable semi-annually on February 15th and August 15th.
On March 6, 2012, we completed a private exchange offer and consent solicitation for any or all of our outstanding 2004 senior subordinated notes. As part of the exchange offer, we solicited and received consents from tendering holders to certain amendments to the indentures governing the 2004 senior subordinated notes, which eliminated certain restrictive covenants under the notes and related indenture. The aggregate principal amount of 2004 senior subordinated notes tendered and exchanged was $203.8 million. An aggregate principal amount of $21.2 million of the 2004 senior subordinated notes remains outstanding as of June 30, 2013.


44

2005 6 7/8% Senior Subordinated Notes

In February 2005, we issued $150.0 million senior subordinated notes with fixed interest payable at a rate of 6.875% per annum, or the 2005 senior subordinated notes. The 2005 senior subordinated notes mature on February 15, 2015. The 2005 senior subordinated notes are callable at our option at par. Interest on the 2005 senior subordinated notes is payable semi-annually on February 15th and August 15th.

On March 6, 2012, we completed a private exchange offer and consent solicitation for any or all of our outstanding 2005 senior subordinated notes. As part of the exchange offer, we solicited and received consents from tendering holders to certain amendments to the indentures governing the 2005 senior subordinated notes, which eliminated certain covenants under the notes and related indenture. The aggregate principal amount of 2005 senior subordinated notes tendered and exchanged was $140.3 million. An aggregate principal amount of $9.7 million of the 2005 senior subordinated notes remains outstanding as of June 30, 2013.

2012 11% Senior Subordinated Notes

On March 6, 2012, we issued $344.2 million senior subordinated toggle notes with fixed interest payable at a rate of 11% per annum, or the 2012 senior subordinated notes, in exchange for $203.8 million of 2004 senior subordinated notes and $140.3 million of 2005 senior subordinated notes. The 2012 senior subordinated notes mature on September 15, 2018. We may redeem the 2012 senior subordinated notes, in whole or in part, at any time, at a price equal to 100% of the principal amount plus accrued interest. If a change of control of us occurs, we must offer to repurchase the 2012 senior subordinated notes at a price equal to 101% of the principal amount, plus accrued interest. In addition, if we undertake certain types of asset sales or suffers events of loss, and we do not use the related sale or insurance proceeds for specified purposes, we may be required to offer to repurchase the 2012 senior subordinated notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2012 senior subordinated notes is payable semi-annually on March 15th and September 15th, commencing September 15, 2012. The initial interest payment on the 2012 senior subordinated notes was payable entirely in cash. For any subsequent interest payment period through March 15, 2018, we may, at our option, elect to pay interest on the 2012 senior subordinated notes either entirely in cash or by paying up to 2% in 2012 senior subordinated notes, or PIK interest. If we elect to pay PIK interest, such election will increase the principal amount of the 2012 senior subordinated notes in an amount equal to the amount of PIK interest for the applicable interest payment period to holders of 2012 senior subordinated notes on the relevant record date.

The 2012 senior subordinated notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

Our senior subordinated notes are uncollateralized general obligations, and are subordinated to borrowings under the bank credit facility, term loan facility, 2009 second lien notes, 2012 second lien notes and 2012 third lien notes. The senior subordinated notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

The senior and senior subordinated note indentures contain certain non-financial and financial covenant requirements with which we and the Tribe must comply. The non-financial covenant requirements include, among other things, reporting obligations, compliance with laws and regulations, maintenance of licenses and insurances and our continued existence. The financial covenant requirements include, among other things, subject to certain exceptions, limitations on our and the guarantors' ability to incur additional indebtedness, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates, merge or consolidate with another company, transfer or sell assets or impair assets constituting collateral.

As of June 30, 2013, we and the Tribe were in compliance with all respective covenant requirements under the senior and senior subordinated note indentures.
We or our affiliates may, from time to time, seek to purchase or otherwise retire outstanding indebtedness for cash in open market purchases, privately negotiated transactions or otherwise. Any such transaction will depend on prevailing market conditions and our liquidity and covenant requirement restrictions, among other factors.
Line of Credit
As of June 30, 2013, we had a $16.5 million revolving credit facility with Bank of America, N.A., or the line of credit. The line of credit matures on March 31, 2015. Pursuant to provisions of the bank credit facility, the line of credit may be replaced by an autoborrow loan governed by the terms of an autoborrow agreement described in the bank credit facility. Under the line of credit, each advance accrues interest on the basis of a one-month LIBOR Rate plus an applicable margin based on our total leverage

45

ratio, as each term is defined under the line of credit. Borrowings under the line of credit are uncollateralized obligations. As of June 30, 2013, no amount was drawn on the line of credit. The line of credit contains negative covenants and financial maintenance covenants that are substantially the same as those contained in the bank credit facility. As of June 30, 2013, we were in compliance with all covenant requirements under the line of credit and had $16.5 million of borrowing capacity thereunder.
2009 Mohegan Tribe Promissory Note

In September 2009, the Tribe made a $10.0 million loan to Salishan-Mohegan, LLC, or Salishan-Mohegan, referred to herein as the 2009 Mohegan Tribe promissory note. The 2009 Mohegan Tribe promissory note matures on September 30, 2014. The 2009 Mohegan Tribe promissory note accrues interest at an annual rate of 10.0%. Accrued interest is payable quarterly in the amount of $1.2 million, commencing December 31, 2013 and continuing through June 31, 2014, with the balance of accrued and unpaid interest due at maturity. Principal outstanding under the 2009 Mohegan Tribe promissory note amortizes as follows: (i) $1.625 million per quarter, commencing December 31, 2012 and continuing through September 30, 2013 and (ii) $875,000 per quarter, commencing December 31, 2013.
2012 Mohegan Tribe Minor's Trust Promissory Note

In March 2012, Comerica Bank & Trust, N.A., Trustee f/b/o The Mohegan Tribe of Indians of Connecticut Minor's Trust, made a $20.0 million loan to Salishan-Mohegan, referred to herein as the 2012 Mohegan Tribe Minor's Trust promissory note. The 2012 Mohegan Tribe Minor's Trust promissory note matures on March 31, 2016. The 2012 Mohegan Tribe Minor's Trust promissory note accrues interest at an annual rate of 10.0%. Accrued interest is payable quarterly, commencing June 30, 2012. Principal outstanding under the 2012 Mohegan Tribe Minor's Trust promissory note amortizes as follows: (i) $500,000 per quarter, commencing December 31, 2012 and continuing through September 30, 2014 and (ii) $1.5 million per quarter, commencing December 31, 2014 and continuing to maturity.
Mohegan Tribe Credit Facility

In March 2012, the Tribe extended a revolving credit facility issued to Salishan-Mohegan with a borrowing capacity of $1.45 million, or the Mohegan Tribe credit facility. The Mohegan Tribe credit facility matures on September 30, 2013. The Mohegan Tribe credit facility accrues interest at an annual rate of 15.0% payable at maturity. Principal outstanding under the Mohegan Tribe credit facility amortizes at a rate of $362,500 per quarter, commencing December 31, 2012. As of June 30, 2013, the Mohegan Tribe credit facility was fully drawn.
2013 Mohegan Tribe Promissory Note

On March 29, 2013, Mohegan Gaming & Hospitality, LLC, or MG&H, purchased and acquired all of the Tribe's membership interest in MG&H in exchange for a promissory note in the principal amount of $7.4 million, or the 2013 Mohegan Tribe promissory note. The 2013 Mohegan Tribe promissory note matures on December 31, 2018. The 2013 Mohegan Tribe promissory note accrues interest at an annual rate of 4.0% payable quarterly, commencing June 30, 2013.

Downs Lodging Credit Facility

In July 2012, Downs Lodging, a single purpose entity and our wholly-owned unrestricted subsidiary, entered into a credit agreement providing for a $45.0 million term loan, or the Downs Lodging credit facility, from a third-party lender. The proceeds of the Downs Lodging credit facility will be used by Downs Lodging to finance Project Sunlight, a hotel and convention center expansion project being developed and built by Downs Lodging at Mohegan Sun at Pocono Downs. The Downs Lodging credit facility matures on July 12, 2016 and accrues interest at an annual rate of 13.0%. Under the terms of the Downs Lodging credit facility, accrued interest of 10.0% is payable monthly in cash during the term of the loan, with the remaining 3.0% due at maturity. In addition, a 3.0% exit fee is payable upon repayment of the loan principal. The Downs Lodging credit facility is a senior secured obligation of Downs Lodging, collateralized by all existing and future assets of Downs Lodging. The Downs Lodging credit facility subjects Downs Lodging to certain covenant requirements customarily found in loan agreements for similar transactions. As of June 30, 2013, Downs Lodging was in compliance with all covenant requirements under the Downs Lodging credit facility.

Salishan-Mohegan Promissory Notes
In December 2012, Salishan-Mohegan Two, LLC, a wholly-owned subsidiary of Salishan-Mohegan, entered into two promissory notes with third-party lenders to fund the acquisition of certain property related to the Cowlitz Project. The first note, in the original principal amount of $150,000, bears no interest and amortizes as follows: (i) $5,000 per month, commencing

46

December 31, 2012 and continuing through July 31, 2014 and (ii) $10,000 per month, commencing August 31, 2014 until fully paid. The second note, in the original principal amount of $375,000, matures on December 31, 2014 and accrues interest at an annual rate of 7.0%, payable monthly, commencing January 1, 2013.
Capital Expenditures
The following table presents data related to capital expenditures (in millions, including capitalized interest):
 
Capital Expenditures
 
Nine Months Ended
 
Remaining Forecasted
 
Total Forecasted
 
June 30, 2013
 
Fiscal Year 2013
 
Fiscal Year 2013
Mohegan Sun:
 
 
 
 
 
Maintenance
$
13.0

 
$
12.7

 
$
25.7

Development
3.8

 
0.1

 
3.9

Subtotal
16.8

 
12.8

 
29.6

Mohegan Sun at Pocono Downs:
 
 
 
 
 
Maintenance
3.0

 
1.9

 
4.9

Expansion
0.3

 
0.3

 
0.6

Subtotal
3.3

 
2.2

 
5.5

Corporate:
 
 
 
 
 
Expansion - Project Sunlight
22.4

 
13.0

 
35.4

Development
0.7

 
—

 
0.7

Subtotal
23.1

 
13.0

 
36.1

Total
$
43.2

 
$
28.0

 
$
71.2


We primarily rely on cash flows provided by operating activities to fund maintenance capital expenditures at Mohegan Sun and Mohegan Sun at Pocono Downs. We plan to fund any development or expansion capital expenditures at Mohegan Sun and Mohegan Sun at Pocono Downs through a combination of existing cash, cash flows provided by operating activities and draws under our bank credit facility. The costs for Project Sunlight are being funded through a combination of a $45 million non-recourse term loan obtained by Downs Lodging and a $5 million investment by us. Project Sunlight is expected to be completed by the end of 2013.













47



Interest Expense
The following table presents our interest expense (in thousands, net of capitalized interest):
 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Bank credit facility
$
5,619

 
$
5,664

 
$
16,896

 
$
16,011

Term loan facility, includes accretion of discount
5,367

 
5,340

 
16,081

 
6,874

2009 11 1/2% second lien senior secured notes, includes accretion of discount
6

 
6

 
18

 
10,221

2012 11 1/2% second lien senior secured notes, includes accretion of discount
5,953

 
5,927

 
17,839

 
7,572

2012 10 1/2% third lien senior secured notes
10,967

 
10,967

 
32,899

 
14,013

2005 6 1/8% senior unsecured notes
—

 
242

 
402

 
6,902

2002 8% senior subordinated notes
—

 
—

 
—

 
8,980

2004 7 1/8% senior subordinated notes
377

 
377

 
1,171

 
7,384

2005 6 7/8% senior subordinated notes
166

 
166

 
525

 
4,652

2012 11 % senior subordinated notes
9,465

 
9,465

 
28,396

 
12,094

Line of credit
—

 
—

 
6

 
95

Salishan-Mohegan bank credit facility (Salishan-Mohegan)
—

 
—

 
—

 
250

2009 Mohegan Tribe promissory note (Salishan-Mohegan)
167

 
281

 
623

 
997

2012 Mohegan Tribe Minor's Trust promissory note (Salishan-Mohegan)
473

 
497

 
1,456

 
508

Mohegan Tribe credit facility (Salishan-Mohegan)
27

 
54

 
121

 
147

2013 Mohegan Tribe promissory note (Salishan-Mohegan)
73

 
—

 
76

 
—

Downs Lodging credit facility (Downs Lodging)
1,557

 
—

 
4,671

 
—

Capital leases
94

 
178

 
314

 
278

Amortization of net deferred gain on settlement of derivative instruments
(18
)
 
(23
)
 
(66
)
 
(231
)
Amortization of debt issuance costs
2,670

 
2,440

 
7,852

 
6,300

Capitalized interest
(584
)
 
—

 
(1,067
)
 
—

Total interest expense, net of capitalized interest
$
42,379

 
$
41,581

 
$
128,213

 
$
103,047

Contractual Obligations
There has been no material change from the contractual obligations previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.
Sufficiency of Resources
We believe that existing cash balances, financing arrangements and operating cash flows will provide us with sufficient resources to meet our existing debt obligations, relinquishment payments, foreseeable capital expenditure requirements and distributions to the Tribe for at least the next twelve months; however, we can provide no assurance in this regard. Please refer to “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 for further details regarding risks relating to our sufficiency of resources. Any future investments in Mohegan Sun and Mohegan Sun at Pocono Downs are anticipated to be funded through a combination of existing cash balances, future operating cash flows and draws under our bank credit facility. The costs for Project Sunlight are being funded through a combination of a $45.0 million non-recourse term loan obtained by Downs Lodging and a $5.0 million investment by us. Inclusive of letters of credit, which reduce borrowing availability under the bank credit facility, and after taking into account restrictive financial covenant requirements, we had approximately $71.6 million of borrowing capacity under the bank credit facility and line of credit as of June 30, 2013. Distributions to the Tribe are anticipated to total approximately $50.0 million for fiscal 2013.
Critical Accounting Policies and Estimates
There has been no material change from the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.
Impact of Inflation

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Absent changes in competitive and economic conditions or in specific prices affecting the hospitality and gaming industry, we do not expect that inflation will have a significant impact on our operations. Changes in specific prices, such as fuel and transportation prices, relative to the general rate of inflation may have a material adverse effect on the hospitality and gaming industry in general.

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Item 3.
Quantitative and Qualitative Disclosures about Market Risk.
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our bank credit facility and term loan facility, both of which accrue interest on the basis of a base rate formula or a Eurodollar rate formula, plus applicable rates, as defined under the respective facility. As of June 30, 2013, $394.0 million and $225.0 million were outstanding under the bank credit facility and term loan facility, respectively.
We attempt to manage our interest rate risk through a controlled combination of long-term fixed rate borrowings and variable rate borrowings in accordance with established policies and procedures. We do not hold or issue financial instruments for speculative or trading purposes.
The following table presents information as of June 30, 2013 about our current debt obligations that are sensitive to changes in interest rates. The table presents principal payments and related weighted average interest rates by expected maturity dates. Weighted average variable interest rates are based on implied forward rates in respective yield curves, which should not be considered to be precise indicators of actual future interest rates. Fair values for our debt obligations are based on quoted market prices or prices of similar instruments as of June 30, 2013.
 
 
Expected Maturity Date
 
Total
 
Fair Value
 
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Liabilities (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt and capital lease obligations (including current portions):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate
$
3,052

 
$
29,021

 
$
16,852

 
$
55,824

 
$
418,627

 
$
552,275

 
$
1,075,651

 
$
1,061,814

Average interest rate
10.2
%
 
7.7
%
 
7.9
%
 
12.3
%
 
10.5
%
 
11.1
%
 
10.8
%
 
 
Variable rate
$
1,000

 
$
4,000

 
$
389,000

 
$
225,000

 
$
—

 
$
—

 
$
619,000

 
$
599,865

Average interest rate (1)
5.5
%
 
5.5
%
 
5.5
%
 
9.0
%
 
—

 
—

 
6.8
%
 
 
___________
(1)
A 100 basis point change in average interest rate would impact annual interest expense by approximately $6.2 million.

Item 4.
Controls and Procedures
Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on an evaluation of our disclosure controls and procedures as of June 30, 2013, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION

Item 1.
Legal Proceedings
We are subject to various claims and legal actions resulting from our normal course of business. Some of these matters relate to personal injuries to patrons and damages to patrons' personal assets. We estimate guest claims expense and accrue for such liabilities based upon historical experience.


Item 1A.
Risk Factors

There has been no material change from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.


Item 6.
Exhibits
The exhibits to this Quarterly Report on Form 10-Q are listed on the Exhibit Index, which appears elsewhere herein and is incorporated herein by reference.



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Mohegan Tribal Gaming Authority has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
MOHEGAN TRIBAL GAMING AUTHORITY
 
 
 
 
Date:
August 13, 2013
By:
/S/    BRUCE S. BOZSUM        
 
 
 
Bruce S. Bozsum
Chairman and Member, Management Board
 
 
 
 
Date:
August 13, 2013
By:
/S/    MITCHELL GROSSINGER ETESS        
 
 
 
Mitchell Grossinger Etess
Chief Executive Officer,
Mohegan Tribal Gaming Authority
(Principal Executive Officer)
 
 
 
 
Date:
August 13, 2013
By:
/S/    MARIO C. KONTOMERKOS        
 
 
 
Mario C. Kontomerkos
Chief Financial Officer,
Mohegan Tribal Gaming Authority
(Principal Financial and Accounting Officer)


52

EXHIBIT INDEX
 
Exhibit No.
  
Description
3.1
  
Constitution of the Mohegan Tribe of Indians of Connecticut, as amended (filed as Exhibit 3.1 to the Authority’s Registration Statement on Form S-4, filed with the SEC on November 1, 2004 and incorporated by reference herein).
 
 
 
3.2
  
Ordinance No. 95-2 of the Tribe for Gaming on Tribal Lands, enacted on July 15, 1995 (filed as Exhibit 3.2 to the Authority’s Amendment No. 1 to its Registration Statement on Form S-1, filed with the SEC on February 29, 1996 and incorporated by reference herein).
 
 
 
3.3
  
Articles of Organization of Mohegan Basketball Club, LLC, dated as of January 27, 2003 (filed as Exhibit 3.3 to the Authority’s Registration Statement on Form S-4, filed with the SEC on September 23, 2003 (the “2003 Form S-4”) and incorporated by reference herein).
 
 
 
3.4
  
Operating Agreement of Mohegan Basketball Club, LLC, a Mohegan Tribe of Indians of Connecticut limited liability company, dated as of January 24, 2003 (filed as Exhibit 3.4 to the 2003 Form S-4 and incorporated by reference herein).
 
 
 
3.5
  
Certificate of Organization of Mohegan Commercial Ventures PA, LLC, dated as of January 6, 2005, as amended (filed as Exhibit 3.5 to the Authority’s Registration Statement on Form S-4, filed with the SEC on June 7, 2005 (the “2005 Form S-4”) and incorporated by reference herein).
 
 
 
3.6
  
Operating Agreement of Mohegan Commercial Ventures PA, LLC, a Commonwealth of Pennsylvania limited liability company, dated as of December 15, 2004 (filed as Exhibit 3.6 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.7
  
Certificate of Limited Partnership of Downs Racing, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.7 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.8
  
Amended and Restated Limited Partnership Agreement of Downs Racing, L.P., dated as of January 25, 2005 (filed as Exhibit 3.8 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.9
  
Certificate of Limited Partnership of Backside, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.9 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.10
  
Amended and Restated Limited Partnership Agreement of Backside, L.P., dated as of January 25, 2005 (filed as Exhibit 3.10 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.11
  
Certificate of Limited Partnership of Mill Creek Land, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.11 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.12
  
Amended and Restated Limited Partnership Agreement of Mill Creek Land, L.P., dated as of January 25, 2005 (filed as Exhibit 3.12 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.13
  
Certificate of Limited Partnership of Northeast Concessions, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.13 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.14
  
Amended and Restated Limited Partnership Agreement of Northeast Concessions, L.P., dated as of January 25, 2005 (filed as Exhibit 3.14 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.15
  
Articles of Organization of Mohegan Ventures-Northwest, LLC, dated as of July 23, 2004 (filed as Exhibit 3.15 to the Authority’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, filed with the SEC on August 10, 2006 (the “June 2006 Form 10-Q”) and incorporated by reference herein).
 
 
 
3.16
  
Operating Agreement of Mohegan Ventures-Northwest, LLC, a Mohegan Tribe of Indians of Connecticut limited liability company, dated as of July 23, 2004 (filed as Exhibit 3.16 to the June 2006 Form 10-Q and incorporated by reference herein).
 
 
 
3.17
 
Articles of Organization of Mohegan Golf, LLC, dated as of November 20, 2006 (filed as Exhibit 3.17 to the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006, filed with the SEC on December 21, 2006 (the “2006 Form 10-K”) and incorporated by reference herein).
 
 
 
3.18
 
Certificate of Formation of Wisconsin Tribal Gaming, LLC, dated as of February 27, 2007 (filed as Exhibit 3.18 to the Authority’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007, filed with the SEC on May 15, 2007 (the “March 2007 Form 10-Q”) and incorporated by reference herein).

53

Exhibit No.
  
Description
3.19
  
Articles of Organization of Mohegan Ventures Wisconsin, LLC, dated as of March 1, 2007 (filed as Exhibit 3.19 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
3.20
  
Certificate of Formation of MTGA Gaming, LLC, dated as of July 27, 2007 (filed as Exhibit 3.20 to the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2007, filed with the SEC on December 21, 2007 (the “2007 Form 10-K”) and incorporated by reference herein).
 
 
 
3.21
  
Articles of Amendment of Mohegan Golf, LLC, dated as of April 8, 2008 (filed as Exhibit 3.18 to the Authority’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008, filed with the SEC on May 15, 2008 and incorporated by reference herein).
 
 
 
4.1
  
Relinquishment Agreement, dated as of February 7, 1998, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut and Trading Cove Associates (filed as Exhibit 10.14 to the Authority’s Form 10-K405 for the fiscal year ended September 30, 1998, filed with the SEC on December 29, 1998 and incorporated by reference herein).
 
 
 
4.2
 
Indenture, dated as of August 3, 2004, between the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, Mohegan Basketball Club, LLC and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.19 to the Authority's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, filed with the SEC on August 16, 2004 (the “June 2004 Form 10-Q”) and incorporated by reference herein).
 
 
 
4.3
 
Supplemental Indenture No. 1, dated as of January 25, 2005, between the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined under the Indenture), and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.25 to the Authority’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed with the SEC on February 14, 2005 (the “December 2004 Form 10-Q”) and incorporated by reference herein).
 
 
 
4.4
 
Supplemental Indenture No. 2, dated as of August 4, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Ventures-Northwest, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2006 Form 10-Q and incorporated by reference herein).
 
 
 
4.5
 
Supplemental Indenture No. 3, dated as of December 18, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Golf, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.23 to the 2006 Form 10-K and incorporated by reference herein).
 
 
 
4.6
 
Supplemental Indenture No. 4, dated as of March 28, 2007, between the Mohegan Tribal Gaming Authority, Wisconsin Tribal Gaming, LLC and Mohegan Ventures Wisconsin, LLC (each a Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.26 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
4.7
 
Supplemental Indenture No. 5, dated as of August 27, 2007, between the Mohegan Tribal Gaming Authority, MTGA Gaming, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.29 to the 2007 Form 10-K and incorporated by reference herein).
 
 
 
4.8
 
Supplemental Indenture No. 6, dated as of March 5, 2012, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.19 to the Authority’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012, filed with the SEC on May 14, 2012 (the “March 2012 Form 10-Q”) and incorporated by reference herein).
 
 
 
4.9
 
Form of Global 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.10
 
Indenture, dated as of February 8, 2005, between the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 (filed as Exhibit 4.28 to the December 2004 Form 10-Q and incorporated by reference herein).


54

Exhibit No.
  
Description
4.11
 
Supplemental Indenture No. 1, dated as of August 4, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Ventures-Northwest, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.23 to the June 2006 Form 10-Q and incorporated by reference herein).
 
 
 
4.12
  
Supplemental Indenture No. 2, dated as of December 18, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Golf, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.27 to the 2006 Form 10-K and incorporated by reference herein).
 
 
 
4.13
 
Supplemental Indenture No. 3, dated as of March 28, 2007, between the Mohegan Tribal Gaming Authority, Wisconsin Tribal Gaming, LLC and Mohegan Ventures Wisconsin, LLC (each a Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.31 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
4.14
 
Supplemental Indenture No. 4, dated as of August 27, 2007, between the Mohegan Tribal Gaming Authority, MTGA Gaming, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.35 to the 2007 Form 10-K and incorporated by reference herein).
 
 
 
4.15
 
Supplemental Indenture No. 5, dated as of March 5, 2012, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.26 to the March 2012 Form 10-Q and incorporated by reference herein).
 
 
 
4.16
 
Form of Global 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.29 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.17
 
Indenture, dated as of October 26, 2009, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 2009 11 1/2% Second Lien Senior Secured Notes Due 2017 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.43 to the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009, filed with the SEC on December 28, 2009 (the “2009 Form 10-K”) and incorporated by reference herein).
 
 
 
4.18
 
Supplemental Indenture No.1, dated as of March 5, 2012, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 2009 11 1/2% Second Lien Senior Secured Notes Due 2017 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.36 to the March 2012 Form 10-Q and incorporated by reference herein).
 
 
 
4.19
 
Form of Global 2009 11 1/2% Second Lien Senior Secured Notes Due 2017 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.44 to the 2009 Form 10-K and incorporated by reference herein).
 
 
 
4.20
 
Indenture, dated as of March 6, 2012, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 2012 11 1/2% Second Lien Senior Secured Notes Due 2017 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.38 to the March 2012 Form 10-Q and incorporated by reference herein).
 
 
 
4.21
 
Form of Global 2012 11 1/2% Second Lien Senior Secured Notes Due 2017 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.39 to the March 2012 Form 10-Q and incorporated by reference herein).






55

Exhibit No.
  
Description
4.22
 
Indenture, dated as of March 6, 2012, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 10 1/2% Third Lien Senior Secured Notes Due 2016 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.40 to the March 2012 Form 10-Q and incorporated by reference herein).
 
 
 
4.23
  
Form of Global 10 1/2% Third Lien Senior Secured Notes Due 2016 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.41 to the March 2012 Form 10-Q and incorporated by reference herein).
 
 
 
4.24
 
Indenture, dated as of March 6, 2012, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 11% Senior Subordinated Notes Due 2018 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.42 to the March 2012 Form 10-Q and incorporated by reference herein).
 
 
 
4.25
  
Form of Global 11% Senior Subordinated Notes Due 2018 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.43 to the March 2012 Form 10-Q and incorporated by reference herein).
 
 
 
31.1
  
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).
 
 
 
31.2
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith).
 
 
 
32.1
 
Section 1350 Certification of Chief Executive Officer (filed herewith).
 
 
 
32.2
 
Section 1350 Certification of Chief Financial Officer (filed herewith).
 
 
 
101.INS**
 
XBRL Instance Document (filed herewith).
 
 
 
101.SCH**
 
XBRL Taxonomy Extension Schema (filed herewith).
 
 
 
101.CAL**
 
XBRL Taxonomy Calculation Linkbase (filed herewith).
 
 
 
101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase (filed herewith).
 
 
 
101.LAB**
 
XBRL Taxonomy Extension Label Linkbase (filed herewith).
 
 
 
101.PRE**
 
XBRL Taxonomy Extension Presentation Linkbase (filed herewith).
 
 
 
 ________________________
*
Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed to be "filed" for purposes of Section 18 of the Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

56