RICHMOND, BC, Jan. 11, 2016 /CNW/ - Great Canadian Gaming Corporation [TSX:GC] ("Great Canadian" or "the Company") announced today that Ontario Gaming East Limited Partnership ("Ontario Gaming East LP" or "the Partnership"), a partnership in which the Company now owns a 90.5% share, completed its previously announced (September 9, 2015) acquisition of Ontario Lottery and Gaming Corporation's ("OLG's") Gaming Bundle 2 (East) (the "East Gaming Bundle") for a purchase price of $51.3 million including certain gaming assets, working capital of approximately $12.3 million, and applicable taxes arising from the transaction. The existing gaming properties acquired within the East Gaming Bundle consist of Shorelines Casino Thousand Islands (formerly OLG Casino Thousand Islands), Shorelines Slots at Kawartha Downs (formerly OLG Slots at Kawartha Downs), and a proposed gaming property in the community of Belleville.
With the acquisition complete, the Partnership signed a 20-year casino operating and services agreement ("COSA") with OLG, which is also renewable at OLG's option for additional consecutive terms of 10 years each. Under the COSA, the Partnership will provide OLG a pre-established, guaranteed annual gaming revenue threshold amount plus 30% of gross gaming revenue above the pre-established gaming revenue threshold for each year. The Partnership will receive an annual service provider fee comprised of (i) a guaranteed base fixed fee component (which will be approximately $15 million per year before the Belleville facility is opened, increasing to $24 million per year thereafter), (ii) a variable component equal to 70% of gross gaming revenue above the applicable pre-established annual gaming revenue threshold retained by OLG, and (iii) a fixed amount for permitted capital expenditures. The Partnership will also retain all non-gaming revenues generated by the facilities including those from food and beverage and entertainment offerings.
During the twelve months ended September 30, 2015, the pro forma normalized EBITDA that Ontario Gaming East LP would have earned from operating the existing Thousand Islands Casino and Slots at Kawartha Downs, assuming both that the new COSA had then applied as well as an estimate for the Partnership's East Gaming Bundle management and administration expenses, is in the range of $16 to $17 million. These results, in addition to the guaranteed revenue payments owed to OLG, are expected to increase in the first quarter of 2017, when the new Belleville facility is expected to reach completion and are dependent on the realization of property development plans and revenue growth plans each of which may actually deviate from current expectations.
On completion of the acquisition from OLG, Ontario Gaming East LP had approximately $30 million in partner capital contributions and a $60 million revolving credit facility arranged on a non-recourse basis to Great Canadian and the minority partner's parent company. The acquisition was funded with $16.3 million of cash from partners' capital and $35 million of debt borrowed on the revolving credit facility. The Partnership also issued a $15 million letter of credit to OLG to secure performance under the COSA, which further reduced the available borrowing capacity on the revolving credit facility. In addition to both the cash from initial partner capital contributions remaining subsequent to the acquisition and the last $10 million of liquidity under the revolving credit facility, the partners expect to increase their capital contributions as the Partnership completes its development plans at each of its East Gaming Bundle properties.
Great Canadian will manage the property developments and operations of the Partnership through a facility development services agreement and a management services agreement. The Company will earn associated fees for providing these services.
"Over the last four months, we have worked very closely with OLG to ensure that the transition process is complete and successful for all stakeholders. We are excited about delivering great entertainment amenities and memorable experiences to our guests, welcoming our new colleagues, and becoming an active community participant in the Eastern Ontario region," said Andy LaCroix, Executive Director, Ontario Operations, Ontario Gaming East LP.
"Great Canadian is pleased to now own 90.5% of its Ontario Gaming East LP subsidiary, an increase from the previous 50.1% share it held," said Rod N. Baker, the Company's President and Chief Executive Officer. "We were already managing the day-to-day operations and property development plans of our subsidiary, so this was a great opportunity to increase our economic interest in an already exciting investment opportunity. The additional 40.4% of partnership units were obtained on the same economic terms as the Company invested for its original 50.1% share."
"It is an honour to be the first private sector owner and operator under OLG's Gaming Modernization Program," concluded Mr. Baker. "We thank OLG for this opportunity and are looking forward to future opportunities to collaborate with OLG through the ongoing modernization of gaming in the Province."
ABOUT ONTARIO GAMING EAST LP
Ontario Gaming East LP, in which Great Canadian Gaming Corporation owns a majority share, was selected as the successful proponent by the Ontario Lottery and Gaming Corporation to own and operate gaming facilities in OLG's Gaming Bundle 2 (East) (East Gaming Bundle). The East Gaming Bundle contains three gaming zones. The first gaming zone includes the Township of Cavan Monaghan, the City of Peterborough and surrounding areas, and is currently served by OLG Slots at Kawartha Downs. The second gaming zone includes a new build opportunity to service the City of Belleville and surrounding areas. The third gaming zone includes the Town of Gananoque, the Township of Leeds and the Thousand Islands, the City of Kingston and surrounding areas, and is currently served by OLG Casino Thousand Islands.
While Ontario Gaming East LP is responsible for the day-to-day gaming operations in the East Gaming Bundle, OLG will continue to:
- Conduct and manage gaming in the bundle
- Require compliance with applicable regulations set out by the Alcohol and Gaming Commission of Ontario (AGCO)
- Be the owner of key player information
- Uphold the standards of its Responsible Gambling program through the service provider, including the self-exclusion program
- Distribute Municipality Contribution Agreement payments to host communities
Ontario Gaming East LP is required to follow all applicable laws, as well as OLG and AGCO regulations and rigorous Responsible Gambling standards.
Late last year, on behalf of the Partnership, Great Canadian announced the new brand of Shorelines Casino for the Kawartha and Thousand Islands gaming properties. The Shorelines brand has been selected as it captures each of the market's historical connectivity to the community and geographical area. In addition, the brand will serve as a key identifier in the Eastern Ontario region that will be synonymous for outstanding customer service, coupled with great gaming options, fantastic restaurants and top-tier entertainment.
The Partnership will continue to develop preliminary plans for a gaming property in the preferred community of Belleville, and if successful, the property will be named Shorelines Casino Belleville.
To learn more about the Shorelines Casino brand and offerings, please visit www.shorelinescasinos.com.
ABOUT GREAT CANADIAN GAMING CORPORATION
Great Canadian Gaming Corporation is a Canadian based company that operates gaming, entertainment and hospitality facilities in British Columbia, Ontario, New Brunswick, Nova Scotia, and Washington State. The Company has 19 gaming properties, which consists of twelve casinos, including two with a four Diamond resort hotel, four horse racetrack casinos and three community gaming centres. A key element of Great Canadian's business model is its commitment to social responsibility. PROUD of our people, our business, our community is Great Canadian's brand that unifies the Company's community, volunteering and social responsibility efforts. Under the PROUD program, Great Canadian annually invests over $2 million in our communities, and in 2014, over 1,200 charitable organizations were supported by Great Canadian. In each Canadian gaming jurisdiction, a significant portion of gross gaming revenue from gaming facilities goes back directly to provincial governments for the purpose of supporting programs like healthcare, education and social services.
This press release contains certain "forward-looking information" or statements within the meaning of applicable securities legislation. Forward-looking information is based on the Company's current expectations, estimates, projections and assumptions that were made by the Company in light of its historical trends and other factors. All information or statements, other than statements of historical fact, are forward-looking information including statements that address expectations, estimates or projections about the future, the Company's strategy for growth and objectives, expected future expenditures, costs, operating and financial results, expected impact of future commitments, the completion of the acquisition of the gaming facilities, assets and undertakings contained within the Ontario Lottery and Gaming Corporation's Bundle 2 (East), the future ability of the Company to operate the Georgian Downs and Flamboro Downs facilities beyond the terms of the signed Ontario Lease Agreements and Ontario Racing Agreements, the Company's beliefs about the outcome of its notices of objection challenging the Canada Revenue Agency's reassessments and its tax position on its facility development commission prevailing, the terms and expected benefits of the normal course issuer bid, and expectations and implications of changes in legislation and government policies. Forward-looking information may be identified by words such as "anticipate", "believe", "expect", or similar expressions. Such forward-looking information is not a guarantee of future performance and may involve a number of risks and uncertainties.
Although forward-looking information is based on information and assumptions that the Company believes are current, reasonable and complete, they are subject to unknown risks, uncertainties, and a number of factors that could cause actual results to vary materially from those expressed or implied by such forward-looking information. Such factors may include, but are not limited to: terms of operational services agreements with lottery corporations; changes to gaming laws that may impact the operational services agreements, pending, proposed or unanticipated regulatory or policy changes; the outcome of restructuring of gaming in Ontario; the Company's ability to obtain and renew required business licenses, leases, and operational services agreements; the future of horse racing in Ontario; unanticipated fines, sanctions and suspensions imposed on the Company by its regulators; impact of global liquidity and credit availability; actual and possible reassessments of the Company's prior tax filings by tax authorities; the results of the Company's notices of objection challenging reassessments received by the Canada Revenue Agency; the Company's tax position on its facility development commission prevailing; adverse tourism trends and further decreases in levels of travel, leisure and consumer spending; competition from established competitors and new entrants in the gaming business; dependence on key personnel; the timing and results of collective bargaining negotiations; adverse changes in the Company's labour relations; the Company's ability to manage its capital projects and its expanding operations; the risk that systems, procedures and controls may not be adequate to meet regulatory requirements or to support current and expanding operations; potential undisclosed liabilities and capital expenditures associated with acquisitions; negative connotations linked to the gaming industry; First Nations rights with respect to some land on which we conduct our operations; future or current legal proceedings; construction disruptions; financial covenants associated with credit facilities and long-term debt; credit, liquidity and market risks associated with our financial instruments; interest and exchange rate fluctuations; non-realization of cost reductions and synergies; demand for new products and services; fluctuations in operating results; economic uncertainty and financial market volatility; technology dependence; and privacy breaches or data theft. The Company cautions that this list of factors is not exhaustive. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. These factors and other risks and uncertainties are discussed in the Company's continuous disclosure documents filed with the Canadian securities regulatory authorities from time to time, including in the "Risk Factors" section of the Company's Annual Information Form for fiscal 2014, and as identified in the Company's disclosure record on SEDAR at www.sedar.com.
Readers are cautioned not to place undue reliance on the forward-looking information, as there can be no assurance that the plans, intentions, or expectations upon which they are based will occur. The forward-looking information contained herein is made as of the date hereof, is subject to change after such date, and is expressly qualified in its entirety by cautionary statements in this press release. Forward-looking information is provided for the purpose of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of the Company's operating environment. The Company undertakes no obligation to publicly revise forward-looking information to reflect subsequent events or circumstances except as required by law.
ON BEHALF OF
GREAT CANADIAN GAMING CORPORATION
"Original Signed By Rod N. Baker"
Rod N. Baker
President and Chief Executive Officer
SOURCE Great Canadian Gaming Corporation
For further information: For enquiries: [email protected] or Ms. Tanya Ruskowski, Executive Assistant to the President and Chief Executive Officer and the Chief Financial Officer, (604) 303-1000; For media enquiries: Sonja Mandic, Director, Media Relations and Social Responsibility, [email protected], 604.889.7114