lixir Gaming currently operates 237 machines at Premier Club at NagaWorld, which have been achieving average win per unit per day (WUD) of over us$ 200 during May, June, and month to date in July. NagaWorld is a five-star hotel luxury casino resort in Cambodia and is the only licensed full service casino in and around the capital city of Phnom Penh.
Clarence Chung, Chairman and CEO of the company, commented: “We are pleased to work with NagaWorld to expand its slot floor operations and to further strengthen our existing relationship with such a well-established gaming operator with a proven track record of operating excellence, deep industry experience, and extensive local market knowledge. Given NagaWorld’s position as the exclusive casino license holder in the Phnom Penh area and our demonstrated success at Premier Club at NagaWorld, we feel confident that we can continue to drive strong growth in participation revenues with these additional placements.”
Under the terms of the agreement, Elixir Gaming will place 200 electronic gaming machines in a prescribed area of NagaWorld’s public casino floor of the casino wing and will share in the gross revenue generated by each of these machines. Both companies will have joint control over the operation of the electronic gaming machines, including floor staff and respective audit rights.
Elixir Gaming and NagaWorld will share the revenue and certain operating costs, such as marketing and floor staff, at a 20% / 80% split, respectively. Elixir Gaming anticipates the Additional Machines, which will be predominantly sourced from the Company’s existing inventory, to be in operation within the third quarter.
In consideration for placement of the Additional Machines, Elixir Gaming shall pay a commitment fee of us$ 5.84 million to NagaWorld. Elixir Gaming will be entitled to 100% of the WUD from the Additional Machines until it has received the total accumulated WUD of us$ 7.3 million (the commitment fee plus Elixir Gaming’s 20% share of the WUD). Revenues from the Additional Machines will be settled and collected daily by Elixir Gaming.
Also today, the company announced that it has entered into an agreement with Elixir International (ELI), a wholly-owned subsidiary of Elixir Group, to amend the unsecured promissory note issued by the Company in April 2008 and as amended in November 2008 to Elixir International.
Under the amended note terms, which are to be effective as of July 1, 2009, Elixir Gaming will defer the repayment of principal and interest on the outstanding principal balance of the note of us$ 9.2 million until July 2010. Interest at the previous rate of 5% will continue to accrue. These terms provide cash flow benefits to Elixir Gaming by reducing cash outlays approximately us$ 1.6 million per quarter until July 2010 and improve financial flexibility enabling the company to pursue high-potential growth opportunities, such as the NagaWorld expansion.
In July 2010, Elixir Gaming will resume equal monthly payments to ELI to repay the remaining principal and interest over an 18-month period. Depending on the available financial resources of the company, it may also prepay all or any part of the outstanding amounts under the convertible note at any time before note maturity date.
Under the previous note terms as amended in November 2008, Elixir Gaming was required to repay the outstanding principal balance under the note, which at that time was us$ 12.1 million, in equal monthly installments of approximately us$ 529,000 for the 24-month period beginning January 2009.
Clarence Chung, Chairman and CEO of the company, concluded: “We appreciate the efforts of our largest shareholder, Elixir Group, and its subsidiary, Elixir International, in working to effect this agreement, which we believe demonstrates their continued support of the Company and creates immediate value for our shareholders. Our ability to defer principal and interest payments provides us strong cash flow benefits and improved financial flexibility. This enables the Company to capitalize on exciting growth opportunities, such as the expansion of our slot operations at NagaWorld, which we expect will be strong contributors to future cash flow."