Long-Term Debt

6 Months Ended

Jun. 30, 2011

Long-Term Debt

Long-Term Debt

NOTE 5 — Long-Term Debt

On April 12, 2011, Dover Motorsports, Inc. and its wholly owned subsidiaries Dover International Speedway, Inc. and Nashville Speedway, USA, Inc., as co-borrowers, entered into a $65,000,000 secured credit agreement with a new bank group.  There was $31,400,000 outstanding under the credit facility at June 30, 2011, at an interest rate of 3.45%.  The maximum borrowing limit under the facility reduces to $60,000,000 as of March 31, 2012 and $55,000,000 as of March 31, 2013 and the facility expires April 12, 2014.  The credit facility provides for seasonal funding needs, capital improvements, letter of credit requirements and other general corporate purposes.  Interest through June 30, 2011 was based upon LIBOR plus 325 basis points.  Interest subsequent to June 30, 2011 is based upon LIBOR plus a margin that varies between 200 and 325 basis points depending on the leverage ratio.  The terms of the credit facility contain certain covenants including minimum interest coverage and maximum funded debt to earnings before interest, taxes, depreciation and amortization.  Material adverse changes in our results of operations could impact our ability to maintain financial ratios necessary to satisfy these requirements.  We expect to be in compliance with the financial covenants, and all other covenants, for all measurement periods during the next twelve months.  In addition, the credit agreement includes a material adverse change clause, prohibits the payment of dividends by us and provides the lenders with a first lien on all of our assets.  The credit facility also provides that if we default under any other loan agreement, that would be a default under this facility.   At June 30, 2011, we were in compliance with the terms of the credit facility.  After consideration of stand-by letters of credit outstanding, the remaining maximum borrowings available pursuant to the credit facility were $12,248,000 at June 30, 2011; however, in order to maintain compliance with the required quarterly debt covenant calculations as of June 30, 2011 $11,148,000 could have been borrowed as of that date.

In 1996, Midwest Racing, Inc. entered into an agreement (the “SWIDA bonds”) with Southwestern Illinois Development Authority (“SWIDA”) to receive the proceeds from the “Taxable Sports Facility Revenue Bonds, Series 1996 (Gateway International Motorsports Corporation Project),” a Municipal Bond Offering, in the aggregate principal amount of $21,500,000.  SWIDA loaned all of the proceeds from the Municipal Bond Offering to Midwest Racing for the purpose of the redevelopment, construction and expansion of Gateway International Raceway (“Gateway”).  The proceeds of the SWIDA bonds were irrevocably committed to complete construction of Gateway, to fund interest, to create a debt service reserve fund and to pay for the cost of issuance of the bonds.  The repayment terms and debt service reserve requirements of the bonds issued in the Municipal Bond Offering corresponded to the terms of the SWIDA bonds.  The bonds were being amortized through February 2012.

We had established certain restricted cash funds to meet debt service as required by the SWIDA bonds, which were held by the trustee (BNY Trust Company of Missouri).  The SWIDA bonds were secured by a first mortgage lien on all the real property owned and a security interest in all property leased by Gateway.  Also, the SWIDA bonds were unconditionally guaranteed by Midwest Racing.  The SWIDA bonds bore interest at a rate of 9.2%.  Interest expense related to the SWIDA bonds was $41,000 and $91,000 for the three and six-month periods ended June 30, 2010 and is included in loss from discontinued operation in the accompanying consolidated statements of operations.

On July 21, 2010, we redeemed the $1,751,000 of remaining outstanding SWIDA bonds for $1,909,000 (including a $158,000 premium to the bondholders).  The redemption resulted in a loss on extinguishment of debt of $208,000 (including the premium, professional fees and the write-off of deferred financing costs) in the second quarter of 2010.  Subsequent to redeeming the SWIDA bonds, the remaining restricted cash was returned to us by the trustee.