TERM LOAN	6 Months Ended
Jun. 30, 2011
TERM LOAN	Note 3. TERM LOAN On May 11, 2006, the Company entered into a Loan Agreement with Goldman Sachs Commercial Mortgage Capital, L.P. (the “Term Loan”). The Term Loan was for an initial principal amount of $209.2 million and for an initial term of two years. The Company has drawn an additional $40.8 million against the Term Loan, the maximum funding of the Term Loan. Covenants under the Term Loan restrict the Company’s future borrowing capacity. The loan had an original two-year term and three, one-year extensions. On August 14, 2009, the Company executed the First Amendment to the Term Loan which extended the loan until June 1, 2011. The Company was required to 1) pay an initial principal payment of $15 million, 2) pay an extension fee of $1.175 million, 3) pay an exit fee of $75,000 for the initial principal payment, 4) purchase an interest rate cap at a cost of $37,500, and 5) pay any out-of-pocket expenses incurred by the lender. On October 30, 2009 the Company was required to pay an additional principal payment of $5.0 million and an exit fee of $25,000 for the additional principal payment. Interest on the loan was based on LIBOR plus 2.9% with a minimum LIBOR rate of 1.5%. Interest incremented to LIBOR plus 3.5% from July 2009 through May 2010 and increased to LIBOR plus 4.0% from June 2010 through May 2011. On July 1, 2010 the Company stopped making interest payments on the Term Loan. The Company accrued interest at a default rate of 5% on the unpaid balance. The Company also incurred a 5% late charge on the accrued interest. The accrued amount totaled $1.1 million and was included in interest expense for the three months ended September 30, 2010. On July 30, 2010 the Company entered into the Second Amendment to the Term Loan which, among other things, forgave the default interest and accrued late charges. The $1.1 million forgiveness of default interest was later reversed and reflected on the statements of operations in the quarter ended September 30, 2010. The Second Amendment to the Term Loan extended the loan until December 31, 2012 and provided the Company with additional loan advances of $22 million. Concurrently, a Participation Agreement was executed between LVH Finance LLC (The “Participant”), an affiliate of the Company, and Goldman Sachs Mortgage Company wherein the Participant funded the $22 million principal advance to the Company. No interest or any fees are to accrue or be paid to the Participant by the Company. The Company received an initial advance on July 30, 2010 of $6.7 million offset by $3.1 million in accrued interest and $0.8 million in closing and loan costs which included an interest rate cap in the amount of $124,000. The remaining funding of the advance, $15.3 million, was funded on August 20, 2010 and was partially offset by $1.2 million in lender fees. The Second Amendment to the Term Loan provides that interest on the Term Loan will be based on LIBOR plus a 4% spread with a minimum LIBOR rate of 1.5%. The spread will increase 0.5% beginning in July 2011 and will increment 0.5% every six months to a maximum of 5.5%. The Second Amendment to the Term Loan allowed the Company to defer making interest payments to a maximum of $10 million. The Second Amendment to the Term Loan also provides for additional liquidity to be provided by the Company’s Members. Members of the Company are required to make contributions, if necessary, up to a maximum of $20 million. The Company elected not to make the interest payments that were due on June 1, 2011, July 1, 2011 and August 1, 2011 in order to conserve liquidity for operating and other needs. The interest payments that were not made amount to $3.5 million. As of July 29, 2011 the Company is in default on its Term Loan. Accordingly, the lender is entitled to exercise various rights, powers and remedies including acceleration of the Loan, termination or suspension of all or any portion of advances or disbursement of funds from restricted cash accounts, accrual of interest at the default rate and the exercise of remedies under collateral documents. The Company is currently in discussions with its lender to negotiate a restructuring of its debt, the outcome of which is uncertain. As of June 30, 2011, the Company has accrued $12.9 million in interest expense of which $10.0 million is a deferral of interest which is allowed under the Second Amendment to the Term Loan, $1.1 million is default interest and late fees, and $1.8 million is additional accrued interest.

TERM LOAN

6 Months Ended

Jun. 30, 2011

Note 3. TERM LOAN

On May 11, 2006, the Company entered into a Loan Agreement with Goldman Sachs Commercial Mortgage Capital, L.P. (the “Term Loan”). The Term Loan was for an initial principal amount of $209.2 million and for an initial term of two years. The Company has drawn an additional $40.8 million against the Term Loan, the maximum funding of the Term Loan. Covenants under the Term Loan restrict the Company’s future borrowing capacity. The loan had an original two-year term and three, one-year extensions.

On August 14, 2009, the Company executed the First Amendment to the Term Loan which extended the loan until June 1, 2011. The Company was required to 1) pay an initial principal payment of $15 million, 2) pay an extension fee of $1.175 million, 3) pay an exit fee of $75,000 for the initial principal payment, 4) purchase an interest rate cap at a cost of $37,500, and 5) pay any out-of-pocket expenses incurred by the lender. On October 30, 2009 the Company was required to pay an additional principal payment of $5.0 million and an exit fee of $25,000 for the additional principal payment. Interest on the loan was based on LIBOR plus 2.9% with a minimum LIBOR rate of 1.5%. Interest incremented to LIBOR plus 3.5% from July 2009 through May 2010 and increased to LIBOR plus 4.0% from June 2010 through May 2011.

On July 1, 2010 the Company stopped making interest payments on the Term Loan. The Company accrued interest at a default rate of 5% on the unpaid balance. The Company also incurred a 5% late charge on the accrued interest. The accrued amount totaled $1.1 million and was included in interest expense for the three months ended September 30, 2010. On July 30, 2010 the Company entered into the Second Amendment to the Term Loan which, among other things, forgave the default interest and accrued late charges. The $1.1 million forgiveness of default interest was later reversed and reflected on the statements of operations in the quarter ended September 30, 2010.

The Second Amendment to the Term Loan extended the loan until December 31, 2012 and provided the Company with additional loan advances of $22 million. Concurrently, a Participation Agreement was executed between LVH Finance LLC (The “Participant”), an affiliate of the Company, and Goldman Sachs Mortgage Company wherein the Participant funded the $22 million principal advance to the Company. No interest or any fees are to accrue or be paid to the Participant by the Company. The Company received an initial advance on July 30, 2010 of $6.7 million offset by $3.1 million in accrued interest and $0.8 million in closing and loan costs which included an interest rate cap in the amount of $124,000. The remaining funding of the advance, $15.3 million, was funded on August 20, 2010 and was partially offset by $1.2 million in lender fees. The Second Amendment to the Term Loan provides that interest on the Term Loan will be based on LIBOR plus a 4% spread with a minimum LIBOR rate of 1.5%. The spread will increase 0.5% beginning in July 2011 and will increment 0.5% every six months to a maximum of 5.5%. The Second Amendment to the Term Loan allowed the Company to defer making interest payments to a maximum of $10 million. The Second Amendment to the Term Loan also provides for additional liquidity to be provided by the Company’s Members. Members of the Company are required to make contributions, if necessary, up to a maximum of $20 million.

The Company elected not to make the interest payments that were due on June 1, 2011, July 1, 2011 and August 1, 2011 in order to conserve liquidity for operating and other needs. The interest payments that were not made amount to $3.5 million. As of July 29, 2011 the Company is in default on its Term Loan. Accordingly, the lender is entitled to exercise various rights, powers and remedies including acceleration of the Loan, termination or suspension of all or any portion of advances or disbursement of funds from restricted cash accounts, accrual of interest at the default rate and the exercise of remedies under collateral documents. The Company is currently in discussions with its lender to negotiate a restructuring of its debt, the outcome of which is uncertain.

As of June 30, 2011, the Company has accrued $12.9 million in interest expense of which $10.0 million is a deferral of interest which is allowed under the Second Amendment to the Term Loan, $1.1 million is default interest and late fees, and $1.8 million is additional accrued interest.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details