Investment in Eldorado

On December 14, 2007, the Company effectively acquired its Eldorado Interest by transferring the Eldorado-Shreveport Investments in part to Eldorado Resorts, LLC (“Resorts”) and the balance to Donald L. Carano (“Carano”), free and clear of any liens. The Eldorado-Shreveport Investments included first mortgage bonds due 2012 (the “Mortgage Bonds”) and 11,000 preferred shares of a partner of the co-issuer of the Mortgage Bonds. The Mortgage Bonds were co-issued by Eldorado Casino Shreveport Joint Venture (the “Louisiana Partnership”) and Shreveport Capital Corporation, a wholly-owned subsidiary of the Louisiana Partnership (the “New Shreveport Notes”). The original principal amount of the Mortgage Bonds was $38,045,363. The 11,000 preferred shares were issued by Shreveport Gaming Holdings, Inc. (“SGH”), then a partner of the Louisiana Partnership, that is not affiliated with Resorts or the Company. In May 2007, NGOF had contributed the Eldorado-Shreveport Investments to the Company at the estimated fair value of such investments as of that date. Effective April 1, 2009, Resorts became a wholly-owned subsidiary of Eldorado when all of the members of Resorts, including AcquisitionCo, exchanged their interests in Resorts for identical interests in Eldorado. Approximately 85% of the Company’s Eldorado Interest was acquired directly from Resorts and the balance from Carano, 14.47% and 2.5659%, respectively.

The Company’s interest in Eldorado was recorded at estimated fair value based on the quoted market price of the Eldorado-Shreveport Investments ($38,314,863) on the acquisition date, which is considered a level 2 fair value input in GAAP. Such value exceeded 17.0359% of the carrying (or book) value of Resorts’ equity by approximately $14.8 million. The Company attributed $16.1 million of its $38.3 million acquisition price to intangible assets, $15.4 million to indefinite-lived intangibles assets and $0.8 million to definite-lived intangibles assets. Subsequently, the Company has adjusted its equity in the net income (loss) of Eldorado by amortization of the excess purchase price attributed to the definite-lived intangibles, approximately $108,000 annually using an estimated economic life of seven years.

The Company acquired its interest in Eldorado pursuant to the terms and conditions of a purchase agreement, dated July 20, 2007. The parties to the agreement were Resorts, AcquisitionCo, and Carano, now the presiding member of Eldorado’s board of managers and the chief executive officer of Eldorado who then held the same positions with Resorts. Carano or members of his family continue to own directly or indirectly approximately 51% of Eldorado.

Eldorado’s five member board of managers is composed of individuals designated by the parties to the purchase agreement, including one member to be designated by AcquisitionCo, currently Timothy T. Janszen. Members of the board of managers are required to be licensed or found suitable by the relevant Nevada and Louisiana gaming authorities.

As a limited liability company, Eldorado is generally not subject to federal income taxes and its members are required to include their respective shares of Eldorado’s taxable income in their respective income tax returns. Eldorado’s operating agreement provides that the board of managers will distribute each year to each member an amount equal to such member’s allocable share of taxable income multiplied by the highest marginal combined federal, state, and local income tax rate applicable to the members for that year.

Changes in the Company’s investment in Eldorado during the years ended February 28, 2013 and December 31, 2011 and the two months ended February 29, 2012 are as follows:



	February 28, 2013			February 29, 2012		December 31, 2011
	(Restated)
Balance, beginning of period	$	23,861,936		$	23,861,936	$	28,197,330
Equity in net loss of Eldorado	(277,238		)	—		(4,233,314		)
Distributions received from Eldorado	(596,257		)	—		(235,641		)
Eldorado's adoption of ASU 2010-16	—			—		133,561
Balance, end of period	$	22,988,441		$	23,861,936	$	23,861,936

The Company did not record any impairment related to its equity method investment in Eldorado during the years ended February 28, 2013 and December 31, 2011 and the two months ended February 29, 2012. Impairment charges prior to the year ended February 29, 2012 have totaled approximately $3.6 million.

The following tables present condensed financial information of Eldorado as of December 31, 2012 and 2011, and for the years then ended (in thousands).



	December 31, 2012		December 31, 2011
	(Restated)
Balance Sheets
Current assets	$	34,928	$	39,926
Restricted cash	5,000		—
Investment in and advances to unconsolidated affiliate	5,066		5,213
Property and equipment, net	189,713		198,728
Other assets, net	27,818		28,795
Total assets	$	262,525	$	272,662

Current liabilities	$	27,301	$	27,421
Other liabilities	174,221		179,218
Equity	61,003		66,023
Total liabilities and partners' equity	$	262,525	$	272,662



	2012			2011
	(Restated)
Statements of Operations
Net operating revenues	$	254,740		$	256,072
Impairment of Investment in Joint Venture	$	—		$	33,066
Operating income (loss)	$	15,481		$	(13,074	)
Net loss	$	(991	)	$	(29,020	)
Net loss attributable to non-controlling interest	—			4,807
Net loss attributable to Eldorado	$	(991	)	$	(24,213	)

The following tables present condensed financial information of one of Eldorado’s unconsolidated investees, the Silver Legacy Joint Venture, as of December 31, 2012 and 2011 and for the years then ended (in thousands).



	December 31, 2012		December 31, 2011
Balance Sheets
Current assets	$	21,764	$	42,504
Property and equipment, net	206,790		217,038
Other assets, net	15,258		6,979
Total assets	$	243,812	$	266,521

Current liabilities	$	23,571	$	160,598
Other liabilities	134,841		10,081
Partners' equity	85,400		95,842
Total liabilities and partners' equity	$	243,812	$	266,521



	2012			2011
Statements of Operations
Net operating revenues	$	114,800		$	122,855
Operating income	$	1,413		$	5,783
Net loss	$	(19,396	)	$	(9,262	)