Marketable Securities, Eldorado Resorts, Inc.

Effective September 19, 2014, as a result of the ERI Merger, the Company’s previous interest in Eldorado was converted into 4,030,440 shares of ERI common stock, $0.00001 par value, including post-closing adjustments, representing approximately 8.6% of such shares then outstanding. Upon conversion, the fair market value of the ERI shares, based on then current trading activity, was approximately $7.1 million less than the carrying value of the Eldorado Interest prior to the ERI Merger, resulting in a write down of the Company's investment and a charge to other comprehensive loss for an unrealized holding loss. Subsequently through August 31, 2015, additional adjustments to carrying value of the ERI shares based on trading activity have resulted in an unrealized holding gain of approximately $21.3 million ($19.4 million during the six months ended August 31, 2015).

Through the date of this filing, the estimated fair value of the ERI common shares based on trading activity has not changed materially from the carrying value as of August 31, 2015.

The original cost of the Company’s investment in Eldorado in 2007 (prior to subsequent impairment charges and equity in the earnings (losses) of the investee through September 18, 2014) was approximately $38 million.

The following table presents unaudited condensed financial information of ERI and Eldorado for the three and six months ended June 30, 2015 and 2014, respectively (in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015			2014
Net operating revenues	$	182,633	$	61,749	$	350,084		$	118,779
Operating income	$	23,059	$	6,775	$	35,143		$	8,327
Net income (loss)	$	4,795	$	2,909	$	(1,369	)	$	576

Recent events involving ERI include, among others, the following:

•

On July 7, 2015, certain of ERI's subsidiaries entered into an agreement to purchase from subsidiaries of MGM Resorts International (1) a 50% membership interest in the joint venture that owns and operates the Silver Legacy which would increase ERI’s total interest to approximately 98.1% and (2) all of the assets and properties of Circus Circus Reno. ERI also expects to acquire the remaining 1.9% indirect interest in the Silver Legacy joint venture held by certain affiliates of ERI. The purchase price is $72.5 million, subject to a customary working capital adjustment, plus the assumption of amounts outstanding under the joint venture’s credit facility, of which approximately $82.0 million was outstanding at June 30, 2015.

•

On July 13, 2015, ERI commenced a cash tender offer and consent solicitations for any and all of the $168.0 million principal amount of 8.625% Senior Secured Notes due 2019 issued by ERI's wholly owned subsidiaries, Eldorado Resorts, LLC and Eldorado Capital Corp. (the "Eldorado Notes") and for any and all of the $560.7 million principal amount of 11.50% Senior Secured Second Lien Notes due 2019 issued by ERI's wholly owned subsidiary, MTR Gaming Group, Inc. (the "MTR Notes"). The total consideration offered in the tender offer was $1,047.92 per $1,000 principal amount of the Eldorado Notes tendered and accepted for purchase and $1,066.39 per $1,000 principal amount of MTR Notes tendered and accepted for purchase, which included $30 per $1,000 in principal amount of Eldorado Notes and MTR Notes. According to ERI’s public disclosure, the tender offer was consummated on July 23, 2015, and approximately $130.0 million in aggregate principal amount of Eldorado Notes and $403.9 million in aggregate principal amount of MTR Notes were accepted for purchase, with the Eldorado Notes and MTR Notes that remained outstanding following the consummation of the tender offer being satisfied and discharged pursuant to the terms of the indentures governing those notes.

•

On July 14, 2015, ERI filed a registration statement relating to a proposed common stock offering with a maximum aggregate offering price of $80 million, excluding the exercise of any overallotment option. ERI intends to use the net proceeds of the offering, together with proposed new borrowings ($425 million term loan and a $150 million revolving credit line), proceeds from the sale of new senior notes, and cash on hand, to (1) purchase or otherwise redeem all of the outstanding ERI Notes (2) pay the purchase price for the Circus Reno/Silver Legacy proposed acquisition and repay all amounts outstanding under the current Silver Legacy credit facility, and (3) pay fees and costs associated with such transactions.

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On July 23, 2015, ERI entered into a new $425 million seven-year term loan (the "New ERI Term Loan") and a new $150 million five-year revolving credit facility (the "New ERI Revolving Credit Facility" and, together with the New ERI Term Loan, the “New ERI Credit Facility”). Also on July 23, 2015, ERI incurred $40 million of borrowings under the New ERI Revolving Credit Facility. The New ERI Term Loan will bear interest at a rate per annum of, at ERI’s option, either (x) LIBOR plus 3.25%, with a LIBOR floor of 1.0%, or (y) a base rate plus 2.25%, and will have an issue price of 99.5% of the principal amount of the New ERI Term Loan. The New ERI Revolving Credit Facility will bear interest at a rate per annum of, at ERI’s option, either (x) LIBOR plus a spread ranging from 2.5% to 3.25%, or (y) a base rate plus a spread ranging from 1.5% to 2.25%, in each case with the spread determined based on ERI’s total leverage ratio. Additionally, ERI will be subject to fees on the unused portion of the New ERI Revolving Credit Facility. The New ERI Credit Facility is secured by substantially all of ERI’s personal property assets and substantially all personal property assets of each subsidiary that guaranties the New ERI Credit Facility (other than certain subsidiary guarantors designated as immaterial or restricted subsidiaries), and mortgages on the real property and improvements owned or leased by ERI or a guarantor.

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On July 23, 2015, ERI issued $375.0 million in aggregate principal amount of 7.0% Senior Notes due 2023 (the “New ERI Notes”) pursuant to an indenture, dated as of July 23, 2015 (the “Indenture”), at an issue price equal to 100.0% of the aggregate principal amount of the New ERI Notes. The New ERI Notes are guaranteed by all of ERI’s direct and indirect restricted subsidiaries other than immaterial subsidiaries. According to the public statements of ERI, it has used or will use the net proceeds from the New ERI Notes offering together with borrowings under the New ERI Term Loan and the New ERI Revolving Credit Facility to (i) purchase or otherwise redeem all of the outstanding Eldorado Notes and all of the outstanding MTR Notes, (ii) pay a portion of the purchase price for the Circus Reno/Silver Legacy Purchase and repay all amounts outstanding under the Silver Legacy Joint Venture credit facility, and (iii) pay fees and costs associated with such transactions. According to ERI’s public disclosure, $50.0 million of the net proceeds from the New ERI Notes offering, plus interest to the latest possible redemption date, were placed in escrow, to be released only if the Circus Reno/Silver Legacy Purchase is consummated on or prior to April 1, 2016; otherwise, $50.0 million in aggregate principal amount of the New ERI Notes will be subject to a special mandatory redemption, on a pro rata basis, at a redemption price equal to 100.0% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.

Management believes that ERI’s future consummation or failure to consummate the Circus Reno/Silver Legacy acquisition and / or its contemplated debt refinancing are likely to significantly impact the Company’s future financial performance. However, the nature and extent of any such impact will depend on numerous factors that are beyond the control of the Company. Accordingly, management is unable to determine at this time the nature or extend to which the Company’s future financial performance may be affected by these future events.