Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments

Fair Value of Financial Instruments

13.  Fair Value of Financial Instruments

The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate:

Cash and Cash Equivalents

The fair value of the Company’s cash and cash equivalents approximates the carrying value of the Company’s cash and cash equivalents, due to the short maturity of the cash equivalents.

Investment in Corporate Debt Securities

The fair value of the investment in corporate debt securities is estimated based on quoted prices in active markets for identical investments. The investment in corporate debt securities is measured at fair value on a recurring basis.

Loan Receivable

On June 1, 2011, following the purchase of all of the outstanding debt of the M Resort for $230.5 million and the receipt of requisite regulatory approvals, the Company acquired the business in exchange for the debt. The Company purchased all of the outstanding bank and subordinated debt of the M Resort in October 2010 at which time the Company also secured the right to acquire the business of the M Resort in exchange for the property’s outstanding debt obligations.  At December 31, 2010, the $230.5 million loan was recorded as a loan receivable within total other assets on the consolidated balance sheet.  See Note 4 for further information.

Long-term Debt

The fair value of the Company’s Term Loan B component of the senior secured credit facility and senior subordinated notes is estimated based on quoted prices in active markets for identical instruments. The fair value of the remainder of the Company’s senior secured credit facility approximates its carrying value as it is variable rate debt.  The fair value of the Company’s other long-term obligations approximates its carrying value.

Interest Rate Swap Contracts

The fair value of the Company’s interest rate swap contracts is measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curve as of the date of the valuation, subject to a credit adjustment to the LIBOR-based yield curve’s implied discount rates. The credit adjustment reflects the Company’s best estimate as to the Company’s credit quality at September 30, 2011. The interest rate swap contracts are measured at fair value on a recurring basis.

The estimated fair values of the Company’s financial instruments are as follows (in thousands):

	September 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	207,821	$	207,821	$	246,385	$	246,385
Investment in corporate debt securities	6,090		6,090		5,828		5,828
Loan receivable	—		—		230,500		230,500
Financial liabilities:
Long-term debt
Senior secured credit facility	1,637,565		1,630,023		1,589,125		1,589,125
Senior subordinated notes	325,000		343,688		575,000		612,875
Other long-term obligations	1,919		1,919		3,782		3,782
Interest rate swap contracts	1,437		1,437		16,746		16,746