Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Will Marks – JMP Securities.
Will Marks – JMP Securities
My first question and I think you pretty much covered it but on borrowing from the credit facility which forces you to I guess comply with covenants it seems like the benefits outweigh the burden but 2 to 1 back exiting and having cash available it is kind of as simple as that?
Fred Kleisner
Yes. We though that given the risks we wanted access and we wanted flexibility. By drawing the money now and keeping it on the balance sheet we have that.
Will Marks – JMP Securities
Second question, some numbers on Hard Rock. Where do you stand right now in terms of debt associated with that project?
Rich Szymanski
The debt is being drawn down as the construction is being completed. I don’t know exactly where we are today. Combined it is probably over $1 billion. I think ultimately it will get to some range of close to between $1.2 billion and $1.3 billion.
Will Marks – JMP Securities
Should we estimate where you will end up with about 14% of that figure?
Rich Szymanski
Yes, by the end of the year as the letters of credit that DLJ have posted as they are drawn our ownership interest for accounting purposes is based on cash and as those letters of credit are converted into cash our current position ownership interest of 20% will be reduced down to 14%.
Will Marks – JMP Securities
That actually does take your debt level down over time because it is your percentage or your dollar amount was over $200 million?
Rich Szymanski
That is absolutely true. That has been our plan all along. As we have taken the ownership interest down initially from 33% down to 14% we are focused again more on the management and that effect.
Fred Kleisner
Coincident to that you will see a rather significant increase in our management fee income from Hard Rock.
Will Marks – JMP Securities
I understand. I also would think your actual debt level was going to stay the same you just weren’t going to be increasing it for the project. How has your total been reduced? Because you haven’t taken additional equity?
Rich Szymanski
That is true. In doing the math we initially started out with a $760 million loan of which we had 33%. We will end up somewhere between $1.2 billion and $1.3 billion and we will only have 14% of that. So the dollar amount has been decreased and it has been decreased by the fact that the equity has been funded by DLJ.
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