Full House Resorts (FLL) Announces Proposed $5M Rights Offering

August 15, 2016 2:08 PM EDT

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Full House Resorts, Inc. (Nasdaq: FLL) announced that it has filed a registration statement on Form S-3 with the Securities and Exchange Commission for a proposed $5,000,000 rights offering. The company expects to distribute, at no charge, non-transferable subscription rights to purchase shares of our common stock, par value $0.0001 per share, for $1.30 per share. The subscription rights will be exercisable for up to a total of 3,846,154 shares of Full House’s common stock.

In the proposed rights offering, each right will entitle the holder to a basic subscription right and an over-subscription right. Under the basic subscription right, each whole right entitles its holder to purchase 0.2022 new shares for each share of our common stock held as of 5:00 p.m., Pacific time, on August 25, 2016 (the "rights distribution record date"), which is the same as one new share for each 4.9449 shares held as of the rights distribution record date. Under the over-subscription right, each rightsholder exercising its basic subscription right in full will have the right to subscribe, at the subscription price, for additional shares to the extent not purchased by other rightsholders, which may be up to five times such rightsholder’s basic subscription right and to the extent available following the purchase of 1,000,000 shares by the standby purchaser. If we receive oversubscription requests for more shares of our common stock than we have available for oversubscriptions, each requesting rightsholder will receive its pro rata portion of the available shares based on the number of shares it purchased under its basic subscription right. If following allocation of available shares to all oversubscribing rightsholders we have allocated fewer than 3,846,154 shares (including the first 1,000,000 shares allocated to the standby purchaser), the standby purchaser will purchase the remaining shares, subject to a cap of 98.85% of the shares being offered. Under Nasdaq rules, the purchase of more than 3,801,860 shares by the standby purchaser would require shareholder approval, and for reasons of cost and expediency, the company has chosen to not seek such approval.

The total gross proceeds of the proposed rights offering is highly likely to be $5,000,000 whether or not fully subscribed by the rightsholders because we are entering into a standby purchaser agreement with Daniel R. Lee, our chief executive officer, president and a director (the “standby purchaser”). The standby purchaser has agreed to purchase all shares not purchased by the rightsholders at the subscription price to the extent necessary to generate $5,000,000 in gross proceeds, subject to the cap mentioned above. Consummation of the standby purchase is subject to usual and customary closing conditions.

We have been informed by each of Bradley M. Tirpak, our chairman of the board; Daniel R. Lee, our president and chief executive officer and a director of our company; and Craig W. Thomas, a director of our company, that he intends to exercise his basic subscription rights in full and may exercise his oversubscription rights as well. Collectively, these individuals will receive basic rights to purchase approximately 7.3% of the common stock offered in the rights offering. These intentions, combined with the standby purchaser's commitment, provide further assurance that the company will receive all $5 million of intended proceeds. However, neither our board of directors nor our management has made any recommendation as to whether you should exercise your rights.

The purpose of the proposed rights offering is to raise equity capital in a cost-effective manner that allows current holders of common stock to participate. The net proceeds will be used to partially fund approximately $10 million of growth projects at existing properties. These projects include refurbishment of the Grand Lodge Casino; new parking and entrances at Stockman’s Casino; a VIP gaming area, sense of arrival improvements, a new casino restaurant, an RV park, and a ferry boat service at Rising Star Casino Resort; a pool and beach complex at Silver Slipper Casino and Hotel; design work for a future hotel addition at Bronco Billy’s Casino and Hotel; and for general corporate purposes. All of these improvements (except for the new potential hotel at Bronco Billy's) are anticipated to be completed within approximately two years. Additionally, our first lien credit agreement has a provision which requires the company to raise a minimum of $5,000,000 in equity capital no later than May 13, 2017 to prevent the interest rate on our first lien debt from increasing by 50 basis points, which would cost the company approximately $0.2 million per year in additional interest expense. For additional information, please see “Use of Proceeds” in the company’s registration statement.

A registration statement on Form S-3 relating to these securities has been filed with the Securities and Exchange Commission. A copy of the prospectus forming a part of the registration statement may be obtained free of charge at the website maintained by the SEC at www.sec.gov.

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