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Form 10-Q MOHEGAN TRIBAL GAMING For: Jun 30

August 11, 2022 1:35 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 
_________________________________
FORM 10-Q
 _____________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission file number 033-80655
 __________________________________________
MOHEGAN TRIBAL GAMING AUTHORITY
(Exact name of registrant as specified in its charter)
 __________________________________________ 
Not Applicable 06-1436334
(State or other jurisdiction
of incorporation or organization)
 (IRS Employer
Identification No.)
One Mohegan Sun Boulevard,Uncasville,CT 06382
(Address of principal executive offices) (Zip Code)
(860) 862-8000
(Registrant’s telephone number, including area code)
 ___________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each
exchange on which registered
NoneNoneNone

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  *
*The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required during the preceding 12 months had it been subject to such filing requirements.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  





MOHEGAN TRIBAL GAMING AUTHORITY
INDEX TO FORM 10-Q
  Page
Number
PART I.
Item 1.

Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 6.
Signatures.




PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements
MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, 2022September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents$156,907 $149,822 
Restricted cash and cash equivalents4,666 5,259 
Accounts receivable, net49,871 40,772 
Inventories20,272 18,455 
Due from Ontario Lottery and Gaming Corporation13,642 16,711 
Contract asset37,196 32,665 
Other current assets33,562 56,466 
Total current assets316,116 320,150 
Restricted cash and cash equivalents
375,987 9,616 
Property and equipment, net
1,598,135 1,531,619 
Right-of-use assets323,067 362,008 
Intangible assets, net313,034 327,255 
Contract asset, net of current portion64,442 87,262 
Notes receivable
2,514 2,514 
Other assets, net
75,390 89,453 
Total assets$3,068,685 $2,729,877 
LIABILITIES AND CAPITAL
Current liabilities:
Current portion of long-term debt$44,012 $80,276 
Current portion of finance lease obligations4,039 5,836 
Current portion of operating lease obligations5,510 9,616 
Trade payables11,551 23,675 
Accrued payroll62,249 53,352 
Construction payables31,849 53,120 
Accrued interest payable53,661 37,546 
Due to Ontario Lottery and Gaming Corporation2,502 22,253 
Other current liabilities178,720 159,802 
Total current liabilities394,093 445,476 
Long-term debt, net of current portion
2,260,208 1,858,478 
Finance lease obligations, net of current portion
109,882 109,189 
Operating lease obligations, net of current portion377,177 410,090 
Warrants and put option liabilities64,136  
Accrued payroll
 3,529 
Other long-term liabilities
39,872 36,357 
Total liabilities3,245,368 2,863,119 
Commitments and Contingencies
Capital:
Retained deficit(134,001)(133,087)
Accumulated other comprehensive loss(45,204)(2,065)
Total capital attributable to Mohegan Tribal Gaming Authority(179,205)(135,152)
Non-controlling interests2,522 1,910 
Total capital(176,683)(133,242)
Total liabilities and capital$3,068,685 $2,729,877 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
 
Three Months EndedNine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Revenues:
Gaming$293,973 $241,289 $841,196 $623,674 
Food and beverage35,622 20,826 96,157 45,209 
Hotel30,256 22,188 84,989 55,882 
Retail, entertainment and other57,227 43,886 155,175 112,833 
Net revenues417,078 328,189 1,177,517 837,598 
Operating costs and expenses:
Gaming, including related party transactions of
$808, $(345), $2,426 and $1,262, respectively
139,760 122,326 424,787 329,392 
Food and beverage29,521 17,544 79,724 40,640 
Hotel, including related party transactions of
$2,161, $2,161, $6,483 and $6,483, respectively
12,354 8,926 34,792 25,907 
Retail, entertainment and other20,571 10,276 56,357 24,412 
Advertising, general and administrative, including related party
transactions of $11,600, $6,327, $36,162 and $22,604, respectively
79,377 55,661 226,770 154,165 
Corporate, including related party transactions of
$1,726, $1,702, $5,746 and $4,966, respectively
15,278 11,238 50,380 35,230 
Depreciation and amortization26,085 27,140 77,653 79,502 
Impairment of tangible assets  17,679  
Impairment of intangible assets  12,869  
Other, net4,006 11,037 13,735 28,843 
Total operating costs and expenses326,952 264,148 994,746 718,091 
Income from operations90,126 64,041 182,771 119,507 
Other income (expense):
Interest income64 125 313 129 
Interest expense, net(53,969)(43,929)(151,055)(128,256)
Loss on modification and early extinguishment of debt(3)(20)(3)(23,978)
Gain on fair value adjustment26,796  20,635  
Other, net83 2,373 (2,595)5,665 
Total other expense(27,029)(41,451)(132,705)(146,440)
Income (loss) before income tax63,097 22,590 50,066 (26,933)
Income tax benefit (provision)(3,534)3,312 (4,553)10,101 
Net income (loss)59,563 25,902 45,513 (16,832)
Income attributable to non-controlling interests(199)(535)(612)(411)
Net income (loss) attributable to Mohegan Tribal Gaming Authority59,364 25,367 44,901 (17,243)
Comprehensive income (loss):
Foreign currency translation adjustment(29,723)216 (43,139)10,660 
Other comprehensive income (loss)(29,723)216 (43,139)10,660 
Other comprehensive income attributable to non-controlling interests   (1,376)
Other comprehensive income (loss) attributable to
Mohegan Tribal Gaming Authority
(29,723)216 (43,139)9,284 
Comprehensive income (loss) attributable to
Mohegan Tribal Gaming Authority
$29,641 $25,583 $1,762 $(7,959)
The accompanying notes are an integral part of these condensed consolidated financial statements.


4


MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(in thousands)
(unaudited)

 
Retained DeficitAdditional Paid-in CapitalAccumulated Other
Comprehensive
Income (Loss)
Total Capital Attributable to Mohegan Tribal Gaming Authority Non-controlling InterestsTotal
Capital
Balance, March 31, 2022$(175,787)$ $(15,481)$(191,268)$2,323 $(188,945)
Net income59,364 — — 59,364 199 59,563 
Foreign currency translation adjustment— — (29,723)(29,723)— (29,723)
Distributions to Mohegan Tribe(17,500)— — (17,500)— (17,500)
Distributions to Salishan Company, LLC related to the Cowlitz Project(78)— — (78)— (78)
Balance, June 30, 2022$(134,001)$ $(45,204)$(179,205)$2,522 $(176,683)
Balance, September 30, 2021$(133,087)$ $(2,065)$(135,152)$1,910 $(133,242)
Net income 44,901 — — 44,901 612 45,513 
Foreign currency translation adjustment— — (43,139)(43,139)— (43,139)
Contribution from Mohegan Tribe— 325 — 325 — 325 
Distributions to Mohegan Tribe(45,175)(325)— (45,500)— (45,500)
Distributions to Salishan Company, LLC related to the Cowlitz Project(640)— — (640)— (640)
Balance, June 30, 2022$(134,001)$ $(45,204)$(179,205)$2,522 $(176,683)
Balance, March 31, 2021$(142,563)$ $9,291 $(133,272)$1,164 $(132,108)
Net income 25,367 — — 25,367 535 25,902 
Foreign currency translation adjustment— — 216 216 — 216 
Contribution from Mohegan Tribe— 2,814 — 2,814 — 2,814 
Distributions to Mohegan Tribe(12,186)(2,814)— (15,000)— (15,000)
Distributions to Salishan Company, LLC related to the Cowlitz Project(159)— — (159)— (159)
Balance, June 30, 2021$(129,541)$ $9,507 $(120,034)$1,699 $(118,335)
Balance, September 30, 2020$(75,692)$ $223 $(75,469)$7,480 $(67,989)
Net income (loss)(17,243)— — (17,243)411 (16,832)
Foreign currency translation adjustment— — 9,284 9,284 1,376 10,660 
Contribution from Mohegan Tribe— 2,814 — 2,814 — 2,814 
Distributions to Mohegan Tribe(36,186)(2,814)— (39,000)— (39,000)
Distributions to Salishan Company, LLC related to the Cowlitz Project(420)— — (420)— (420)
Other— — — — (7,568)(7,568)
Balance, June 30, 2021$(129,541)$ $9,507 $(120,034)$1,699 $(118,335)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5


MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Nine Months Ended
June 30, 2022June 30, 2021
Cash flows provided by operating activities:
Net income (loss)$45,513 $(16,832)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization
77,653 79,502 
Non-cash operating lease expense6,371 9,072 
Accretion of discounts
1,582 974 
Amortization of discounts and debt issuance costs
11,548 15,309 
Paid-in-kind interest 22,065  
Gain on fair value adjustment(20,635) 
Loss on modification and early extinguishment of debt 23,725 
Provision for losses on receivables
3,902 3,493 
Deferred income taxes4,634 (10,382)
Impairment charges30,548  
Other, net
2,839 (6,612)
Changes in operating assets and liabilities:
Accounts receivable, net(13,392)(7,823)
Inventories(1,858)(689)
Due from Ontario Lottery and Gaming Corporation3,205 (194)
Contract asset16,495 6,185 
Other assets25,490 (328)
Trade payables(12,178)2,565 
Accrued interest payable14,607 23,421 
Due to Ontario Lottery and Gaming Corporation(19,667)6,101 
Operating lease obligations(3,600)13,016 
Other liabilities33,375 4,617 
Net cash flows provided by operating activities228,497 145,120 
Cash flows used in investing activities:
Purchases of property and equipment
(201,549)(33,358)
Investments related to the Inspire Korea project(5,611) 
Other, net(2,029)1,206 
Net cash flows used in investing activities(209,189)(32,152)
Cash flows provided by (used in) financing activities:
Proceeds from revolving credit facilities797,091 697,153 
Repayments on revolving credit facilities(861,836)(804,153)
Proceeds from issuance of long-term debt619,570 1,223,802 
Repayments of long-term debt(48,502)(1,135,356)
Payments on finance lease obligations(4,614)(808)
Contributions from affiliates325 2,814 
Distributions to affiliates(46,140)(39,420)
Payments of financing fees(66,911)(24,082)
Other, net(1,607)(1,000)
Net cash flows provided by (used in) financing activities387,376 (81,050)
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents406,684 31,918 
Effect of exchange rate on cash, cash equivalents, restricted cash and restricted cash equivalents
(33,821)1,625 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
164,697 142,069 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$537,560 $175,612 
6


Nine Months Ended
June 30, 2022June 30, 2021
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the condensed consolidated balance sheets:
Cash and cash equivalents$156,907 $158,406 
Restricted cash and cash equivalents, current4,666 2,002 
Restricted cash and cash equivalents, non-current375,987 15,204 
Cash, cash equivalents, restricted cash and restricted cash equivalents
$537,560 $175,612 
Supplemental disclosures:
Cash paid for interest$107,801 $86,810 
Non-cash transactions:
Right-of-use assets additions (reductions)$(27,363)$24,787 
Right-of-use obligations additions (reductions)$(27,363)$24,154 
Paid-in-kind interest capitalized$7,029 $ 
Paid-in-kind interest converted to debt$23,872 $ 
Increase in construction payables$ $44,735 
Finance lease assets and obligations
$ $79,102 
Senior secured credit facility reduction $ $45,000 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 — Organization and Basis of Presentation
Organization
The Mohegan Tribal Gaming Authority (the “Company,” “we,” “us,” or “our”) was established by the Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe”) in July 1995. We have the exclusive authority to conduct and regulate gaming activities for the Mohegan Tribe on tribal lands and the non-exclusive authority to conduct such activities elsewhere. The Mohegan Tribe is a sovereign Indian nation with independent legal jurisdiction over its people and land.
We are primarily engaged in the ownership, operation and development of integrated entertainment facilities. We currently own two facilities in the United States and operate five facilities in the United States and Canada. We are also currently developing a facility in South Korea, the Inspire Entertainment Resort located adjacent to the Incheon International Airport (“Inspire Korea”).
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and the United States federal government declared it a national emergency. The spread of COVID-19 has affected most segments of the global economy, including our operations. In March 2020, we temporarily suspended operations at our properties in the United States and Canada to ensure the health and safety of our employees, guests and the surrounding communities in which we operate, consistent with directives from various governmental bodies. All of our properties in the United States were reopened by July 2020. Our properties in Canada reopened in July 2021, but were temporarily closed again from January 5, 2022 through January 30, 2022, due to a resurgence of COVID-19 at that time.
COVID-19 has had a significant impact on our operations, the full extent of which depends on future developments which are highly uncertain and cannot be predicted with confidence. Such developments include the following:
the duration of COVID-19 or the extent of any resurgence or variants of COVID-19;
the manner in which our guests, suppliers and other third parties respond to COVID-19, including the perception of safety and health measures we implemented;
new information that may emerge concerning the severity of COVID-19 and the actions to contain or treat it;
general economic conditions; and
consumer confidence.
Accordingly, we cannot reasonably estimate the extent to which COVID-19 will further impact our future financial condition, results of operations and cash flows.
We could experience other potential adverse impacts as a result of COVID-19, including, but not limited to, charges from further adjustments to the carrying value of our intangible assets, as well as other long-lived asset impairment charges. Actual results may differ materially from our current estimates as the scope of COVID-19 evolves, depending largely, but not exclusively, on the duration and extent of our business disruptions.
Basis of Presentation 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by US GAAP. All adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of our operating results for the interim period, have been included.
Our results of operations for these interim periods are not necessarily indicative of operating results for other interim periods, full fiscal years or any other periods, particularly given the impact of COVID-19 as discussed above.
8

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. The preparation of financial statements in conformity with US GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities.
Similar to other sovereign governments, the Mohegan Tribe and its entities, including the Company, are not subject to United States federal income taxes. However, certain of our non-tribal entities are subject to income taxes in various state and local jurisdictions within the United States and in Canada.
Inspire Korea
The initial phase of Inspire Korea primarily consists of an integrated entertainment resort. Design and construction work was temporarily paused in September 2020 while we were in the process of securing the necessary financing for the project, which was completed in November 2021 (see Note 2). During this temporary pause in construction, Inspire Korea obtained approval to modify its development plan and adjust the timing of a future sub-phase of the initial phase of the project.
On December 27, 2021, Inspire Korea elected to terminate a licensing arrangement for a previously-planned sub-phase and discontinue related design work. As a result, we recognized an intangible asset impairment of $12.9 million related to the licensing arrangement and a tangible asset impairment of $17.7 million on the related construction in progress.
Recently Issued Accounting Pronouncements
ASU 2019-12
In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies various aspects related to the accounting for income taxes. This new standard removes certain exceptions to the general principles in ASU 2019-12 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 was effective for annual reporting periods beginning after December 15, 2020. There was no effect on the Company’s financial statements from adopting this new standard.
ASU 2021-10
In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU 2021-10”), which requires business entities to provide certain disclosures about government transactions that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance. ASU 2021-10 is effective for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the effect ASU 2021-10 will have on its disclosures.
9

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Note 2 — Long-Term Debt
June 30, 2022September 30, 2021
(in thousands)Final MaturityFace ValueBook ValueBook Value
Senior Secured Credit Facility2024$ $ $27,000 
Line of Credit2024  20,227 
2021 8% Senior Secured Notes
20261,175,000 1,160,271 1,157,731 
2016 7 7/8% Senior Unsecured Notes2024500,000 495,033 493,599 
MGE Niagara Credit Facility
Revolving
2024  27,534 
Swingline202414,372 14,372 4,333 
Term Loan202465,926 65,322 68,965 
MGE Niagara Convertible Debenture204031,024 31,024 31,468 
Inspire Korea Credit Facility2025321,272 267,961  
MGE Korea Term Loan2027298,872 203,467  
Mohegan Expo Credit Facility (1)
2022  25,697 
Guaranteed Credit Facility202325,812 25,459 27,208 
Redemption Note Payable202444,620 39,909 53,130 
OtherVaries1,402 1,402 1,862 
Long-term debt2,478,300 2,304,220 1,938,754 
Current portion of long-term debt(44,012)(44,012)(80,276)
Long-term debt, net of current portion$2,434,288 $2,260,208 $1,858,478 
Fair value$2,297,568 
Unamortized discounts and debt issuance costs$174,080 $34,022 
__________
(1) Repaid at maturity on April 1, 2022.
Amendment to Senior Secured Credit Facility
On May 31, 2022, the Company entered into a first amendment to its Senior Secured Credit Facility. Among other things, the amendment extended the maturity date of the Senior Secured Credit Facility from April 14, 2023 to April 12, 2024 and replaced the interest rate based on the London Interbank Offered Rate with an interest rate based on a secured overnight financing rate (“SOFR”).
Borrowings under the Senior Secured Credit Facility bear interest as follows: (i) for base rate loans, a base rate equal to the highest of (x) the prime rate, (y) the federal funds rate plus 50 basis points and (z) the daily SOFR rate plus a 0.10% credit spread adjustment (subject to a 0.75% floor) plus 100 basis points, plus a leverage-based margin of 100 to 275 basis points and (ii) for SOFR loans, the applicable SOFR rate plus a 0.10% credit spread adjustment (subject to a 0.75% floor), plus a leverage-based margin of 200 to 375 basis points.
The Company incurred $0.7 million in costs in connection with this transaction during fiscal 2022. These debt issuance costs were reflected as an asset and are being amortized over the term of the Senior Secured Credit Facility using the effective interest method.
Amendment to Line of Credit
On May 31, 2022, in connection with the amendment to the Company’s Senior Secured Credit Facility, the Company also entered into a first amendment to its Line of Credit. This amendment extended the maturity date of the Line of Credit from April 14, 2023 to April 12, 2024 and replaced the interest rate based on the London Interbank Offered Rate with a rate based on SOFR.
Inspire Korea Financing
Inspire Korea Credit Facility
On September 24, 2021, Inspire Korea entered into a loan agreement providing for a loan commitment of up to 1.04 trillion Korean won (“KRW”) in two tranches (the “Inspire Korea Credit Facility”), comprised of a 740.0 billion KRW credit facility (the “Tranche A Facility”) and a 300.0 billion KRW credit facility (the “Tranche B Facility”). The Inspire Korea Credit Facility
10

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

is being used to pay for the construction, operation, financial and other project costs in connection with Inspire Korea (see Note 1). All obligations under the Inspire Korea Credit Facility are secured by liens on substantially all assets of, and equity interests in, Inspire Korea (subject to certain exceptions and limitations). The Inspire Korea Credit Facility matures 48 months after the date of the first draw, which was November 29, 2021.
Inspire Korea Credit Facility Summary
September 30, 2021June 30, 2022
Total Capacity
Outstanding Borrowings (Face Value)
(in millions)
KRW
USD
KRW
USD
Tranche A Facility
740,000.0 $625.1 296,000.0 $228.6 
Tranche B Facility
300,000.0 $253.4 120,000.0 $92.7 
Total1,040,000.0 $878.5 416,000.0 $321.3 

Mandatory prepayments are required under the Inspire Korea Credit Facility in connection with certain specified asset dispositions or receipt of insurance proceeds, without a prepayment fee. The Inspire Korea Credit Facility may not be voluntarily prepaid in whole or in part until one year after the date of the first draw. After such date, any voluntary prepayment requires a prepayment fee as defined in the Inspire Korea Credit Facility agreement.
Loans outstanding under the Tranche A Facility bear interest at a fixed rate of 5.4% per annum or a floating rate equal to the sum of a base rate and an applicable margin (as defined in the Inspire Korea Credit Facility agreement). Loans outstanding under the Tranche B Facility bear interest at a fixed rate of 7.0% per annum or a floating rate equal to the sum of a base rate and an applicable margin (as defined in the Inspire Korea Credit Facility agreement). The Inspire Korea Credit Facility includes an interest reserve whereby a portion of loan proceeds is reserved for payment of interest. Interest on Tranche A Facility loans is fully reserved and interest on Tranche B Facility loans is reserved for 36 months. If any portion of the Inspire Korea Credit Facility is undrawn, Inspire Korea is required to pay a 0.3% commitment fee on the undrawn amount.
The Inspire Korea Credit Facility contains certain customary covenants applicable to Inspire Korea, including covenants governing: incurrence of indebtedness, incurrence of liens, investments, mergers or consolidations, asset sales, acquisitions of assets, the payment of dividends and other distributions and affiliate transactions. In addition, the Inspire Korea Credit Facility includes other covenants, representations and warranties and events of default that are customary for financing transactions of this type.
In connection with the Inspire Korea Credit Facility, the Company entered into a credit enhancement support agreement to provide up to $100.0 million credit enhancement support for Inspire Korea’s payment of principal, interest and other sums due under the Inspire Korea Credit Facility.

The Company incurred $59.1 million in costs in connection with this transaction during fiscal 2022. These debt issuance costs were reflected as a debt discount and are being amortized over the term of the Inspire Korea Credit Facility using the effective interest method.
MGE Korea Term Loan
On November 4, 2021, MGE Korea Limited (“MGE Korea”), an indirect wholly-owned subsidiary of the Company and parent company of Inspire Korea, entered into a $275.0 million secured term loan facility agreement (the “MGE Korea Term Loan”). MGE Korea received funding from the MGE Korea Term Loan on November 24, 2021 (the “Utilisation Date”). The MGE Korea Term Loan was primarily used to make a capital contribution to Inspire Korea in order to partially fund construction-related costs for Inspire Korea. The MGE Korea Term Loan matures 66 months after the Utilisation Date.
The MGE Korea Term Loan bears payment-in-kind interest at a rate of 17.0% per annum, to be compounded and capitalized at the end of each quarter, or paid in cash if so elected by MGE Korea.
If the MGE Korea Term Loan is voluntarily prepaid, if certain mandatory prepayment events are triggered or if it is repaid following a notice of acceleration, MGE Korea must pay a prepayment fee (as defined in the MGE Korea Term Loan agreement). The MGE Korea Term Loan is secured by a fixed charge over 100% of MGE Korea’s share capital and a debenture over the assets of MGE Korea (subject to certain exceptions and limitations).
The MGE Korea Term Loan contains certain customary covenants, including covenants governing: incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, disposals, acquisitions and investments, arm’s length transactions, mergers and the development and management of Inspire Korea. In addition, the MGE Korea Term Loan includes
11

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

financial maintenance covenants pertaining to net leverage and debt service coverage of MGE Korea and Inspire Korea, and contains a requirement that Inspire Korea maintain a minimum cash balance in the amounts set forth in the MGE Korea Term Loan. The MGE Korea Term Loan also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations.
The Company incurred $10.0 million in costs in connection with the MGE Korea Term Loan during fiscal 2022. These debt issuance costs were reflected as a debt discount and are being amortized over the term of the MGE Korea Term Loan using the effective interest method. In addition, the allocation of proceeds to the issuance of warrants and associated put option (see below) resulted in an original issue discount on the MGE Korea Term Loan of $84.8 million, which will also be amortized over the term of the MGE Korea Term Loan using the effective interest method.
MGE Korea Warrant Agreement
In connection with the MGE Korea Term Loan, on November 4, 2021, MGE Korea Holding III Limited (“MGE Korea Holding III”), the parent company of MGE Korea, entered into a warrant agreement (the “Warrant Agreement”) to issue detachable warrants (the “Warrants”). The Warrants can be converted into up to a total of 4,400 shares of capital in MGE Korea Holding III at an initial exercise price of $0.01 per share. At the time of issuance, the Warrants represented 22.0% of the fully-diluted share capital of MGE Korea Holding III.
The Warrants are generally exercisable at any time after the third anniversary of the Utilisation Date (November 2024) until the tenth anniversary of the Utilisation Date (November 2031), but may be exercised earlier upon certain triggering events defined in the Warrant Agreement. Upon the earlier of (i) the tenth anniversary of the Utilisation Date (November 2031) and (ii) the consummation of an Exit Event (as defined in the Warrant Agreement), all unexercised Warrants will expire.
Warrant holders do not have any rights held by holders of shares in the capital of MGE Korea Holding III to vote or to receive dividends and other distributions (other than as set forth in the Warrant Agreement). Warrant holders and shareholders of MGE Korea Holding III have certain preemptive rights in relation to any proposed issuance of equity securities by MGE Korea Holding III or certain affiliates (as defined in the Warrant Agreement), subject to customary exceptions.
Holders of unexercised Warrants have the right to require the parent of MGE Korea Holding III (the “Parent”) to purchase all of the unexercised Warrants that they hold at certain relevant times (the “Put Option”). In turn, the Parent has the right to require the holders of unexercised Warrants to sell all of the unexercised Warrants they hold at certain relevant times (the “Call Option”). Both the Put Option and the Call Option are exercisable at any time in the period from (and including) the date six years and six months after the Utilisation Date (May 2028) until the tenth anniversary of the Utilisation Date (November 2031). The aggregate cash purchase price for both the Put Option and the Call Option equals the higher of: (i) the fair market value of the relevant unexercised Warrants and (ii) $110.0 million, multiplied by a fraction, the numerator of which is the number of the relevant unexercised Warrants and the denominator of which is the total number of Warrants.
The Warrants and the Put Option are classified as long-term liabilities and are re-measured at their estimated fair values at each reporting date. The estimated fair value of the Warrants and the Put Option was determined by utilizing the income approach (discounted cash flow method) and a binomial lattice model. This valuation approach utilized Level 3 inputs. The primary unobservable inputs utilized were the discount rate, which was 11.5%, and the expected volatility of the underlying stock price, which was 55.0%.
Debt issuance costs incurred during fiscal 2022 and allocated to the Warrants and the Put Option totaling $4.2 million were expensed on the Utilisation Date and recorded within Corporate costs and expenses.
Warrants and Put Option
(in thousands)
Balance, March 31, 2022$90,932 
Additions 
Unrealized gain(26,796)
Balance, June 30, 2022$64,136 
Balance, September 30, 2021$ 
Additions84,771 
Unrealized gain(20,635)
Balance, June 30, 2022$64,136 
12

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Note 3 — Revenue Recognition
Revenue Disaggregation
The Company is primarily engaged in the ownership, operation, management and development of integrated entertainment facilities both domestically and internationally. The Company’s current wholly-owned operations are primarily focused within Connecticut and Pennsylvania. The Company also currently operates and manages other gaming facilities elsewhere within the United States and Canada. The Company generates revenues by providing the following types of goods and services: gaming, food and beverage, hotel and retail, entertainment and other, which includes management and development fees earned.
Revenue Disaggregation by Geographic Location
Three Months Ended June 30, 2022
(in thousands)ConnecticutPennsylvaniaCanadaOther
Gaming$157,933 $59,291 $59,244 $17,505 
Food and beverage23,120 4,251 7,235 1,016 
Hotel24,025 1,631 4,601 (1)
Retail, entertainment and other 31,387 1,610 8,547 15,683 
Net revenues$236,465 $66,783 $79,627 $34,203 
Three Months Ended June 30, 2021
(in thousands)ConnecticutPennsylvaniaCanadaOther
Gaming$163,938 $57,134 $13,283 $6,934 
Food and beverage16,770 2,940  1,116 
Hotel20,758 1,430   
Retail, entertainment and other 18,595 1,427 1,097 22,256 
Net revenues$220,061 $62,931 $14,380 $30,306 
Nine Months Ended June 30, 2022
(in thousands)ConnecticutPennsylvaniaCanadaOther
Gaming $479,297 $172,570 $151,254 $38,075 
Food and beverage66,774 11,265 14,957 3,161 
Hotel69,469 4,561 10,963 (4)
Retail, entertainment and other 87,981 4,766 17,545 44,883 
Net revenues$703,521 $193,162 $194,719 $86,115 
Nine Months Ended June 30, 2021
(in thousands)ConnecticutPennsylvaniaCanadaOther
Gaming$434,928 $141,795 $38,502