Icahn Enterprises LP (IEP) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen, I am John Saldarelli, the Company's Chief Financial Officer. Welcome to American Real Estate Partners 2004 year-end earnings conference call. At this time, all participants are in a listen-only mode. The Company will make a presentation which will be followed by a question-and-answer session. Participants in the earnings presentation are requested to submit their questions via the webcast at any time during the presentation by using the form shown on your screen.

I would like to inform you that this presentation is being recorded today, Wednesday, March 16, 2005 and will be archived in the Investor Relations section of the American Real Estate Partners website located at www.areplp.com.

This presentation includes certain non-GAAP financial measures, including EBITDA. Reconciliation information for non-GAAP financial measures presented here can be found under the Investor Relations section of the AREP website located at www.areplp.com.

Before we begin, I would like to remind you that for purposes of the Private Securities and Litigation Reform Act of 1995, certain elements of this presentations are forward-looking and are based on our view of the general economy and our businesses as we see them today. These statements can be identified by the words such as expects, anticipates, intends, plans, believes, seeks, estimates, and will.

Forward-looking statements include, but are not limited to, statements about the expected future business and financial performance of AREP, its subsidiaries and businesses that we have agreed to but have not net acquired. These statements are based, among other things, on assumptions made with information currently available to management, including management's own assessments of our existing core businesses and businesses that we have agreed to but have not yet acquired. We ask that you interpret all of our comments in that light.

I would now like to introduce you to Keith Meister, the Company's President and Chief Executive Officer.

Thank you, John. And thank you for taking the time to join us this morning. In the room with me today, in addition to John Saldarelli, are Marty Hirsch, Executive Vice President of Real Estate Acquisitions. And on the phone from Las Vegas are Rich Brown and Denise Barton who run our Gaming Operations. And on the phone from Dallas is Bob Alexander who runs our Oil & Gas Operations.

I'm going to walk through some presentation materials, and then we will turn it over for a brief Q&A. During that period of time Rich, Denise, Bob, John, and Marty will be available to assist me in answering your questions.

Getting into the materials. The first slide 2004 key achievements. 2004 was an excellent year for American Real Estate Partners. We began the year by acquiring 2 casinos, Arizona Charlie's Boulder and Arizona Charlie's Decatur from affiliates of Carl Icahn for $125.9 million. In conjunction of these acquisitions, we formed ACEP and contributed our 100 percent interest in the Stratosphere into ACEP -- [audio difficulties].

Hello? Hello? Rich, is that you?

Yes.

We lost Keith.

We did too.

Give me one second, gentlemen.

So far this has been a fantastic transaction for us. Rich Brown and his team in Las Vegas have done a phenomenal job both growing the top-line and cutting costs in Las Vegas. And throughout the year they continue to exceed our internal profitability expectations and we continually revised up our projections. In 2004, ACEP achieved EBITDA of 72.4 million.

Additionally, during the course of 2004, in May, AREP completed its first corporate bond deal. We issued $353 million of senior notes due 2012 at 8.125 percent. This transaction gave us our first opportunity to introduce ourselves to the high-yield bond community, as well as to the rating agencies. During the course of the year, I think we have done a good job in developing our relationships with both the rating agencies and the bond buying community and we look forward to staying in touch with those parties.

Also in 2004, we made a decision to monetize a portion of our traditional triple net lease real estate portfolio. Taking advantage of what we viewed as high real estate valuations, a low interest rate environment and tremendous liquidity. We determined to take all of our 128 properties, market them for sale, and we decided that if a buyer wanted to pay more than we thought a property was worth, then we would look to sell.

As a result of that process, we closed on the sale of 57 properties in 2004, with a book value of 165 million. We realized proceeds of 245.5 million resulting in a gain of approximately 80.5 million. Since December 31, 2004 we have sold or entered into sales contracts or letters of intent for 15 additional properties. Those properties have a book value of 62.3 million and they are expected to be sold for a purchase price of approximately 97.9 million, which will result in a book gain of 35.6 million. Obviously, there can be no assurance that these assets under contract or LOI will close.

Pro forma for the pending asset sales, AREP's triple net lease portfolio will be comprised of 56 properties with a book value of approximately 134 million. During 2005, we intend to continue to aggressively manage our portfolio. To the extent we see opportunities to acquire properties at attractive valuations, we will look to do so and we may attempt to take advantage of 1031 opportunities.

Additionally, during the course of 2004, we acquired the Grand Harbor and Oak Harbor developments in Vero Beach, Florida. Our purchase price was approximately 75 million. We acquired the properties with all cash, which I think is one of our competitive advantages. We have a very strong balance sheet and we're able to move very quickly when we find a good opportunity. We will get into this transaction in more detail later in the presentation, but based on early results, we are very optimistic about the prospects for this acquisition.

As we turn to the next slide, we provide a brief update on recent events in 2005. As most of you are aware, we entered into agreements in January to purchase a 50 percent membership interest in NEG Holding, as well as to purchase 100 percent of the equity of TransTexas Gas Corporation and 100 percent of the equity of Panaco ,Inc. In December, we acquired 100 percent of the outstanding debt securities of TransTexas and Panaco. All of these interests were held by affiliates of Carl Icahn. AREP will hold its Oil & Gas interests through a newly-created 100 percent owned subsidiary AREP Oil & Gas.

In addition, we entered into agreements to acquire interest also for entities affiliated with Carl Icahn in entities that own Sands Casino and Hotel in Atlantic City. Upon completion of these acquisitions, AREP will consolidate for financial reporting purposes all of its interest in Oil & Gas and Gaming.

Pro forma for these transactions, there is no cross ownership and operating assets between American Real Estate Partners and Carl Icahn. And additionally, all of Mr. Icahn's operating interest in the Gaming business and the Oil & Gas business are held directly through American Real Estate Partners. This transaction allowed us to increase our concentration in Gaming and Oil & Gas and to focus on our 3 core lines of business. In total, including the debt acquired in December, the aggregate purchase price of these assets is approximately 757 million. Of which 466 million of the consideration is in the form of depository units of American Real Estate Partners valued at $29 per unit, and the remaining amount is in cash.

In February 2005, in conjunction with the announcement of these transactions, we visited the bond market again. We initially anticipated raising approximately 300 million in debt, but based on the warm reception we received and what we perceived as a low-interest rate environment and strong liquidity in the debt Capital Markets, we upsized our deal to 480 million and raise that money and 7.125 percent due 2013. During the last 12 months we have put a long-term capital structure in place at what we believe is a prudent level of leverage and add an advantageous in the cycle to lock in long-term rates.

Let me give you a brief update on the status of the pending acquisitions. Since we have announced the transactions, each of NEG, TransTexas and Panaco have continued to operate on plan. There have been no surprises. The purchase agreements required reserve reports to be updated through January 21. Those reserve reports are expected to be received and reviewed by the end of March. Based on what we have seen to date, they are consistent with our expectations.

Since a large portion of the consideration for the purchases will be in depository units, AREP intends to file an information statement regarding unit holder consent for the transaction. We believe this will be filed as soon as practicable. TransTexas, which will be acquired for cash, will likely close in advance and we expect that transaction to close in late March. The NEG, Panaco and GB Holdings transactions are expected to close during the second quarter.

Moving to the next slide, we show the consolidated balance sheet on an actual basis as of 12/31/04, as well as the pro forma for the acquisitions and the $480 million debt financing. On a pro forma basis, AREP will have approximately 1.2 billion of cash in U.S. Government agency obligations, and will have total assets of approximately 3.2 billion. Our total debt will be 1.24 billion, of which only the 830 million of corporate debt, the 2 bond issues, are recourse and/or guaranteed by AREP or ARO [ph]. The 215 million of bonds at our gaming subsidiary, ACEP, are non-recourse to AREP.

Additionally, the 43.7 million of note payable, which is the only third-party debt on our AREP Oil & Gas assets, which is a working capital line at NEG is non-recourse, as are the 91.9 million of mortgages on portions of our triple net lease real estate portfolio. On an actual basis, our partners equity or net worth is 1.32 billion as of December 31. Additionally, if you add the 100 million of Limited Partnership preferred units, that would increase the book value available for corporate obligations to over 1.4 billion. On a pro forma basis, our shareholders equity after giving effect to the transactions would have been 1.48 billion or almost 1.6 billion when including the preferred equity.

When we have talked about AREP in the past, we have really focused on AREP as a balance sheet story. AREP still is a balance sheet story. We have a very strong balance sheet, but as a result of the pending acquisitions, there is a second piece to this story. It is not only AREP's strong balance sheet, but also a strong income statement and excellent cash flow coverage.

This slide shows total revenue and EBITDA for American Real Estate Partners for the 12-month period ended September 30, 2004, as well as for the 12-month period ended December 31, 2004. We show the revenue and EBITDA on an actual basis, as well as on a pro forma basis. What you will see is that as a result of these acquisitions, revenue for the period ended 12/31/04 on a pro forma basis increased from 453.6 million to $768.6 million. And additionally, EBITDA would have increased from 253.8 million to 373.2 million on a pro forma basis.

I ask you, though, to look at the various footnotes and remind you that included in 2004 pro forma EBITDA is approximately 84 million of income from discontinued operations, which is a gain on sale of real estate. And unrealized noncash loss of 23.6 million for securities sold short. As of March 1, based on market pricing, this loss has reversed and we now have a net gain of approximately $3 million.

Additionally, included in EBITDA is a noncash impairment loss of 15.6 million from a writedown of our interest in GB Holdings. This writedown is based on our purchase price, pre-earnout for the interest we are acquiring in GB. We have written the GB interest down to our purchase price for the incremental interest we are acquiring.

From the 12-month period ended September 30 to the 12-month period ended December 31, you will see revenue growth, as well as EBITDA growth on a normalized basis. The revenue and normalized EBITDA growth are primarily driven by strong performance at our casino business, as well as performance at the Oil & Gas business. As you know, both of these businesses are experiencing strong secular tailwinds and each of our management teams, we feel, is performing very strongly.

The next slide provides an overview of our Oil & Gas operations on a pro forma basis. We have provided you with some detail on 2004, as well as an outlook into 2005. In 2004, the combination of NEG, Panaco, and TransTexas would have achieved 187.7 million in revenue and EBITDA of 134.3 million. This business has a very high EBITDA margin of approximately 71.6 percent. Combined CapEx was approximately 117 million, of which we think a third was maintenance capital and two-thirds was investing for growth.

One of the things that we view to be the lifeblood of a E&P company is its inventory. You need to have wells to drill to replace production. And as a result of the acquisitions and other investments we have made in our assets, we are in an enviable position of having lots of low-risk drilling inventory. Between the 3 companies, we have over 600 identified prospects for drilling and a pipeline to keep us very busy for the next few years. Our philosophy with the Oil & Gas business is when prices are high, you drill. And when prices are low, you look to do acquisitions.

So in the current environment, in which Oil & Gas pricing has increased dramatically over the last 12 months, it is a great opportunity to drill. With current market conditions and our inventory, we expect to see gains both from pricing, as well as increased production in 2005.

Our average sales price for both oil, natural gas, and NGLs in 2004 was $34, $5.38 and $26.72 respectively, well below where the commodities are currently trading. So as we look forward to '05, we think there is significant upside versus the '04 numbers from pricing.

To give you a snapshot view of '05, we are projecting 252.3 million of revenue, 181 million of EBITDA, margins staying relatively constant at 71.9 percent and you'll see we are continuing to increase our capital expenditures. We are projecting 155.2 million of CapEx. This is money that we believe is well spent. About a third of our CapEx will be to replace existing reserves that are produced and two-thirds will be for growth. So under the current environment, with our prospects, we think one of the best returns on invested capital that AREP can achieve is through drilling and we intend to continue to do so.

Our '04 plan is based on average oil sales prices of $40 per barrel, NGL prices of 25 per barrel and natural gas prices of $5.50 per Mcf. I remind you again that the market prices are currently well in excess of this. So if Oil & Gas pricing stays where it is, we think there is the possibility for upside versus our 2005 outlook.

The next slide shows combined reserves on a PB-10 basis. All of these reports have been prepared by third-party independent engineering firms. The PB-10 is based on pricing data as of December 31, 2004. At December 31, oil was $43.45, NGLs were $29.70, and gas was $6.18 per Mcf. What you will see is that the present work using a 10 percent discount rate of our existing proved reserves is approximately 852.5 million.

What this analysis does not take into account are any of our probable -- any of our probable reserves. As I alluded to on the previous slide, the lifeblood of any Oil & Gas company is its inventories of probables and possibles. And one of the things that Bob Alexander and his team are most excited about is the large inventories we have of probables and possibles. So we intend to invest money over the next few years to turn those probables and possibles into proved producing reserves.

Flipping forward to the next slide. We provide an overview of our existing hedges. We've hedged approximately 50 percent of both our Oil & Gas production in 2005. We've put these hedges in place with floor prices of approximately $43.16 and ceilings of $46.24 for oil and a $5.26 floor for gas and a $7.03 ceiling. As we look out -- as we are out on our bond road show in February, we had the 2005 hedges in place and we had not yet put our 2006 hedges in place, but it was something we were thinking about.

Right after the road show, we put our '06 hedges in place, and we hedged slightly less than 50 percent of our anticipated Oil & Gas production for 2006 at floor prices of $41.68 and ceiling prices of $45.30 for oil and floor prices of $5.37 for gas and a $6.31 ceiling. These hedges provide downside protection for us in case commodity prices fall, but with only 50 percent of our production hedged, we think we are also able to profit and participate from commodity price appreciation. We think it is a proven strategy based on current market conditions to go out 2 years and lock in about 50 percent of our production.

Moving forward to discuss our gaming and entertainment assets. We have provided a summary of our 2004 results, as well as an outlook for '05. ACEP, which is comprised of our 3 Las Vegas assets achieved revenue of 300 million in 2004 and EBITDA of approximately 72.4 million. Throughout the course of '04, we continually revised up our projections and I think it is a good time to take a moment to commend Rich Brown and his team for a solid job executing.

The Las Vegas gaming market had a wonderful year in 2004, and even in that environment, we think we outperformed. Rich and his team across all 3 properties did a wonderful job of growing the top line and cutting costs. The Sands in Atlantic City had revenue of 171.2 million and EBITDA of 18 million. Rich and his team have begun to experience significant progress in recent months in terms of stabilizing revenue and cutting costs.

I believe they have taken over 25 million of costs out of The Sands over the last 18 months and revenues have stabilized. The fourth quarter of 2004 versus the fourth quarter of 2003 saw significant pick-up, and Rich and his team are encouraged by the prospects for The Sands going forward into 2005.

Turning to our outlook for '05. At ACEP, we are continuing to project both top-line and EBITDA growth. We're anticipating 312.4 million of revenue with 73.9 million of EBITDA. One point we need to note here is we are spending capital to renovate and expand the Arizona Charlie's Decatur property and we are anticipating some business interruption costs, which are included in these numbers.

We are not providing projections for The Sands. The Sands is a separate reporting company that has yet to put out its financials, so we are using 2004's results as a placeholder for our 2005 outlook. However, I will note that our purchase price for The Sands was based on an earn-out. The earn-out is only achieved if the average EBITDA for 2005 and 2006 is 24 million. So Rich and his team are cautiously optimistic towards the ability to grow the EBITDA and they will attempt to hit those targets.

As I said regarding the Oil & Gas business, when market conditions are ripe, it makes a lot of sense to invest in your properties, and when market cycles are a little cooler, it makes a lot of sense to have lower multiples to be an acquirer. We see the same thing in the gaming business, both at the Stratosphere in Las Vegas, as well as The Sands in Atlantic City, we have opportunities for expansion.

We are sitting with excess land at the north end of the strip, and at the Stratosphere, our occupancy is currently in the low 90 percent range and we think a good return on investment is to pursue room expansion with a potential convention center. So Rich and his team are working to prepare those plans, and it is something we intend to continue to review with the ACEP Board during 2005.

Additionally, Atlantic City is more of a seasonal market. As a seasonal market, it is very important to peak the peaks. During many weekends in Atlantic City we are sold out and having to turn away business. We have opportunities for expansion there, and the team at The Sands is currently considering that. So in addition to strong, solid, organic growth, cost-cutting and execution from the existing asset base, we think we have the opportunity to employ further capital and look forward to doing so to grow our gaming and entertainment business over the coming years.

The next slide provides an overview of our real estate business. Our real estate assets provide a strong third business platform. Included on this slide are our home building business, our traditional triple net lease real estate portfolio, and our resort operations at New Seabury and Vero Beach.

In 2004 we achieved revenue of 62.2 million and EBITDA of 21 million. In 2005, we are projecting significant revenue and EBITDA growth with revenues of 146.7 million and EBITDA of 40.4 million. As we have mentioned before, our triple net lease portfolio is a very stable fixed-income-like portfolio. The revenues generated from the triple net lease assets should be flat from '04 to '05. Subject to additions, revisions for asset sales or purchases.

Where most of this growth is coming from is our home-building business. Specifically, we acquired Oak Harbor and Grand Harbor for $75 million in 2004. At the time of the acquisition, Oak Harbor and Grand Harbor were comprised of 36 substantially finished homes ready for sale, 364 substantially finished lots ready for sale, and approximately 400 acres of raw land. Additionally, Oak Harbor and Grand Harbor have 45 holes of golf, a beach club and other resort operations.

To date, we have executed or closed 19 sales contracts on the 36 units of finished inventory we acquired. Pricing has been strong, and we've continued to increase prices. Consequently, we expect to generate revenues from those asset sales in '05 as the transactions closed. Additionally, we have a development plan to commence building homes on a portion of the 364 lots in 2005 in Vero Beach.

Also, we have growth expectations coming from our Hammond Ridge project. Hammond Ridge is a high-end residential development in Armonk, New York. It consists of 37 to be built luxury homes, of which we have executed sales contracts for 16 units in 2004 and we will deliver those units in 2005-2006 and book the revenues at that time.

Our marketing -- our marketing and sales efforts commenced in January of '04, and we are very pleased with our results to date. At Penwood a luxury community in Bedford, we had 44 units, 33 of which have been sold and we anticipate selling the remaining 11 units in 2005. At Hammond Ridge, our average sales price has been about $2.1 million per unit, and about $2.4 million per unit at Penwood.

Finally, New Seabury, which is a much larger development project. We are cautiously optimistic that we will begin to break ground and develop in 2005, and we expect that we will ultimately build over 400 units. This will likely occur during next 5 years depending on market conditions, the conclusion of pending litigation and absorption.

At this time, the Cape Cod market continues to be extremely vibrant. During the period of time that we saw approvals at New Seabury, we benefited from tremendous real estate price appreciation and we think we will be hitting the market running at an opportune time in 2005. Finally, our resort operations at New Seabury continue to be profitable and we project growth there as well in '05.

The next slide provides a summation of our outlook for '05. We expect to achieve pro forma EBITDA in 2005 of 313.8 million from our 3 core operating segments. We anticipate having maintenance CapEx of approximately 87.2 million, and cash interest expense based on the current pro forma capitalization of approximately 92 million. As such, our operating segment EBITDA less cash interest, less CapEx will be approximately 134.6 million.

We note that these numbers do not include significant cash flow we expect to achieve in the future from New Seabury and Vero Beach as those projects are believed to ramp significantly in 2006 and the years following.

Additionally, we show our nonoperating assets, our cash and equivalents, and our marketable equity and debt securities which total 1.459 million [ph]. So we have recurring operating EBITDA less cash interest, less maintenance CapEx of 135 million and 1.46 billion of what we call nonoperating assets. Additionally, pro forma for the closing of the pending acquisitions, we anticipate having approximately 62 million depository units outstanding.

As we look ahead to 2005, AREP is a very strong, diverse holding company with operations in 3 core lines of business, Real Estate, Gaming, and Oil & Gas. And our plan in '05 is to continue to aggressively manage those core businesses. In each of our 3 core business lines, we think we have tremendous opportunities to invest in our assets for growth.

In home building, we believe New Seabury and Vero Beach should provide opportunities for growth over the next 5 years. In Oil & Gas, we have a large inventory of drilling opportunities. And in our Gaming business, we have opportunities for expansion at the Stratosphere and at The Sands.

In addition, each of these business lines we believe have strong management teams that are proven to us, and we are very excited about the prospects of providing them additional capital to invest in and grow their business, as well as for potential acquisitions. Finally, we also pursue opportunities to acquire controlling interest in distressed businesses and asset-intensive industries. We will continue to explore such opportunities in 2005.

In conclusion, we believe 2004 was a year of great achievement for American Real Estate Partners. Both from a corporate transaction level, as well as from a business unit operational perspective, we had numerous successes. We've continued those achievements into '05, and we are very optimistic about our outlook for '05. With that, I'd like to turn the call back to the moderator so we can open up the call for a brief Q&A. Thank you very much for your time this morning. Operator?

(Operator Instructions). Our first question comes from the line of Chris Middleton. Please go ahead.

I am a portfolio manager at Spencer Clark in New York City. I have been a shareholder of American Real Estate Partners since 1996, and I am happy to see the promise of it coming true in the last couple of years. One thing that I wanted you guys to address is the overall holding company's structure.

A lot of people are concerned about your general partner's intentions with regard to the remaining minority shareholders with this most recent transaction, I think he's got over 90 percent now of the shares. And some people are concerned about the possibility of a minority shareholder cram down that could take advantage of -- of that position.

This -- the reason for this is that I think back in '94-'95 there was a stock rights offering that was very detrimental to minority shareholders and very dilutive to book value back then. Can you give us any assurance that the minority shareholders will not be forced out of the Company any time soon?

Thanks for the question. What we are trying to focus on today is our '04 results and our outlook for '05. We are very excited about our prospects. We think we have continued to perform on the plans we have articulated, and we look forward to continuing to do that in '05. With regard to transactions for which there is no plans at this point, I don't think it is appropriate to comment. Let's take the next question.

(Operator Instructions).

Just one other point, after we take the telephone questions, we have a series of questions from the Internet that we will then address.

We have no further telephone questions.

The first question from the Internet from Rob Martin at Schneider Capital is, what would be the expected range of unit pricing at New Seabury based on current market conditions?

New Seabury is actually comprised of 13 separate communities. So within the 400 units, we're developing -- there will be product at various price points. The low end probably about $0.5 million up to the high end of about -- of about $2 million. On average, we are anticipating an average sale price of about $1 million per unit and probably gross margins of approximately 50 percent.

The next question we have is from Wachovia Securities. The question is, please comment on the fact that you were selling rental properties because of high values yet buying waterfront property in Florida.

As I think we addressed, the decision to sell the triple net lease portfolio was because it was a fixed-income-like portfolio. We saw very limited growth in that portfolio and affectively viewed it as trading at inverse to bond yields.

The acquisition of Vero Beach in Florida I think provided us a lot of opportunity. We were able to understand the home building component of it as well as the resort operations. We were comfortable buying existing inventory, as well as entitled and non-entitled land. And I think because of our flexibility and because of the ability we were able to acquire an asset that the traditional public home builders may not have been able to acquire because of up-front dilution, we were able to move quickly and buy something where we think the total return on invested capital could be in excess of our hurdles. So we are continuing to focus on real estate in '05, we are just looking to find a higher return investment opportunities.

Another question is why is ACEP expected to be flat in '05? Is there anything unusual in '04 versus the '05 estimates?

As I think I mentioned the only unusual factor in '05 versus '04 is an expansion at the Boulder property. When we acquired Boulder, it was EBITDA negative for the first year that we acquired it, I believe the EBITDA was in excess of $7 million. We have had great success there, and we are looking to expand our casino floor space so we can increase the number of slot machines. So there will be some business interruption cost there that is in the numbers, and if it were not for that, we would expect to see EBITDA growth that would be a little -- a little stronger.

We also have new initiatives at the Stratosphere, a new ride that was just -- that was just commenced last weekend and some other -- some other opportunities for growth. I think Rich and his team have continually put up budgets that they have outperformed and we hope they do the same in '05.

The last question is, what is driving the significant growth in the real estate segment. I think I may have -- I think I may have addressed this question during the prepared materials, but to speak for a second about our real estate business. I think we have a great outlook going forward. Just because of the scale of New Seabury and Vero Beach. These are very large projects that provide a predictable base of cash flows starting in '05-'06 and then forecasting out over a planned period probably through 2010.

Additionally, we have never levered any of our home building projects, so we think we take a low-risk approach to the home building business, and we think each of New Seabury located on Cape Cod looking out over Nantucket and Vero Beach right on the Intra-coastal are sort of choice pieces of real estate that we think should perform well regardless of sort of the market environment. Obviously market pricing conditions will drive margins, but we think they will be highly profitable projects regardless of the market cycle.

With that, if the -- operator, if there are no other questions from the telephone, I think we will -- we will stop the Q&A

We do have one further question on the telephone, it comes from the line of Burt Weinstein. Please go ahead, sir.

Yes, hi. Given your cash balance, I was just curious as to what your plans were for the GB Holdings bonds. I may have missed it. You may have said it earlier in the call. Seems like you are carrying a pretty big negative arbitrage with a little cash [inaudible] and paying out 11 percent especially for the first mortgage bonds. Just curious what your plans were there.

We do not currently have any plans with regard to those bonds.

Great.

Well, do you have a follow-up?

That means -- you mean you will deal with them at maturity date?

Yes, I mean we will continue to assess how -- exactly right.

Okay. I am sorry. You continue to assess --?

We will deal with that. We have some time until September, so we will -- we'll address that at the appropriate time.

Okay. Thanks very much.

With that, I want to thank you for joining us for our first earnings call. And we look forward to continually updating you on our progress during '05 and the future. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and we ask that you please disconnect your lines.