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Business
Feb. 29, 2008
Copyright © Las Vegas Review-Journal

CORRECTION - 3/1/2008
A story in Friday's Business section contained the incorrect name for a gaming company. The gaming company's name is Herbst Gaming.

Herbst Gaming seeks debt fix

Smoking ban takes toll on slot business

By HOWARD STUTZ
REVIEW-JOURNAL

Herbst Gaming, which has taken a financial hit in the past year after a statewide smoking ban cost the company customers in its slot machine route operation, has asked Goldman Sachs to assist in evaluating financial and strategic alternatives, including the sale of the business.

In a statement released Wednesday, Las Vegas-based Herbst Gaming, which significantly grew its statewide casino business through two high-profile acquisitions in 2007, said the alternatives could include a recapitalization, refinancing, restructuring or reorganization of the company's debt, or a sale of some or all of its businesses.

According to a November report by Deutsche Bank, Herbst Gaming had total debt of approximately $1.15 billion as of Sept. 30, much of it publicly held.

Herbst Gaming is privately owned and controlled by three brothers, Ed Herbst, who serves as president and CEO; and Tim and Troy Herbst, who both hold the titles of executive vice president.

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    • In Terrible Herbst' most recent quarterly earnings, Herbst said in November it had a net loss of $28.9 million in the third quarter, which ended Sept. 30, and had a net loss for the first nine months of 2007 of $34.1 million.

    Company executives said a statewide smoking ban enacted by Nevada voters in November 2006 and taking effect in January 2007 cut into the company's profits. The ban outlawed smoking in bars, taverns and restaurants -- locations where Herbst operates slot machines as part of its statewide slot machine route. Revenues from the slot route dropped more than 20 percent in the third quarter and are off almost 19 percent through the first nine months of 2007.

    "The recent impact from Question 5, the Nevada smoking ban, and general economic weakness has required us to explore our alternatives," Ed Herbst said in a statement. "We are confident that our retention of a financial adviser will help us capitalize on the strength of our brand and position the company to maximize long-term value."

    Company executives were not available for comment beyond the statement. Herbst Gaming has not announced a date for the release of its fourth-quarter and year-end earnings.

    Herbst Gaming operates 16 casinos in Nevada, Missouri and Iowa. In Nevada, Herbst Gaming has small casinos in Henderson, Pahrump and Searchlight, but has expanded throughout the state. In January 2007, Herbst paid $119 million to buy Sands Regent, which included four Northern Nevada casinos including the Sands Regency Casino in Reno.

    Four months later, Herbst Gaming paid MGM Mirage $400 million to acquire three Primm Valley resorts at the Nevada-California border. Herbst also operates Terrible's, an off-Strip casino on East Flamingo Road. Herbst's slot machine route operation business includes more than 7,000 slot machines inside some 700 restaurants, taverns, convenience stores, bars and grocery stores.

    "The company has a long history of providing gaming services in Nevada and we believe in the strength of the Terrible's brand," Ed Herbst said.

    He added there was no assurance the evaluation by Goldman Sachs would result in any specific transaction.

    Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.

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    TMJ wrote on March 02, 2008 08:39 PM: The severe impact that the ban has had on ALL convenience stores in the Valley is devastating. I wish that more would report on the servious economic impact. Nothing was served by ban on smoking in C-Store, most people did not understand what they were voting for, and yet another freedom is taken from citizens. Oh, I was wrong - the casinos were served well what with the exodus of local C-store gamers to the casinos. Most who post have an understanding of what is happening but others????? Get a clue fellas!


    anonymous wrote on February 29, 2008 07:35 PM: They overpaid for the Primm properties and now they are literally paying for it.

    Just a bad bad deal.


    lvfnby1 wrote on February 29, 2008 03:59 PM: This is just part of a campaign to lay blame on the smoking ban. Herbst Gaming sees these losses in a year when they make the largest acquisitions in the history of the company??? Give me a break. I'm certain Goldman Sachs will see through the smoke.


    Chris H. wrote on February 29, 2008 02:45 PM: It is the inequity of the regulation of tabacco smoking at local taverns versus big casinos that has led to the exodus of the local slot player from small business owners to large corporation-held properties.
    Any self-employed or small business owners should have nightmares about such sweeping legislation stealing their bread-and-butter overnight.


    Dilerious wrote on February 29, 2008 02:34 PM: LV has the most relevent post here. Don't blame the cigarette ban, the Herbst knew about it when they acquired recent acquisitions.

    In case no one noticed, there has been a downturn in the economy.

    Hope they give a big check to the family of the NHP Trooper who died while responding to their employee's 911 call for help becasue a plastic cooler was found on the Herbst property in Washoe County.


    American Gaming Guru wrote on February 29, 2008 02:24 PM: Agreed. The Herbst family is invaluable to Nevada and they run a great organization.


    Richard Goldman wrote on February 29, 2008 01:22 PM: J You are so right. Without the intruders and interlopers Vegas was a great place.

    I love the Terrible Herbst folks too, hope they stay in business.
    These anti-smoking nuts need a real life. I'll bet not one of them ever ran a business or paid an employee anything. They just feed off welfare from our tax money.

    Viva The Old Las Vegas!

    J wrote on February 29, 2008 12:07 PM:
    Another native here. The Herbst family has been a cornerstone of Las Vegas for decades. They are excellent community citizens and a great example of a true Las Vegas family. Those of you who make specious claims that they do not give back are clueless.

    From these comments, it's obvious Las Vegas has changed, and for the worse, with the influx of carpetbaggers in the past 15 years. You guys just don't "get" what made Las Vegas a great place to live for so many years ... You heard about how "great a place it was to live" through the media and then moved here only to kill it with your your general anti-Vegas attitudes. You all suck.

    Las Vegas is dead ... Long live Las Vegas.


    J wrote on February 29, 2008 12:07 PM: Another native here. The Herbst family has been a cornerstone of Las Vegas for decades. They are excellent community citizens and a great example of a true Las Vegas family. Those of you who make specious claims that they do not give back are clueless.

    From these comments, it's obvious Las Vegas has changed, and for the worse, with the influx of carpetbaggers in the past 15 years. You guys just don't "get" what made Las Vegas a great place to live for so many years ... You heard about how "great a place it was to live" through the media and then moved here only to kill it with your your general anti-Vegas attitudes. You all suck.

    Las Vegas is dead ... Long live Las Vegas.


    Chris H. wrote on February 29, 2008 11:31 AM: I had the pleasure of working for the Herbst family for about two years. These are good, honest and caring people who are providing gainful employment for many Nevadans and others out-of-state. Las Vegas gaming benefits from people such as the Herbst's. Imagine nothing but big corporations running everything. I admire the honest and forthright approach they are taking to these issues during these difficult times.


    Jerry Mac wrote on February 29, 2008 09:55 AM: Call Harry Reid - maybe he could bail out the Herbst's and prevent the bankers from foreclosing on their 25 million mansion in Southern California.


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