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Herbst faces tough choice

Deadline looms for local company

Herbst Gaming has until Dec. 3 to accomplish one of two tasks -- pay its bondholders more than $846.8 million or come up with a restructuring plan for the company's debt payments. Otherwise, the Las Vegas-based company will probably end up in bankruptcy court.

Herbst, which operates 15 casinos in Nevada and the Midwest and a 7,200-machine Nevada slot route business, said in March it was facing bankruptcy unless it could restructure the company's $1.2 billion debt. A negotiation period expired at the end of September but the bondholders granted an extension until Nov. 5.

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  • In a filing with Securities and Exchange Commission on Wednesday, Herbst Gaming said it received a notice last week that its bondholders, who had put the company into default earlier this year, were demanding immediate payment of the outstanding principal on the loans. On Monday, the lenders agreed to give Herbst three weeks to make good on the payment or put forward a restructuring agreement.

    "It sounds like the lenders are done talking," said one investment source familiar with the matter. "The bonds are trading so low, the lenders are willing to put the company into bankruptcy."

    Herbst Gaming officials did not return phone calls for comment.

    Wachovia gaming analyst Dennis Farrell Jr. said a bankruptcy filing seems to be the direction the company is heading.

    "From a lenders' perspective, there has been tremendous decline in the valuations (of the bonds) and there is a continued weakness in the locals gaming market," Farrell said. "The question is what kind of equity value is in the Terrible's brand and the name."

    Under terms of the bondholders' agreement, the lenders will stand aside and not demand payment but just for a short time.

    Herbst Gaming, which is privately held by brothers Ed, Tim and Troy Herbst, but has public debt, began exploring strategic refinancing alternatives earlier this year with investment firm Goldman Sachs.

    The company, which paid $394 million last year to MGM Mirage to acquire the three Primm Casinos, has seen its revenues fall dramatically this year. Revenues from Primm collapsed because high gasoline costs kept Southern California customers from making the drive along Interstate 15. Also, the Herbst slot route operations were heavily affected by a statewide ban that made smoking illegal where food is served.

    Herbst lost more than $78.8 million in the first half of the year.

    Most analysts who have followed the matter believe Herbst will have to sell several pieces of the company, including its casinos. The Herbst brothers may have to give up some control to an outside entity.

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



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    l. duguay wrote on December 10, 2008 11:41 AM: Great to see that the voters in this state don't really care about money or jobs; but would rather beliee the lobbyists lies. It is the voters who said yes to the smoking ban (12.51% tax loss this year so far). I'm happy to see that voters can afford to lose $548,823,081 tax revenue so far this year, and it looks to be going up all the time (22.3% loss in Oct).

    You won't see me travelling 4 hours by plane & spending money to go to Vegas to do the same thing I can do here; afterall I could let my hubby get a woman a half an hour away, but I still can't have a smoke after dinner. What you always say is that there is no choice, but its not the legislators but the people decide where money is spent while vacationing. Strange to cut off the money that feeds you, then say it was the owners fault; not the voters. Great deflection of the problems the voters and the anti smoking extremists (who say no ban revenue losses have ever happened) have caused to the loses from states golden cash cow.

    Too bad the compromise of signage was never used, Nevada would only have months of hurt now. You reap what you sew, even if you ignore all the other states that have lost money since their smoking bans years ago.


    Herby Herbst wrote on December 08, 2008 09:07 PM: MGM purchased Primm for around 80 million back in 200 i believe... then (with no upgrades except an apartments for the employees est. at 20 million) sold it to Herbst for 350+million??? What is wrong with that picture


    Holly & Lacey wrote on November 20, 2008 04:37 PM: How many Herbst brothers does it take to clean a bathroom.....Guess we will all find out after Dec. 3, 2008


    Wayne wrote on November 15, 2008 03:09 AM: It's the same old story. A company (or individual) buys something they can't afford and then can't pay off the debt. Why doesn't the government bail them out like they did the airlines, banks, and soon the auto industry? If a person loses their job and can't pay their bills, they are thrown out on the street. When the executives of companies screw up the business, the government bails them out. I say let them all go out of business.


    Casino worker wrote on November 14, 2008 05:44 PM: Herbst was screwed from the beginning, even the employees knew the price tag for Primm was way too much. Herbst had no business entering a deal like that and they should fire their financial advisors. The brothers should have never showed up personally to relieve the casinos of alcohol and food that cost in the thousads just to look like big shots for their friends during the races. The upper management is a joke, especially Mr. Sturbins and Star. Those guys do not know how to run anything and do not care about the employees. Old man Herbst was a good guy and his sons ruined everything he worked hard for. Incentives for people to go to Primm, ha, the rooms are already at 12 bucks a night so there's not much left to do other than go bankrupt. Hopefully the bank and team they put in there will keep mid management employees on down because they work hard and need their jobs, especially right now. Get rid of all the executives that have bled that place dry. The smoking ban did not affect the numbers there, thats all b.s., anyone can look it up. I agree with the person that commented about the name, come on, welcome to Terribles lol. No thanks. They live up to their name, terrible. The MGM nailed them and hopefully they'll stick to gas stations and racing from now on. Those properties were worth a quarter of what they paid. God bless those employees and I hope they find a respectable place to work. The brothers and their arrogant fiends need to pack up and move on. Read the reviews anywhere, they took a huge dive once the MGM brand and food quality was tossed out the window. See u in hell E.T.T.


    Leonard Peony wrote on November 14, 2008 07:45 AM: 50's Omelette House on DI. Before smoking ban, did a brisk business but non smokers were stuffed on one side and still breathed smoke. All the tables on the non-smoking side were full while many non-smoking tables were empty.
    Post smoking-ban - place is packed at all morning hours. The 1-3 smokers out of 50 people that might be in the restaurant take a few steps outside. I asked one of the waitresses how business was affected since the ban...she said it went through the roof. Families bring their kids out now to places because there is no smoking.


    the gambler wrote on November 13, 2008 11:51 PM: So funny-some ignorant people think everyone should breath second hand smoke and risk their health so a few businesses can make money and get rich. You are F-ing kidding me right?


    mr reason wrote on November 13, 2008 11:48 PM: Greg-
    what an idiot you are!
    The Herbst family ran this company into the ground-they wanted to play with the big boys in gaming and got burned!
    As for the smoking ban-it's funny how these bars will never say how many non-smokers are now patronizing their establishments and how their profits have risen. If their profits aren't going up-IT'S THE ECONOMY DUMMIE! People don't have the money they did a year ago to waste on video poker. It's so easy to blame the "evil smoking ban", it makes me laugh. Where are all the "bar for sale" signs the lobbyists told us would pop up because of this evil law? There are none-because it was BS to begin with. Typical "doom and gloom" republican rhetoric they spewed.Everyone is still raking in the money-not what they "projected"-so they claim a loss-typical shuck and jive. People are focusing on their personal finance and their homes now-not PT'S pub or the other million bars in Vegas. That was your lesson for today Greg!


    greg wrote on November 13, 2008 11:06 PM: GOOD THING THE LOSERS IN THIS STATE PASSED THAT GREAT SMOKING BAN!!!! MAYBE THE SO-CALLED EXPERTS THAT SAID THE LAW WON'T FINANCIALLY EFFECT ANY BUSINESSES SHOULD PUT THEIR MONEY WHERE THEIR MOUTH IS AND MAKE UP THE GAP FOR THE LOST OF REVENUE DUE TO THEIR LAW


    terry lanni wrote on November 13, 2008 09:50 PM: Ha-Ha Herbst's-I sold you that junk in Primm at top dollar-now it ain't worth nuthin'! I got mineS boyyyy!!!


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