Quantcast
MobileRJ | RSS TwitterTwitter FacebookFacebook E-mail Alerts
Home manage Las Vegas Review-Journal
  Jobs Cars Homes Shopping Travel Weddings Golf Best of Las Vegas Photo   Search:

RECENT EDITIONS
Sun Mon Tue Wed Thu Fri Sat

sponsored by
Business
Mar. 11, 2009
Copyright © Las Vegas Review-Journal

Herbst Gaming will split businesses

Under deal, lenders will control casinos; Herbst brothers will control slot routes

By HOWARD STUTZ
LAS VEGAS REVIEW-JOURNAL

Primm glows at dusk March 3. In 2007, Herbst Gaming spent $349 million to acquire the Primm Valley, Buffalo Bill's and Whiskey Pete's hotel-casinos in Primm from MGM Mirage.
Photo by Jason Bean/Review-Journal

Herbst Gaming, which has spent the past year seeking a financial restructuring plan for its $847 million in debt, announced an agreement Tuesday with its bondholders in which the company will lose ownership of its 15 casinos in Nevada, Iowa and Missouri, but retain control of its Nevada slot routes.

Approximately 68 percent of the company's lenders under its senior credit facility signed off on the agreement, which calls for Herbst Gaming to be divided into two separate holding companies through a prepackaged bankruptcy filing.

Most Popular Stories
  • Fraud with Portent
  • Debt-ridden casino operators told to expect pressure
  • REAL ESTATE: Las Vegas home prices stabilize as threat of foreclosure flood wanes
  • GAMING COMPANY EARNINGS: Station drops $455.4 million
  • THE STRIP: License backed for Aria
  • THE STRIP: License approved for Aria
  • GLOBAL GAMING EXPO: Recession over? Don't bet on it
  • Union wants insiders to help pull Station from bankruptcy
  • Foreclosure wave continues
  • INSIDE GAMING: Missouri outburst hurts Lee, Pinnacle




    • Herbst Gaming general counsel Sean Higgins said the plan is expected to be filed with the U.S. Bankruptcy Court in Nevada on March 23, although the date could be extended. The restructuring is intended to convert Herbst's outstanding debt into a combination of new debt and equity in the two holding companies.

    One holding company will own the casinos, including the three properties at Primm and the off-Strip Terrible's hotel-casino. The casino entity will be owned 100 percent by the lenders.

    The second company, which covers the 600-location, 6,800-machine Nevada slot route operation, will be owned 90 percent by the three Herbst brothers. The lenders will control 10 percent of the business.

    "We have been dealing with our lenders on this issue for a long time and this ends up being a good result," Higgins said. "The Herbst family will control the route and has the ability to rebuild that operation into a viable and profitable business entity."

    Herbst Gaming was one of the first casino operations to run into the financial trouble that has now besieged the industry. Companies such as MGM Mirage, Las Vegas Sands Corp., Harrah's Entertainment and Station Casinos have all faced or are considering debt restructuring plans

    Herbst Gaming Chief Financial Officer Mary Beth Higgins said the company explored numerous alternatives, including casino sales.

    "The group of assets made the most sense together," she said. "Peeling off any one or two didn't solve an issue. A comprehensive restructuring was required."

    Higgins said gaming regulators in Nevada, Iowa and Missouri won't look at the restructuring until it is approved by the court, which could take about 120 days.

    Until then, Herbst Gaming will run the casinos and slot machine routes without any changes.

    "Our operations will continue as usual," Herbst Gaming Chief Executive Officer Troy Herbst said. "We will continue to make timely payments to our vendors. Our customers will not experience any impact from the restructuring and business will continue without interruption. This agreement allowed us to preserve over 7,300 jobs and that's a big one for us."

    Because more than two-thirds of the approximately 135 lenders signed off on the restructuring agreement, Herbst Gaming should emerge from bankruptcy court as planned, company officials said. Once the legal proceedings are completed, gaming applications will be filed in Nevada for both the new casino company and the slot route company, and in Iowa and Missouri for the casino company.

    When new gaming licenses are issued, potentially with a one-year time frame, the new casino owners will most likely bring in new management, Troy Herbst said.

    "It's disappointing because we worked hard at building an outstanding business," Troy Herbst said. "Even now, our casinos and our routes are generating positive cash flow. They are making money. It's just the debt that has overwhelmed us."

    Herbst Gaming began as a slot machine route operator, owning games in bars, taverns and restaurants throughout Nevada and sharing the revenues with the establishments' owners. The company grew substantially in 2007, spending $140 million to acquire five Northern Nevada casinos and spending $349 million to acquire Primm Valley, Buffalo Bill's and Whiskey Pete's from MGM Mirage.

    However, a voter-enacted smoking ban inside taverns and restaurants sent gamblers to casinos and damaged revenues from the route operations.

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

    Newsvine Digg Fark Technorati reddit StumbleUpon del.icio.us Slashdot Propeller Mixx Furl Twitter MySpace Facebook Google Bookmarks Yahoo! Bookmarks Windows Live Favorites Ask MyStuff myAOL Favorites

    Leave Your Comment 23 Reader Comments
    Terms & Conditions
    The following comments are provided by readers and are the sole responsiblity of the authors. The reviewjournal.com does not review comments before publication nor guarantee their accuracy. By publishing a comment here you agree to abide by the comment policy. If you see a comment that violates the policy, please notify the web editor.

    Some comments may not display immediately due to an automatic filter. These comments will be reviewed within 48 hours. Please do not submit a comment more than once.
    Current Word Count:

    Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

    ex gambler wrote on March 12, 2009 01:34 PM: Funpat...check this out


    http://bleacherreport.com/articles/119377-the-real-story-behind-the-ufcs-royal-family/show_full


    abe s. wrote on March 11, 2009 06:29 PM: More B.S.!
    If the smoking ban was so terrible-where are all the for sale signs on PT'S and Roadrunners etc? That's what we were told years ago-it would just drive out business. Oh, that's right-it was just typical republican doom and gloom rhetoric back then. People don't have money to blow on slots anymore. It's the economy dummies!


    pacman720 wrote on March 11, 2009 03:50 PM: Darrin...you are wrong..they couldnt sell anything now cause no one has any money & even if they did you'd only get pennies on the dollar for them....and did you know they don't even own the land thats under the 3 Primm properties? They still have the route operations and that was generous of the lenders. The only casinos in Nevada that were worth anything were Terribles Vegas and Rail City in Reno..not sure how the Pahrump market is doing these days..anyway it will be interesting how this and the others ( Stations, Harrahs, MGM) plays out in the next 6 months.


    funpat wrote on March 11, 2009 03:46 PM: Ex gambler

    Why don’t you let us uninformed conspiracy theorists in on your proof of mob involvement? Your statement is no different than me saying you like to touch little boys, except I’m telling the truth. BTW I like your tin foil hat and your good friend Chester Stiles got what he deserved.

    Go away you mor.on


    ex gambler wrote on March 11, 2009 02:54 PM: Thank you Herbst and Frattita and Corrigan famileis for making this city successful. Your are real Nevadans.

    Yes, they both made their fortunes off of 'mob' money. They truly are 'Real Nevadans.'


    Darrin wrote on March 11, 2009 01:31 PM: It would have been much easier for the Herbst family to wave the white flag and just have sold everything. But no. Why did they hang tough and try to make a deal with their lenders? They have their own money, and would have been fine on their own. Instead, they have given the fifteen casinos that they owned a new lease on life by giving them up. Along with this, all of the employees now have a chance at future employment at these properties.
    I truly believe these guys care about their employees.
    WTG Herbst!


    Blak wrote on March 11, 2009 12:37 PM: I am in disbelief with some of the comments here. The Frattitas and Herbst families have owned, operated and managed businesses in this town for decades. They have provided employment and benefits to many who moved here from other areas seeking opportunity. Let me guess, those hate mongers among you probably worked for one of their companies and somehow, failed a drug test, got fired and now are hoping Obama will do for you what these business owners have done for many over the years. Your selfish and jealous comments only show how different you all are from the business owners who take all the risk. Thank you Herbst and Frattita and Corrigan famileis for making this city successful. Your are real Nevadans.


    Ken wrote on March 11, 2009 12:27 PM: dob is my new hero!


    dob wrote on March 11, 2009 11:27 AM: Mark groceries are not like the government, just because they make money on slots does not mean they have to give it to you.

    Liberal thinking seems to have replaced common sense


    Mark$ wrote on March 11, 2009 11:15 AM: If it is true that slot route operators like Herbst "share the revenue with the establishments' owners", then will someone explain to me why groceries in Las Vegas supermarkets aren't say 10% cheaper than their counterparts in say southern California, since gamblers are contributing so much extra to the Krogers/Vons/Albertsons bottom line.


    Read All Comments