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Oct. 31, 2009
Copyright © Las Vegas Review-Journal

CASINO COMPANIES: Herbst reorganization plan gets OK

Once company sheds bankruptcy, secured lenders to get control

By ARNOLD M. KNIGHTLY
LAS VEGAS REVIEW-JOURNAL

Once Herbst Gaming reorganizes, secured lenders will get 100 percent of the company. Herbst Gaming operates Terrible's in Las Vegas, above, 14 other casinos and a 600-location Nevada slot route.
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Herbst Gaming is positioned to become the first Nevada casino company to emerge from bankruptcy.

The casino and slot route operator company Friday won court approval of a reorganization plan that will hand the company to its secured lenders, leaving nothing for noteholders owed $363 million.

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    • Bankruptcy Judge Gregg Zive in Reno approved the plan Friday, overruling objections from the noteholders and other low-ranking creditors who claim the three Herbst brothers drove their company into bankruptcy by doubling its debt to $1.15 billion through a pair of acquisitions in 2007.

    The company spent $140 million to acquire five Northern Nevada casinos and $349 million to purchase the three Primm casinos -- Whiskey Pete's, Buffalo Bill's and Primm Valley Resort -- from MGM Mirage in 2007.

    As part of the reorganization plan, the company agreed not to file lawsuits related to the 2007 expansion, a decision opposed by unsecured creditors. The creditors argued they could potentially be paid more by suing lenders and the Herbst family.

    "I find the probability of success to be very low," Zive said in court, referring to the potential lawsuits.

    Herbst, which has about 5,400 employees, owns 12 casinos in Nevada, two in Missouri and one in Iowa. Locally, the company owns the 275-room Terrible's hotel and casino.

    It also has a 600-location, 6,800-machine Nevada slot route.

    Sean Higgins, Herbst's general counsel, Friday said the company will not comment until early next week on the court decision.

    The Las Vegas-based gaming company filed for bankruptcy March 22, claiming it had agreements with creditors to be divided into two holding companies. One holding company, owned 100 percent by the lenders, would cover the casinos. A second holding company, owned 90 percent by the Herbst brothers and 10 percent by the lenders, would cover the slot machine routes.

    That deal fell apart after noteholders attacked it.

    The secured lenders, represented in the case by their agent, Wilmington Trust Co., are owed $876.5 million. Their identities were not made public as part of the company's reorganization plan.

    The lenders will receive 100 percent of Herbst Gaming, both the casinos and slot routes, once the company reorganizes. The new company will issue $350 million in new senior secured bank loans as part of the reorganization.

    Timothy P. Herbst, Edward J. Herbst and Troy D. Herbst will have their equity, which was held in family trust, wiped out by the reorganization, according to court documents.

    The brothers remain directors of the company after the reorganization with Troy Herbst as the company's chief executive officer.

    Gerald Gordon, attorney for Herbst Gaming, said the plan will take nearly a year to gain approval from gaming regulators where the company operates.

    Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893. Bloomberg News contributed to this report.

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    Free Nevada wrote on October 31, 2009 12:01 PM: @AP: Agreed.

    @Spoiler: It seems pretty obvious that they hold favor with at least one of the "secured lenders."

    > The secured lenders, represented in the case by their agent, Wilmington Trust Co., are owed $876.5 million. Their identities were not made public as part of the company's reorganization plan.


    Spoiler wrote on October 31, 2009 11:49 AM: Am I reading this correctly, after driving the business into bankruptcy by inept and incompetant decisions, the new owners are going to allow these three morons to continue to run the company. You will get what you deserve.


    Joe wrote on October 31, 2009 11:39 AM: Wow, the Herbst just followed the Fetitta's method on how to get rich - just go suck every dime out of the company, make hundreds of creditors eat it in the shorts, and then lose the company to bondholders. Nice. Yes, Herbst's lost the company (kind of),but they still sucked millions out. Karma is a biiitch though boys.


    The Vegas Cheat wrote on October 31, 2009 10:34 AM: The Judge is doing them a favor. This family has connections. The son took over and put them in bankruptcy. He bought casinos in Primm. The gas crisis caused them to go flat. He bought condos. Another bust. The guy is a real dummie. Now, he's back to playing golf and doing nothing!


    Dave wrote on October 31, 2009 09:39 AM: Now if the same could be done with Stations, perhaps the employees would learn to respect their employer again.


    Cap wrote on October 31, 2009 08:41 AM: Maybe a little less attention on pharmaceuticals, Ed. And maybe a little less attention on spending money and more attention on keeping it so that you can continue to employ people. You boys do have a responsibility, and it's not to have the best Trophy Truck or the coolest jet. Good thing daddy kept the Oil business, otherwise that would have gone away as well. Hope you have good insurance.


    AP wrote on October 31, 2009 08:18 AM: Decades of hard work wiped out in a couple of years.

    Primm is a disaster.


    Bat Guano wrote on October 31, 2009 07:25 AM: Easy come, easy go.