BUSINESS REORGANIZATION: Herbst Gaming files Chapter 11 plan - News

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Mar. 23, 2009
Copyright © Las Vegas Review-Journal

BUSINESS REORGANIZATION: Herbst Gaming files Chapter 11 plan

Owners seek debt relief to ensure normal operations

By HOWARD STUTZ
LAS VEGAS REVIEW-JOURNAL

Herbst Gaming filed a prepackaged Chapter 11 bankruptcy reorganization plan Sunday that will result in the company losing ownership of its 15 casinos but retaining control of its Nevada slot machine route.

Herbst Gaming Chief Executive Officer Troy Herbst said in a statement that the company previously negotiated an agreement with a majority of its secured lenders covering $847 million in total debt. The company announced plans for the prepackaged bankruptcy March 10.

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Herbst, who owns the gaming company with his brothers, said the Chapter 11 process will allow operations at the company's casinos and its slot machine routes to continue. The current management team will remain in place, employees will receive pay and benefits, and suppliers will be paid on a regular basis.

"Today's action is the most effective means to implement our debt restructuring and achieve a capital structure that fits current business conditions," Herbst said. "We are pleased to have found a solution to our burdensome debt load that allows the company to preserve jobs and ensure normal daily business operations."

Herbst Gaming operates 15 casinos in Nevada, Iowa and Missouri and a 600-location, 6,800-machine Nevada slot route, the state's largest. The company's troubles began in 2007 when it spent $140 million to acquire five Northern Nevada casinos and $349 million to purchase the three Primm casinos from MGM Mirage.

The souring economy sapped consumer spending, and high gasoline prices last year kept Southern California casino customers at Indian casinos closer to home rather than the Primm properties north on Interstate 15. Also, a voter-enacted smoking ban in bars and restaurants hurt revenues from the route operations.

Herbst Gaming had planned to file bankruptcy today but decided to take the action a day early. The company filed its voluntary petitions for Chapter 11 with the U.S. Bankruptcy Court for the District of Nevada in Reno. In addition to the court, the plan needs approval of gaming regulators in Nevada, Missouri and Iowa.

"Since we already have an agreement in place on a restructuring with our secured lenders, the company expects to confirm the plan of reorganization expeditiously and without disruption to our business," Herbst said.

Under the reorganization plan, which was approved by about 68 percent of the company's lenders under its senior credit facility, Herbst Gaming will be divided into two holding companies. One holding company, owned 100 percent by the lenders, will cover the casinos. A second holding company, owned 90 percent by the Herbst brothers and 10 percent by the lenders, will cover the slot machine routes.

The plan calls for termination of all outstanding obligations under the company's two different Senior Subordinated Notes and the cancellation of all existing equity in the company.

When the company announced the agreement March 10, Herbst Gaming General Counsel Sean Higgins said the prepackaged plan was a result of nearly a year of discussion with the company's lenders.

"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."

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

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. nonamenonamenoname wrote on May 25, 2009 02:43 AM: I can tell you all FIRST hand that the smoking ban was a major blow to the herbst , alot of the revenue came from not only the bars but from the super markets! Yes! Super markets! I will not get into detail on how much , but let's just say that the ROUTE makes a ton! And as for as the other things the Herbsts' bought , well that's fine and all but the economy did hurt not just the Herbst but ALL the operators! And in the end when the Bankrupcty is over with they will come out smelling like a rose! I wish everyone would get off the wagon about Daddy this and Daddy that! Get over it. Sounds too me like alot of posters' are extremely jellous of how well the Herbst have done and will continue to do! And to the person who posted about the 147 or what ever location #'s? Get your facts straight! They are pushing closer to 700+ locations in NEVADA! So if you think they are hurting... Think again! They obviously know exactly how to run a Company! I tip my hat too them for what they have done and what they plan on doing in the future! vickie wrote on March 31, 2009 03:40 PM: Ken is absolutely right, they can make any excuse they wish and blame it onwhatever-the truth is they over extended themslves---greedy greedy, and look what that gets them..l.ol. blakdmnd wrote on March 24, 2009 10:01 AM: Ex Gambler (how are the meetings going) and so, Both of your eloquent retorts emphasize your idiocy. It is exactly why they kept the slot routes you DOLTS. Having 147 locations that are NOT taverns are a good move. Who cares who holds the paper you morons, they are a family and will continue to succeed even without comments like "daddy's stations". Do you both hang out in the same sand box because the bell rang and you need to go in and start finger painting. ex gambler wrote on March 23, 2009 03:30 PM: blakdmnd ...add yourself to the a_hole list. If those slots at the gas stations are so lucrative, why then are they crying about the smoking ban? so wrote on March 23, 2009 02:01 PM: balkdmnd, Yes i do think before i type and you are the stupid one Herbst Gaming does not own ANY gas stations! Daddy owns all the gas stations, the boys just own the slot routes. So maybe you should think before you type you TOOL! Joe Bama wrote on March 23, 2009 01:12 PM: Well,at least they can keep their money pump. If they had lost the slot route they would be dealing roulette at the Horseshoe. Ken wrote on March 23, 2009 12:54 PM: I love how the smoking ban is tied into all of this by people who look for simple answers. They overextended themselves just like Stations, Harrahs, MGM. Is this really a surprise to anyone? blakdmnd wrote on March 23, 2009 12:46 PM: ex gambler, Add yourself to the list of stupid. blakdmnd wrote on March 23, 2009 12:43 PM: so, Do you think before you type? They kept the slot route because they own 147 gas stations you tool. Wow your an idiot. ex gambler wrote on March 23, 2009 11:34 AM: Bada Bing...(so). Exactly my thoughts. Read All Comments