Back in March 2007 Herbst Gaming was given Nevada Gaming Commission approval to buy the three Primm Valley casinos from MGM Mirage for US$400 million. The company, which grew out of the Terrible Herbst Oil Company in 1987 to become an established slot route operator and owner of eleven casinos, just one year later in March 2008 said it was considering filing for bankruptcy. Herbst has a deadline of 30 September to formulate a restructuring plan for a debt close to US$1.2 billion.

At the end of last February Herbst engaged Goldman, Sachs & Co as a financial advisor. At that time Ed Herbst, then Chairman, President and CEO of Herbst Gaming, commented, “The Company has a long history of providing gaming services in Nevada and we believe in the strength of the Terrible's brand; however, the recent impact from Question 5, the Nevada smoking ban, and general economic weakness has required us to explore our alternatives. We are confident that our retention of a financial advisor will help us capitalize on the strength of our brand and position the Company to maximize long-term value."

The possible alternatives for the company included recapitalisation, refinancing, restructuring or reorganisation of its obligations or a sale of some or all of its businesses. The Nevada Gaming Control Board yesterday granted preliminary approval for Brandywine Bookmaking, a sports book operator, to operate sports and racing wagering facilities at six Herbst properties. The agreement between Herbst and Brandywine will give Brandywine, which operates as Lucky's, control of the race and sports books at Terrible's on East Flamingo Road, Herbst's three Primm casinos and the company's two casinos in Pahrump.

Herbst Gaming has become just one more victim of the present economic downturn that has hit the Nevada gaming industry so hard. Finance is now neither as easy to find nor as cheap as it was a year ago. Properties such as the Herbst Primm Valley casinos have seen a marked decline in revenue as the steep increase in fuel prices has meant many Californians, who were the main source of players at these Nevada casinos, have cut both visits and amounts gambled.

Brandywine will pay Herbst a percentage of the revenue from sports betting with a guaranteed minimum. Higher wagers will be accepted than at present, something that could encourage gamblers back into Herbst casinos as sports betting facilities are not available at California’s tribal casinos. The deal still needs to be approved by the Nevada Gaming Commission. (E-09.05.08)

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