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Gaming Guru

Rod Smith
 

Harrah's Confident Purchase of Horseshoe Will Go Through

9 March 2004

LAS VEGAS -- Harrah's Entertainment picked up the gauntlet Monday, announcing it will proceed with its planned three-way deal to buy out the Binion's Horseshoe despite the clouded title to land under the downtown landmark.

"We expect to close on the deal no later than (Tuesday) morning," Harrah's spokesman Gary Thompson said Monday afternoon.

The sale of the Horseshoe was planned to close Friday but appeared to be in danger when former state Sen. Bill O'Donnell made a $1.184 million offer for one of the many separate parcels on which the Horseshoe sits. A hearing is scheduled before District Court Judge Michael Douglas this morning on O'Donnell's offer, which was confirmed Friday by probate Commissioner Don Ashworth but is being contested by Owen Parry's heirs.

The last-minute bid for the so-called Parry parcel sent lawyers scurrying over the weekend to get around O'Donnell's offer, which topped MTR's own bid for the unprobated parcel by $5,000.

Thompson said Friday night that O'Donnell's bid for the parcel was a possible deal killer because Chester W.Va.-based-MTR Gaming Group, which would buy the Horseshoe from owner Becky Binion Behnen, would not negotiate with O'Donnell to buy the parcel.

"If MTR walks away from the deal, we walk away from the deal," Thompson said Friday night.

One expert agreed that could be a problem.

"Uh-oh. Trouble in River City. It seems like what (O'Donnell) is doing is a form of green mail," agreed University of Nevada, Las Vegas, professor Hal Rothman.

Harrah's, which is buying the World Series of Poker and rights to the Horseshoe name in Nevada, however, reached agreement with Behnen and MTR over the weekend to go forward with their deal to take over the 52-year-old property, Thompson said Monday.

He said Harrah's has been told through O'Donnell's attorneys that he plans to enjoy the rental income from owning the property. O'Donnell could not be reached for comment.

Thompson, however, expressed confidence the transaction would not only close this morning, but that Harrah's would be able to reopen the Horseshoe by April 1 or shortly thereafter as planned.

"Depending on how the hearing goes, there are a number of avenues we can pursue (to deal with any possible remaining claims by O'Donnell, the Parry estate or Owen Parry's heirs)," Thompson said.

Harrah's and Jerry dePalma, a local attorney who represents Behnen, declined to discuss what steps the parties to the three-way deal may take after the hearing this morning. MTR could not be reached for comment.

However, sources familiar with contested real-estate deals said the most likely solution would be getting the city to exercise its right of eminent domain to seize the land and lease the parcel to MTR.

"Eminent domain is unpopular and especially in Nevada because of our libertarian leanings and the corporate leanings of the community," Rothman said.

In this instance, there would be an ironic twist because Mayor Oscar Goodman is a First Amendment attorney and noted defender of civil liberties, Rothman said.

"He'd be eminent domaining a private citizen in favor of a corporate entity," he said.

Goodman, however, said his primary goals are to put 900 out-of-work constituents back to work and make the Fremont Street Experience as viable as possible.

"I'll do just about anything I can to make sure it's healthy. I don't want to speculate on eminent domain. I wouldn't do it except in dire circumstances. It's given the city a real black eye in the past," he said, referring to the taking of the land under Neonopolis while it was still being planned. "Still, real lives are involved in this and I'll be looking at (the option) carefully."

DePalma said he and Behnen are still exploring all their options with Harrah's and MTR, but they "are (also) willing to do almost anything possible" to close the transaction.

"Out gravest concern about O'Donnell's blatant money grab is 1,000 people being out of a job. Becky Behnen has instructed me to do whatever we can to make sure these people get back to work."

Thompson said Harrah's expects to close on the transaction this morning before the hearing before Douglas is concluded.

"The hearing will not have an impact on the closing. (Depending on the outcome of the hearing), the question will be what to do with that part of the property, a 4,000-square-foot area," he said.

Harrah's, which originally entered the picture as the buyer of the property, will also operate the Horseshoe for the first year, with a one-year option and two six-month options to extend the operating agreement with MTR, which owns and operates the Speedway Casino at the Ramada Inn in North Las Vegas.

Harrah's on Saturday sent letters to more than 900 employees who were working when the property closed Jan. 9. It will start conducting interviews Wednesday for rehiring the workers. Workers who want to schedule interviews should call 382-1600, ext. 7329.

"Assuming the transaction closes as we expect late today or tomorrow, we will (also) send accrued vacation checks later today or tomorrow," Thompson said Monday.

As soon as the three-way transaction closes, payments will be transferred to creditors of the Horseshoe by Harrah's, which initially agreed to buy the Horseshoe largely through the assumption of an estimated $50 million in liabilities.

Creditors who requested anonymity expressed concern Monday that settlement payments had not been transferred Friday as expected and that the deal might be dead or dying.

Thompson said Harrah's later this week will start very aggressively marketing the World Series of Poker, now set to start April 23 at the Horseshoe.

Deutsche Bank analyst Andrew Zarnett said relative to overall operations for Harrah's, whose 2004 revenues are projected at $4.6 billion, the sale and reopening of the Horseshoe is not very important.

"But in terms of them being clever in doing a neat deal, taking over the World Series of Poker and buying use rights to the Horseshoe brand in Nevada, it's very important for their growth," he said. "Having the brand presents a strong opportunity to build a Strip resort with an ID independent from Harrah's brand."

Harrah's Confident Purchase of Horseshoe Will Go Through is republished from Online.CasinoCity.com.