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Gaming Guru

Howard Stutz

Herbst Gaming talks restructuring with lenders

8 December 2008

LAS VEGAS, Nevada -- Herbst Gaming said late Thursday it is discussing a restructuring agreement with its lenders after missing a $5.1 million interest payment earlier in the week.

In a filing with the Securities and Exchange Commission, the locals gaming company also extended its forbearance and standstill agreement with its banks until Feb. 2 in an effort to restructure $846.8 million in debt.

Meanwhile, Herbst Gaming said it lost $101.2 million in the first nine months of 2008, compared with a net loss of $34.1 million for the same period a year earlier.

Herbst, which is privately held by brothers Ed, Tim and Troy Herbst but has public debt, operates 15 casinos in Nevada and the Midwest and a 7,200-slot machine route operation.

In March, the company said it was facing bankruptcy unless it could restructure its debt. Negotiation deadlines have been extended several times this year.

Gaming analysts expect the company to file bankruptcy, or possibly, a prepackaged bankruptcy in which the Herbst brothers would give up control over parts of the business.

Herbst grew significantly in 2007, acquiring casinos in Northern Nevada and completing a $394 million purchase of the three Primm Casinos from MGM Mirage. Also, the company finished an expansion to its Terrible's Casino on East Flamingo Road.

However, the company's gaming revenues were ravaged by a statewide voter-enacted ban on smoking in restaurants and taverns. Herbst's slot route operations lost business; through September, revenues from routes were $186.9 million, down 12 percent compared with $212.5 million for the first nine months of 2007.

The company's casino operations in Primm were hurt this year because high gasoline prices kept visitors from Southern California from making the drive on Interstate 15. Still casino revenues companywide have increased 4 percent in the first nine months of the year.

The company's nine-month loss stems from an operating loss of $16.7 million and interest expenses of $85.3 million.