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LAS VEGAS, Nevada -- Herbst Gaming appointed two independent directors to oversee any potential restructuring opportunities for the financially troubled casino operator.
Attorneys John O'Reilly and John Brewer will entertain, evaluate and negotiate all restructuring proposals for Herbst Gaming, which is facing a potential bankruptcy because of mounting debt. The company announced the plans in a filing with the Securities and Exchange Commission on Monday.
Brewer is a partner in Kummer, Kaempfer, Bonner and Renshaw. O'Reilly, who heads O'Reilly & Ferrario, is a former chairman of the Nevada Gaming Commission.
O'Reilly and Brewer will recommend any ideas to brothers Ed, Tim and Troy Herbst, who are the owners of Herbst Gaming and the board's other three members.
Herbst Gaming, which operates casinos and Nevada's largest slot machine route, is privately held by the three brothers but has publicly owned debt.
Last week, Moody's Investors Service continued to downgrade its rating on Herbst Gaming bonds, revising the probability of default from Ca to Ca/LD. Herbst failed to make interest payments on some of its bonds in May and earlier this month.
Moody's said the negative outlook recognized that Herbst is seeking financial and strategic alternatives to address the deterioration in the company's operating results and capital structure.
"There is no assurance that it will successfully achieve any such alternative in the near term," Moody's said in a statement.
At the end of March, Herbst Gaming told investors the company might have to seek bankruptcy protection unless it can reorganize a payment structure for its more than $1.146 billion debt. Auditors said the company's troubles meeting its bond payments triggered a potential default under its credit agreement.
Las Vegas-based Herbst said its Southern Nevada operations have been hurt by failing economic conditions, a statewide ban on smoking in taverns and restaurants, and competition from American Indian casinos in Southern California.
Herbst Gaming operates 15 casinos in Southern and Northern Nevada, including the three Primm resorts along Interstate 15 at the California-Nevada border, and the off-Strip Terrible's on East Flamingo Road. The company also owns three casinos in Missouri and Iowa and operates approximately 7,200 slot machines through its Nevada route operation.
Recently, the company closed a small stand-alone casino it operated in the Northern Nevada community of Dayton.
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