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Gaming Guru

Cy Ryan
 

Lady Luck Management Deal Approved

22 August 2003

CARSON CITY, Nevada -- Despite concerns about finances, the state Gaming Commission has given approval for two men to take over the gaming at the Lady Luck casino in downtown Las Vegas.

A two-year limited license will go to Robert H. O'Neil with 83 1/3 percent ownership and Keith E. Grossman with 16 2/3 percent.

They believe the downtown gaming industry is on the rebound.

"The economy is coming back slowly in Southern Nevada," O'Neil told the commission Thursday.

But Commission Chairman Peter Bernhard said he was worried about the "thin capitalization" of the project. He said the two men were putting up little if any of their own money and most of the financing comes from loans.

Bernhard said they had "nothing at risk." If the property failed, there was nothing "to stop you from walking away."

But Grossman said they have personally guaranteed some of the loans. He said the casino has struggled for the past few years under the ownership of Isle of Capri. With no changes, revenue is up 4-5 percent this year compared to last year, he said.

The AMX company owns the 800-room hotel and the casino and it is leasing the gaming operation to O'Neil and Grossman. AMX is making an $8 million to $10 million renovation of the rooms and other parts of the resort and will aggressively promote timeshares.

Grossman said hotel occupancy now is 80 percent and up to 100 percent on weekends.

He told the commission there will be $600,000 to $700,000 in pre-opening cash available.

Commissioner Augie Gurrola said there are a number of Indian casinos being built in the San Diego area and some experts believe that will hurt downtown Las Vegas. O'Neil replied that downtown Las Vegas was unique and was up to meeting the challenge of the tribal casinos in California.

"San Diego can't duplicate Glitter Gulch and the excitement of Las Vegas," O'Neil said.

Grossman said his group, called the Henry Brent Company, does not intend to make any management changes immediately. He said the employees have "stuck it out" through lean times.

The Lady Luck will spend more on marketing than in the past; it will have a direct mailing campaign; promote rodeo and speedway tickets and may develop the 480-seat showroom that has been sitting empty, Grossman said.

But he added, "I don't have a magic wand." Six years ago, the casino was "doing very well," he said.

Andrew Donner, a Las Vegas businessman, originally sought to be licensed by the state regulators as part of the company. But he ran into trouble because of mistakes on his tax returns in the past. So he bowed out but he is still loaning the company $2 million.

The commission sought assurances that Donner would not have any say in the casino operation. Grossman said Donner will not be on the premises and will not be involved in any of the marketing or other casino operations.

Grossman works for Donner, who is a major shareholder in the Timbers Hospitality Group that runs a string of taverns in Las Vegas. Grossman said Donner will be treated as any other lender who gets periodic briefings on the state of business.

"Henry Brent (Co.) stands alone as the operator," Grossman said.

Alliance Gaming Corp.'s United Coin Machine Co. slot route unit has agreed to loan the casino about $1.6 million.

Donner backed out initially when the question of his tax returns was raised but state regulators said he could apply when he straightened them out and operated for a period of time without problems.

Donner told the commission he had "no excuse for the tax matters." He said his business was expanding rapidly and he had 25 companies. "I will be before you in the future and there will be no areas of concern about taxes or business probity."

Because of the concerns about the financial structure, the commission imposed a two-year limited license, requiring the group to return to see how things were progressing. Gurrola voted against the limited license, saying it would impede the group from getting financing but he said he supported the licensing of the individuals.