CasinoCityTimes.com

Gurus
News
Newsletter
Author Home Author Archives Search Articles Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links
Related News
Recent Articles
Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Landry Gets Two for One Deal

26 May 2005

LAS VEGAS -- Poster Financial Group's sale of the Golden Nugget Laughlin to Barrick Gaming has collapsed, according to a filing with the Securities and Exchange Commission.

Landry's Restaurants, which is purchasing the Golden Nugget Las Vegas from Poster Financial, is expected to gain the Laughlin property as well without putting up additional money.

In its quarterly financial statement to the SEC, Poster Financial said Las Vegas-based Barrick Gaming terminated its November 2004 agreement to purchase the 300-room, tropical-themed hotel-casino on the Colorado River for $31 million. Barrick, which operates several downtown casinos, claimed certain provisions in the purchase agreement were breached by Poster Financial.

If the deal were to fall through -- the agreement expires May 31 -- Houston-based Landry's, which in February announced it was buying the 1,900-room Golden Nugget Las Vegas for $295 million in cash and debt assumption, would add the Laughlin casino to the transaction.

Because Landry's is purchasing the gaming subsidiary of Poster Financial, the company would not be obligated to cover the cost of the Golden Nugget Laughlin.

"The way the agreement was structured, if that deal fell through, then we would just pick up that property as well," Steve Scheinthal, Landry's general counsel, said Wednesday. "We don't have to add any more money to deal. The transaction was between Poster and Barrick and the funds from that deal would have gone to pay down debt."

Poster Financial Group Chief Financial Officer Dawn Prendes would not comment on the matter, saying the company's SEC filing would serve as its public statement.

In the filing, Poster Financial said, "There is no adjustment to the purchase price for the acquisition of the Golden Nugget Laughlin because the net proceeds that would have been applied to outstanding balances under the credit facility would not have been received from Barrick."

Barrick Gaming President Stephen Crystal said the company terminated the purchase agreement because annual cash flow at the Golden Nugget Laughlin fell below $4.6 million, which violated the contract's language.

Crystal said Poster Financial took a one-time charge of $1.2 million that was applied to the Golden Nugget Laughlin, which brought the casino's cash flow to $3.4 million.

He disputed Poster Financial's claims that Barrick wasn't able to close the transaction.

"That would make our purchase 10 times cash flow, which in our view, just isn't what had been represented to us," Crystal said. "We had the ability to finance the deal and our financing was in place."

He said that Barrick is entitled to regain its $1 million deposit that was placed in escrow, but Poster Financial disagreed with the company's request.

"Poster Financial vigorously disputes any assertion that it has breached any of the provisions ... or that Barrick is entitled to any of the funds that were placed into the escrow account," according to the filing.

Landry's backed Poster Financial's view of Barrick.

"Barrick wasn't able to perform, and that was it," Scheinthal said.

In February, Landry's Chairman and Chief Executive Officer, Tilman Fertitta, said the company hoped to introduce the Golden Nugget into several U.S. gaming jurisdictions, much in the way the company has branded its line of restaurants, such as Landry's Seafood House, Joe's Crab Shack and the Rainforest Cafe.

"We think a lot of the Laughlin market and we don't mind picking up this property as well," Scheinthal said.

Landry's said it hopes to close the Golden Nugget purchase by the end of the year.