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Benjamin Spillman

'For sale' sign could be headed for Fitzgeralds

7 May 2008

LAS VEGAS, Nevada -- Fitzgeralds owner Don Barden is pledging his downtown Las Vegas property to generate a $35 million equity stake in a slots-only casino in Pittsburgh, making a sale likely for the Fremont Street hotel.

Ratings agency Standard & Poor's reported that Barden, through companies he owns, pledged money from Fitzgeralds to restructure debt on the Pittsburgh slots parlor scheduled to open in 2009.

Bankers funding the transaction wanted Barden to have a bigger stake in the project, Standard & Poor's analyst Ben Bubeck said.

"That gives him ownership rights," Bubeck said. "He hasn't actually put any equity in up until this $35 million."

Word that Barden would leverage Fitzgeralds prompted the agency to upgrade the corporate credit rating of his firm, PITG Gaming Holdco, to "B."

It also means a potential exit from Las Vegas for Barden, who in 2000 became the first black person to wholly own a Nevada casino.

Money from Fitzgeralds will come due at the opening of the Pittsburgh project, scheduled for May or June 2009, Bubeck said.

"Once the casino is built in Pittsburgh, they need to contribute $35 million one way or another from that casino," he said. "Indications are they are going to sell it."

Kirk Saylor, Fitzgeralds vice president and chief operating officer, did not return a call for comment.

John Knott, executive vice president for global gaming at real estate firm CB Richard Ellis said Fitzgeralds should have no problem generating offers of $35 million or more.

"I think $35 million for Fitzgeralds would be considered a bargain," he said. "The line would form behind me."

Terry Caudill, owner of the Four Queens, spent $32 million this year to acquire Binion's. Investors Stephen Siegel and John Tippins recently bought the downtrodden Gold Spike for $21 million.

In its current state, Fitzgeralds would likely be considered a step above those properties and a step below the Golden Nugget, the largest downtown casino-hotel.

Barden announced a deal to buy Fitzgeralds, along with sister casinos in Tunica, Miss., and Black Hawk, Colo., for $149 million in late 2000.

In late 2001, when Barden's company, Majestic Investor LLC, took over Fitzgeralds, Barden suggested he would be increasing his stake in the Las Vegas market.

As recently as 2006, Barden said he was in Las Vegas for the long haul, even going so far as to spend $13.5 million to acquire an office building at 302 E. Carson to use as corporate headquarters.

"We are positioning ourselves downtown for the future," he said in February 2006.

However, since acquiring the license for a Pittsburgh casino, Barden has been under pressure to put more money into that deal.

Ratings agencies worried the Pittsburgh property could fall behind in debt service if business is weak in its first year of operation. The money pledged from Fitzgeralds assures lenders Barden's group will stay current on their Pittsburgh operations.

"It all depends on how the casino performs," Bubeck said of the capital behind the Pittsburgh deal. "It is enough money to get it built."