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Benjamin Spillman

Rumors around Binion's sale

1 June 2007

LAS VEGAS, Nevada -- The place that made poker famous is awash in rumors of a possible sale, but its owners still aren't showing their hand.

Binion's in downtown Las Vegas has been the subject of sale speculation for months and a recent remark by the chief executive officer of the West Virginia company that owns the historic casino added fuel to the rumors.

But so far neither Edson Arneault nor anyone else in the Chester, W.Va., headquarters of MTR Gaming Group is willing to elaborate on plans for the struggling casino, the former home of the World Series of Poker, an event that's reaped millions of dollars and raised poker's profile worldwide.

That leaves the casino's 850 employees, investors and downtown enthusiasts to wonder about the future of what was once among the most successful and notorious casinos in Las Vegas.

"I've heard rumors ever since I have been here. And companies have expressed interest in this property," said Bill Robinson, Binion's chief operating officer since May 2006. "Nobody from corporate has talked to me about this."

Robinson was responding to remarks by Arneault, president, chief executive officer and chairman of the board for MTR Gaming, during a conference call in May to discuss the company's earnings.

"We view it as an investment property rather than one of our strategic properties," Arneault told investors, which suggested MTR Gaming would like to unload Binion's, which posted a negative cash flow of $3.3 million last year.

MTR Gaming has already agreed to sell its other Las Vegas property, Speedway Casino in North Las Vegas, for $18.2 million, and investor conference calls focus more on its racetrack and casino operations in West Virginia, Pennsylvania and Ohio than problems in Nevada.

"You don't invest in MTR for Binion's," said Justin Sebastiano, a senior gaming analyst for Nollenberger Capital Partners, who follows the company.

Sebastiano said MTR Gaming's future is in slot machines and racetracks in Pennsylvania and the potential approval of table games in West Virginia.

Binion's, Sebastiano said, has been a drag on MTR Gaming's stock since the company bought it from Harrah's Entertainment in 2004 for about $20 million.

"I don't really see it getting better for them anytime soon," Sebastiano said. "I'm estimating negative cash flows over the next few years."

Neither Arneault nor Steven Overly, MTR Gaming's vice president of business and legal affairs, returned several calls to comment or elaborate on the remarks.

Robinson said as far as he knows, the company plans to continue to invest in Binion's in an attempt to right the listing operation.

Recent improvements include a club that operates at night on the 24th floor of the hotel tower in space Binion's Ranch Steakhouse uses earlier in the evening.

Casino renovations include new carpeting and decor and 200 new slot machines. And there are plans to upgrade at least one floor of hotel rooms in an attempt "to see what the price resistance is" and attract higher-spending customers, Robinson said.

Binion's isn't the only casino in downtown Las Vegas operating in an air of uncertainty.

The Tamares Group recently listed the Gold Spike for sale at a price of $15 million. The smoky, down-market property has reportedly piqued the interest of a number of potential buyers, including operators of the Sapphire gentleman's club near the Strip.

Tamares also recently parted ways with the Navegante Group, the company that had been managing the Gold Spike, Plaza, Las Vegas Club and Western Hotel. Company officials, through representatives, have hinted they intend to make changes but so far have declined requests to elaborate on their plans.

Owners of the Golden Nugget and El Cortez are investing about $100 million and $20 million, respectively, in their properties.

Gaming revenue continues to decline at downtown casinos. Gaming win in March was $55.3 million, a 7 percent decrease compared with $59.5 million a year ago. It was the 10th consecutive month of decline for the market.

"It is not the Vegas Strip," said Sebastiano of Binion's and its downtown location. "I just don't think it is that great of an asset."

MTR Gaming Group shares fell 8 cents, or 0.51 percent, Thursday to close at $15.76 on the Nasdaq National Market.