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Chris Sieroty

Nevada regulators recommend sale of Palms majority stake

3 November 2011

LAS VEGAS, Nevada -- The state Gaming Control Board on Wednesday unanimously recommended the sale of a majority stake in The Palms Casino Resort to Leonard Green & Partners L.P. and TPG Capital, as owner George Maloof nears completion of a restructuring that will reduce the property's debt.

Leonard Green and TPG have already purchased the property's $459 million outstanding loan. The Nevada Gaming Commission will consider the board's recommendation to approve the sale on Nov. 17.

"It will be 10 years since we opened this month," Maloof told the three-member board. "We've had great success. We are very fortunate to have two great partners."

Maloof also thanked the board for the opportunity to work in Nevada for almost 25 years. He said 600 of the property's 2,000 employees have been at the Palms since it opened in 2001.

Under the deal, Leonard Green and TPG will own 98 percent of the Las Vegas celebrity hangout through a company called FP Holdings L.P. Maloof will own 2 percent of the Palms, with options to acquire an additional 7.5 percent.

Matthew Dillard, a partner with Dallas-based TPG, said Maloof has a 10-year employment agreement and will remain as the new company's chairman of the board.

Dillard also said the Palms was expected to have access to a $60 million line of credit from Wells Fargo & Co.

"We are currently in extensive negotiations with Wells Fargo to provide $60 million," he said. "I believe it will close by the (gaming commission) meeting in two weeks."

Dillard said FP Holdings will use $30 million to pay down the loan on Palms Place, while the other $30 million will be invested in various projects.

The Palms casino was expected to be the first remodeling project, along with upgrades to the existing Palms tower. Updates of the resort's restaurants and food court are also expected to start in the first quarter of 2012.

Palms President Joe Magliarditi said the hotel would spend $3.5 million for 214 new slot machines by year's end. In all, the Palms casinos will see $5 million in upgrades.

"I can't say enough about how good of a job (George) did building the Palms brand," Magliarditi said. "We are reinvigorating that brand."

He stressed that the hotel-casino will continue to focus on local customers as it extends it brand to outside markets.

In other business, the board recommended Ronald Paul Johnson's appointment as receiver for Goldman Sachs Mortgage Co. to oversee operations of the Las Vegas Hilton, if approved by the Clark County District Court.

Bud Hicks, a partner in the Las Vegas firm McDonald, Carano, Wilson LLP, told the board that Goldman Sachs' petition to "assume control" of the Las Vegas Hilton is pending before District Court Judge Elizabeth Gonzalez.

He said Goldman Sachs wants to "keep the Las Vegas Hilton afloat" but wants Johnson, a former Riviera executive, to oversee day-to-day operations of the historic property.

"Goldman Sachs Mortgage Co. is willing to dump funds into the property," Hicks assured the board.

Colony Resorts LVH Acquisitions LLC, a subsidiary of billionaire Thomas Barrack's Los Angeles company Colony Capital LLC, owns the Las Vegas Hilton.

In August, Colony Resorts disclosed it had defaulted on its $252 million term loan after skipping three payments over the summer totaling $3.5 million to conserve cash for operating expenses.

Hicks said the next hearing in the case is set for Tuesday. Goldman Sachs has been trying to foreclose on the 2,950-room property and install Johnson as a receiver to displace current management.