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Howard Stutz

Largest Affinity Gaming shareholder wants to increase stake

27 November 2012

LAS VEGAS -- The largest shareholder in casino operator Affinity Gaming wants to increase its ownership to roughly one-third of the Las Vegas-based company, a filing Monday with the Securities and Exchange Commission shows.

Z Capital, an Illinois-based private equity firm, said in the filing it has two separate agreements to purchase 823,488 shares and 844,940 shares of Affinity Gaming.

The acquisitions would give Z Capital ownership of more than 33 percent of the company's outstanding shares.

The deals are subject to Z Capital gaining regulatory approval by gaming authorities in Nevada, Missouri, Iowa and Colorado.

Affinity is privately held but has publicly traded debt.

Over the past 18 months, Z Capital has increased its ownership stake in Affinity, which was created from the remnants of the bankrupt Herbst Gaming in December 2010.

Affinity now operates 15 casinos, including nine in Nevada. The company, which owns the three Primm casinos and the off-Strip Terrible's, is selling three of its Northern Nevada casinos.

In an Oct. 23 regulatory filing, Z Capital said it owned 24.97 percent of Affinity Gaming and expected to increase its stake above 25 percent, which would trigger change-of-control clauses under gaming regulations in the states where the company operates.

Z Capital Chief Executive Officer Jim Zenni said in the filing that he questioned "the governance practices" of the company's board of directors, but he supports the management team, which is led by CEO David Ross.

Zenni complained about Affinity's board authorizing a $300,000 payment to company Chairman Don Kornstein, who helped negotiate a three-way asset swap with Golden Gaming and Jett Gaming last year. Affinity did not use an outside adviser in the deal.

On Oct. 24, Affinity announced it had retained Deutsche Bank Securities to act as its financial adviser in its evaluation of future opportunities.

If gaming regulators approve the latest transactions, Z Capital expects to seek a seat on the Affinity Gaming board of directors.