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Howard Stutz

Proxy fight looms over control of Affinity Gaming

19 March 2013

LAS VEGAS -- A potential proxy fight over control of Affinity Gaming involves the company’s two largest shareholders with separate proposals for changing the makeup of the casino operator’s board of directors.

Illinois-based private equity firm Z Capital Partners, which controls 30.5 percent of Affinity, said late Thursday that it intends to nominate three candidates for election to the company’s five-person board.

Meanwhile, Affinity announced earlier this week that company representatives met with members of Silver Point Capital, a Connecticut-based hedge fund that owns 24.9 percent of the company. Silver Point is proposing that Affinity’s board be expanded to seven members.

According to a statement from Affinity, Silver Point plans to nominate a slate with “a majority of new directors.”

Affinity CEO David Ross, who is also a member of the company’s board, said Friday he couldn’t comment on the pending proxy battle. The annual shareholder meeting is scheduled for May 14 in Las Vegas.

Las Vegas-based Affinity operates 12 casinos in four states: Nevada, Colorado, Iowa and Missouri. In Nevada, Affinity operates six casinos, including the off-Strip Terrible’s and the three Primm properties at the California-Nevada border.

Affinity was created in December 2010 following the bankruptcy reorganization of Herbst Gaming.

Z Capital CEO James Zenni, who has been critical of Affinity’s board since last year, plans to nominate himself along with two other senior executives with his private equity group.

The move is the latest action Zenni has taken against the board.

Earlier this month, Z Capital sued the company’s board in Clark County District Court, saying changes in the company’s governance have breached fiduciary responsibility.

Before the lawsuit was filed, Z Capital withdrew a proposal it made in February to acquire all of Affinity’s outstanding shares.

In the fall, Zenni questioned a $300,000 payment the board authorized to Chairman Don Kornstein, who helped negotiate a three-way asset swap and sale between Affinity, Golden Gaming and JETT Gaming, in which Affinity disposed of its slot machine route operations and acquired three Colorado casinos.

In December, Nevada gaming regulators found Zenni “suitable’ to be an investor in Affinity gaming. At the time, Z Capital had already filed regulatory paperwork to take control of the company.

Zenni has called Affinity’s current management team “outstanding” and said the company’s intention “is to maintain, rather than change” current management.

In Thursday’s statement, Zenni said his slate of board candidates “are squarely aligned with the company’s stockholders and we are committed to ... a renewed focus on driving value.”

Zenni said “has no current intention” for Z Capital to renew its offer to acquire all of Affinity.