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Gaming Guru

Tim O'Reiley

Jerry's Nugget remains in play

17 August 2012

LAS VEGAS -- Jerry's Nugget gained court approval Thursday to continue operating routinely while in Chapter 11 bankruptcy, as competing versions emerged in court papers about how the North Las Vegas landmark ran into financial trouble.

After only a few minor objections from creditors, U.S. Bankruptcy Judge Mike Nakagawa approved a series of measures that let Jerry's Nugget continue to use cash flow to pay utilities and suppliers and to meet its 338-person payroll. The locals casino, which opened in 1964 and has always been run by the Stamis family, will now try to rework $5.3 million in loans that came due after nearly a year of negotiations failed.

Casino President Jeremy Stamis portrayed main lender U.S. Bank as turning a deaf ear to efforts to revise terms of a $3.7 million mortgage that matured Oct. 1. Turnaround consultant Alliance Management LLC, brought in at the bank's insistence last year, framed the terms of one offer that the bank rejected, Stamis wrote.

Instead of striking a deal out of court, the bank filed a foreclosure notice in January and a lawsuit in March to have a receiver take over Jerry's Nugget. Five months of subsequent talks went nowhere.

Stamis declined further comment on the case. But Toby Stoops, the Minneapolis-based assistant vice president of U.S. Bank who handled the account, wrote that Stamis backed out of a couple of deals at the last minute. In December, for example, Stoops said, Stamis presented the bank with "an entirely new deal" after the terms of a loan extension seemed set.

"[I]t was my understanding, based on my previous communications with Jeremy Stamis, that I was simply waiting for signatures from Jerry's Nugget," wrote Stoops.

Instead, he said, a U.S. Bank account that would have normally held about $300,000 shriveled to $2,500. Frequently, banks take cash flow as part of the collateral for a loan and require businesses to deposit daily receipts into one of its accounts. At this point, Stoops said, about $500,000 in deposits "have been diverted to an unknown depository institution."

The loan was taken out in 2005 to finance renovations. The casino covers 87,000 square feet, with about 630 slots, nine table games and a 150-seat bingo hall.

According to Stamis, two other factors helped drive Jerry's Nugget into bankruptcy. Stamis was an investor in a planned luxury mobile home park in Mesquite, pledging a corporate guarantee of $40.3 million loan to finance the project. The project was never built, and 2010-1 CRE Joint Venture, an entity that took over the loan from the failed Community Bank of Nevada, filed suit in Clark County District Court last year to collect a deficiency it set at $33.1 million.

This potential liability, wrote Stamis, hampered efforts to restructure the Jerry's Nugget debt.

Further, Las Vegas's economic slide hindered the casino, as revenues declined 3.4 percent in 2011 to $22.5 million. Thanks to cost-cutting measures, particularly in overhead, the $614,000 net loss in 2010 improved to a $314,000 profit last year.

This year, Jerry's Nugget projects revenues to rebound to $23.6 million, but the profit to decline to $216,000.