Nevada regulators OK Hilton split

Friday, Dec. 18, 1998 | 11:52 a.m.

CARSON CITY -- The Nevada Gaming Commission Thursday joined New Jersey, Mississippi and Australia in approving plans by Hilton Hotels Inc. to split its lodging and casino business.

Things are falling in place for the spin-off to occur by the end of the year. Thomas Gallagher, counsel for Hilton, told the commission the new gaming company, Park Place Entertainment Corp., earlier this month secured its targeted $2.5 billion in financing.

And the Internal Revenue Service has given a favorable tax ruling to the split and to Park Place to acquire Grand Casinos Corp., which has three casinos in Mississippi.

When completed, Park Place will be among the world's biggest casino companies with 18 locations and an estimated $2.7 billion in annual revenue. This includes the Paris, scheduled to open in September on the Las Vegas Strip.

Gallagher said Park Place will use about $1.5 billion of its new financing to retire debts from the old combined company and to pay off $555 million in loans owed by Grand.

The financing package includes $2.1 billion in bank credit and $400 million in subordinated debt, Gallagher said. After retiring the loans, the new corporation will have $1 billion to work with.

Stephen Bollenbach will be chairman of the board for Park Place. Arthur Goldberg will be chief executive officer. Bollenbach runs Hilton now while Goldberg is its top casino boss.

Several large stockholders will be officers both in the Hilton and Park Place. The spin-off has been approved by shareholders.

Not included in the acquisition of Grand Casinos are its Indian management contracts and about 10 undeveloped acres near the Polo Tower in Las Vegas. Those assets are being spun off into Lakes Gaming Corp.

In other action, the commission approved the application of Fitzgeralds Gaming Corp. to pledge its equity securities in its clubs in Las Vegas and Reno to Bank of New York in connection with a $205 million financing package.

Mike McPherson of Fitzgeralds said it has sold its interest in Indian gambling in Arizona and is going to "focus on its core properties" in Mississippi, Colorado and Nevada.

Commissioner Augie Gurrola wanted to know about plans for the downtown Las Vegas casino and said, "You have got to start generating cash."

McPherson said the company has "no resources for additional expansion." The company, McPherson said, is "highly leveraged" like many other gaming operations.

The Las Vegas casino remodeled its hotel rooms two years ago and is enhancing its slot machines.

There are a lot of tourists visiting the Fremont Street Experience, McPherson said. The challenge of the downtown casinos is getting them to gamble.

He said the proposed 264,000-square-foot Neonopolis development featuring theaters, upscale shops and restaurants should help lure people to the downtown area.

Carla Brown, counsel for Fitzgeralds, said the company hopes to sell Harolds Club and the Nevada Club, both in downtown Reno, by January. These two properties are closed.

Also approved was the application of Terry P. Ellis to become owner of the Pot O' Gold casino in Henderson. Ellis said he hopes to increase revenue, though there is growing competition in that area.