Binion loan aids LV gaming group

Thursday, April 11, 2002 | 11 a.m.

Las Vegas-based Phoenix Leisure Corp. announced Wednesday it has received a $2 million loan from riverboat casino owner Jack Binion.

The one-year loan carries a 12 percent interest rate, and may be extended for an additional year upon payment of an extension fee. It is secured by Phoenix land holdings in Colorado and a mortgage on Phoenix's non-operating gaming vessel in Mississippi.

Proceeds after closing costs were used to pay down debt and "current liabilities," the company said.

Phoenix's holdings include a racetrack in Wyoming and four Wyoming off-track betting centers. The company also owns a 50 percent stake in four Washington cardrooms; the other 50 percent is held by its president, Eric Nelson.

These cardrooms are expected to generate $300,000 in net income on $2.6 million in total revenue for the quarter ended March 31, Phoenix said.

The loan came five days after an affiliate company of Phoenix, Viva Gaming & Resorts Inc., recorded a $9.7 million write-off charge related to its gaming operations in Mexico. Phoenix owns 18 percent of Viva Gaming, and loaned the company more than $2 million in cash and gaming equipment for the construction of a "lottery entertainment center" in Mexico City. Nelson is also president and chief executive of Viva Gaming.

Viva Gaming opened a 440-machine center in Mexico City on Nov. 1. The gaming machines paid in tickets and prize vouchers, rather than cash. Mexico prohibits gambling, but Viva Gaming claimed the machines were games of skill.

Hours after the center opened, it was ordered closed by federal officials. A federal court ruled in December that the center could reopen with 47 machines, but an appellate court overruled this decision. A final decision will be made by the Mexican Supreme Court, but the center cannot operate while the case is on appeal. Phoenix Leisure cut off funding to Viva Gaming following the appellate court's ruling.

Because of the rulings, Viva Gaming said the value of its Mexican assets had been reduced below book value, and took a $8.1 million goodwill impairment charge. It also took a $1.6 million writedown on the value of its Mexican licenses.

At the same time, the company announced the resignation of its chairman, Robert Sim. The company will be directed by Viva Gaming's three-member board of directors.