Barrick hampered by debt, sources say

By Liz Benston (contact)

Monday, June 27, 2005 | 11:06 a.m.

The company that bought four downtown casinos last year and devised plans to redevelop the neighborhood with new commercial districts and high-rise condos is in financial trouble, according to several sources familiar with the company.

Barrick Gaming Corp. bought the Plaza, the Las Vegas Club, the Western and the Gold Spike from downtown casino operator Jackie Gaughan in March 2004.

Regulators have scheduled a public hearing this Wednesday to consider an application by Barrick's landlord and silent partner to "participate in operations." The Gaming Control Board and Nevada Gaming Commission will vote on the application in back-to-back meetings.

The landlord, Tamares Barrick Las Vegas Properties, is jointly owned by Barrick and a company called Tamares Las Vegas Properties, which is affiliated with a private investment company called Tamares Group.

Tamares has approached regulators because it wants to be able to loan money to Barrick to keep the casinos operating while Tamares decides whether to install a new management company, sources said.

Tamares put up much of the money for Barrick Gaming to buy the casinos, according to sources familiar with both companies.

Sources say Barrick has been struggling to make debt payments because the interest rate is too high relative to what the properties have been generating.

"Barrick has mired themselves with debt," one source said. "They are way overlevered."

Tamares has the right to remove Barrick if Barrick defaults on its loan to Tamares, according to another source.

"They were just barely able to buy the properties much less make capital improvements," the source said. "They have been falling further behind."

Barrick officials could not be reached by press time.

Barrick executives have repeatedly said that the properties are making a profit and performing better than they were under the previous owners. They have also denied rumors of financial problems.

But sources say interest owed to Tamares has been eating away at that performance and that Gaughan, unlike Barrick, owned the properties free and clear.

Barrick operates the casinos under a tenant relationship with Tamares, a framework created so that Tamares wouldn't have to get a Nevada gaming license.

Tamares Group was founded by Finnish entrepreneur Schlomo Zabludowicz and is now headed by his son Poju. The company's Web site cites "significant worldwide interests in finance, real estate, technology, manufacturing and leisure."

An article that appeared in The Nation magazine in 2002 cited Poju Zabludowicz's support of Israeli neoconservative causes as well as his company's ownership of an arms manufacturer.