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February 27, 2015

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Gaming Commission approves Herbst reorganization

CARSON CITY – The Herbst family, a pioneer in Nevada gambling, is bowing out and a new company is taking over 15 casinos in three states and a mammoth slot machine operation.

“This is not a happy day for them,” said Peter Bernhard, chairman of the Nevada Gaming Commission, which approved the deal on Thursday.

The company has been in bankruptcy for more than a year but is now under the management team of CEO David Ross and Chief Operating Officer Ferenc Szony. The Herbst family will no longer have management or board positions.

Szony told the commission that all the casinos were “cash flow positive” except one.

Commissioner Tony Alamo questioned Ross and Szony about the reduction in employees during the stint in bankruptcy. The company has laid off about 1,000 workers but many of them gained new employment when the company handed over its restaurant businesses to other firms.

Szony said the new company was in a “growth mode” when talking about employment. It now has about 5,200 employees.

The company had expected to emerge from bankruptcy, but there have been objections by some bondholders about the terms. Attorneys for the new company said Bankruptcy Judge Greg Zive has denied several claims.

The bondholders have filed suit in federal court and U.S. District Judge Robert Jones has scheduled a hearing for Monday in Las Vegas. Attorneys said they didn't expect a decision from Jones for one or two months.

Bernhard got assurances from lawyers of the new company they wouldn't use commission approval to help their side in arguing against the bondholders in the federal court case.

Under the gaming application, Silver Point Capital, which bought debt in the Herbst company, will end up with 15 percent and was licensed.

Edward Mule, one of the founders of Silver Point, said it started buying the debt of Herbst in 2007. Mule said the company also holds debt in Station Casinos and Caesars Entertainment Corp.

Alamo said Silver Point, by getting a state license, “could swoop in and take over a distressed company.” But Mule said it is not involved in the day-to-day management of firms such as Herbst. Alamo said he felt assured that Silver Point wouldn't do that.

Of the gaming holdings, Herbst has riverboat casinos in Iowa and Missouri. Attorneys said regulatory bodies in both states have approved this deal.

In other action, the commission approved the application of Michael Ensign, father of Sen. John Ensign, to end up with 33 percent of the Hacienda Hotel & Casino. He will be assuming the interest held by his other children, David Ensign, William Ensign and Deborah Lara.

The commission also got its first look at a proposed regulation to allow sports books to accept wagers on things besides horse racing, greyhound racing or athletic sports event.

Dennis Neilander, chairman of the Nevada Gaming Control Board, said these bets might be placed on such things as billiards or poker. He said the 2009 Legislature widened the law to permit bets on “other events.”

The commission is expected to approve the regulation in January.

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