Looking in on: Gaming:

Lenders give Herbst Gaming more time to repay debts

Reliance on budget-conscious customers drives down profits

Fri, May 23, 2008 (2 a.m.)

Steve Marcus

Herbst Gaming, which owns Buffalo Bill’s casino in Primm, has suffered from the slumping economy.

Herbst Gaming reached an agreement with lenders this month that buys the company more time to work out a deal with them and potentially avoid bankruptcy court despite the company’s worsening finances.

The agreement includes suspending payments on bond debt until Sept. 30. Most of the company’s $1.1 billion in debt is in bank loans, which carry less risk than corporate bonds.

“I think these are cordial negotiations” with lenders, Wachovia Capital Markets bond analyst Dennis Farrell said. “The family has built up a lot of good will in Las Vegas and with their lenders. It’s just a matter of coming to an agreement on how to lower the debt burden.”

The company’s slot route and small casino business benefited for many years from Las Vegas’ population growth but is now feeling the brunt of the slowdown, as Herbst caters to budget-conscious customers who are more affected by a downturn, Farrell said.

Herbst had $16.5 million in losses in the first quarter due to higher gas costs and the economic slowdown, with slot route operating profit down 6 percent in the first quarter compared with a year ago and the company’s casino business down 5 percent over the same period.

The Primm casinos, dependent on budget travelers hurt by the high cost of gas in Southern California, generated a dismal $300,000 in operating profit in the first quarter. Little more than a year ago the three properties generated an annual operating profit of roughly $40 million, and under previous owner MGM Mirage the casinos earned more than $70 million several years ago, when times were good and tribal casinos were in their infancy.

•••

Lackluster demand for condominiums and condominium hotels hasn’t deterred Fontainebleau Resorts from forging ahead with sales of condo-hotel units at its Fontainebleau Las Vegas resort on the Strip.

In fact, Fontainebleau partner Turnberry Associates, a veteran of South Florida’s roller-coaster condo market, says the lull in condo construction and demand will weed out more speculative projects, benefiting condo owners longer term.

“This is part of the boom and bust in real estate,” said Bruce Weiner, president and chief operating officer of Turnberry Associates. “Las Vegas is having a slowdown this year but I’d rather own in Las Vegas than in, say, Peoria, Ill. In the long run, people who stay the course will be fine.”

The property, which snagged financing before the markets soured, hopes to open a multimillion-dollar sales center by September, luring wealthy customers who will appreciate the property’s architectural details and hip amenities.

•••

CityCenter President and Chief Executive Bobby Baldwin has a lavish, garden-fronted office at MGM Mirage’s corporate headquarters at the Bellagio. But he spends most of his time these days at an office building behind the New York-New York housing about 500 designers, architects and planners working on CityCenter.

By day, when he’s not in that office, Baldwin, in his hard hat and bright yellow construction vest, is on the nearby construction site.

By night, Baldwin enjoys a more relaxed view of the job site from his condo at Panorama Towers. It is across Interstate 15 and offers a direct view of CityCenter.

From there he can hear the 24-hour hum of cranes, trucks and clanking building materials. Noises that might be distracting to other residents no doubt bring some comfort to Baldwin, who gets up in the middle of the night to watch CityCenter rise from the darkness.

Discussion: 4 comments so far…

By LV

5/23/08 at 7:45 a.m.

Suggest removal

Bobby Baldwin...

Please start managing the contruction @ Panorama...It closed a year ago and still doesn't have it's ammenities!

Please help us!
By LVBear

5/23/08 at 10:39 a.m.

Suggest removal

>>> The Primm casinos, dependent on budget travelers hurt by the high cost of gas in Southern California, generated a dismal $300,000 in operating profit in the first quarter.<<<

These casinos also have been hurt by the Herbsts' greed. Knowing that much of the customer base at these roadside casinos are sick, addicted gamblers who can't stand to wait another 45 minutes to lose their money in Las Vegas, Primm management installed a shameful ripoff -- 6 to 5 blackjack payoffs at double deck games at all three casinos. But even the gambling addicts voted with their feet. It is hard to feel sorry for the Herbsts when they have tried to rip off the gullible public with stunts like that. Further discussion of it is at

http://www.thebeargrowls.com/?p=114
By williamtomany1

5/24/08 at 5:56 p.m.

Suggest removal

The greedy Herbst Family is now going to pay the piper
By dave

6/13/08 at 10:07 a.m.

Suggest removal

Ok Herbsts listen up!! If you really want to get out of the mess you're in I have the answer! This is your chance to bring that sorry border town back to the booming hot spot that it once was prior to the MGM taking it over. First thing you should do is to go and find and BUY up all of those great old Keno machines that every casino in Las vegas and other towns got rid of! Throw out all of those stupid machines that are now in your your casinos and fill every square foot of space with nothing but those great old Keno machines. Set all the machines at 92% payback for at least 1 year before dropping them down to 86% payback and whatever you do,NEVER drop them down to 72% payback! Now change the name of that border from Primm Valley to KENO CITY NEVADA. The last thing you have to do now is get the word out to ALL of us devoted Keno machine lovers and sit back and watch that border town BOOM!! I remember when Buffalo Bills first opened. It was packed with those great old Keno machines. Bells were ringing with winning jackpots, every seat was taken with plenty of people waiting for a machine to become empty and it was the greatest thing ever! My wife and I were hooked for life and could not keep ourselfs from staying away from that place! Over the years of GREED and change of ownership, the jackpots were getting farther and fewer apart. We than started to go there less, but were still addicted to them. The final straw was when not only did your casinos start removing the Keno machines, but also so did the entire state of Nevada do the same thing! The very last time my wife and I stopped in you casinos and saw that every Keno machine was gone, I said to my wife we will never even stop here again for anything! I also told her, watch this place go broke in less than a year. After all Primm Valley is not Las Vegas and you really need us sick addicted hard core Keno machine gamblers and trust me when I tell you there are plenty of us! If Primm valley has nothing to draw us there, why even go! Well it's your choice, listen to me or go out of businnes!
Dave
PS I'm not talking about those good for nothing Game king or other multiple game machines that have Keno on them. The good ones are the ones that Buffalo Bills opened with and they are a Keno game only machine, I just don't know the name or maker of them.