X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

LAS VEGAS- Herbst Gaming may file for protection from creditors under Chapter 11 of the US Bankruptcy Code if it is unable to alter its payment structure for $1.14 billion in debt. The locally based casino operator and slot machine route manager revealed the possibility in its annual report filed this week with the Securities and Exchange Commission.

Herbst Gaming is privately held by the Herbst brothers, Ed, Tim and Troy, but roughly three-quarters of its debt is provided by publicly traded bonds. The company operates 16 casinos (some with hotels) and 7,200 slot machines in Nevada.

In this and previous filings, the company has said its Southern Nevada operations are being negatively affected by the subprime mortgage crisis and a statewide ban on smoking in taverns and restaurants. Herbst’s overall revenues grew 43% to $849.2 million in 2007, thanks to the acquisition of two major casino companies, but a 20% loss in revenue from its slot route business coupled with the increased debt load from the acquisitions resulted in a net loss of $127.2 million, according to SEC filings.

The specific mention of a bankruptcy filing follows the company’s decision last month to engage Goldman, Sachs & Co. as financial advisor to evaluate financial and strategic alternatives, including recapitalization, reorganization and sale. Prior to that an independent audit of the company’s finances by Deloitte & Touche came with a “going concern” qualification, which is a default under its credit agreement with its bond holders.

In its annual report, the company states that it expects to enter into discussions with its credit agreement lenders to negotiate a forbearance agreement. If it is not successful in obtaining the forbearance or entering into another transaction to address its liquidity and capital structure, the lenders under its credit agreement would have the ability to accelerate repayment of all amounts outstanding under the credit agreement ($853 million at March 15, 2008). If the lenders under the credit agreement were to require repayment of the outstanding borrowings upon a default, the holders of its subordinated indebtedness would have the ability to declare a default, and accelerate repayment of, the subordinated indebtedness ($330 million principal amount at March 15, 2008).

“If either the credit agreement indebtedness or the subordinated indebtedness were to be accelerated upon a default, we would be required to refinance or restructure the payments on that debt,” the company states. “If we were unable to do so, we may be required to seek protection under Chapter 11 of the U. S. Bankruptcy Code.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.