The wobbly casino dominoes are in full tumble mode. The latest gravitational casualty is Herbst Gaming, which
tonight filed a long anticipated pre-packaged bankruptcy, the terms of which involve the termination of both the company's common stock as well as its 7% and 8.125% Senior Notes. The only winner in all this are the company's secured lenders which get to convert their existing $847 million in outstanding debt into debt and 100% equity of the reorganized company. Additionally, the company's more profitable slot route business will be split off with the Herbst family retaining a 90% equity stake in it, while lenders get 10% in the spinco.
While the company, which owns the Terrible's name, operates mostly in secondary markets with operations in such Vegas feeder cities as Primm and Pahrump, the spreading weakness from Vegas' atrocious gaming market means that more overlevered Strip-based properties will soon likely follow suit in Herbst' footsteps. Zero Hedge is closely following the developments at stressed operator MGM Mirage which now takes the podium of the Casino Death Watch arena.
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2 comments:
Nice try Tyler. These properties in Nevada are amazing cash machines. Whet is atrocious is the extent to which they were absolutely buried in debt. This necessitated huge year over year gains in the win just to service the debt. In 25 years these licenses will still be very sought after. The Casinos aren't dying, the debt on them is!
There is a Terrible's gas station on every corner in Vegas. Each one has at least 10 slot machines. Each time I stop to fill the tank I witness 1/2 of those seats filled. Mini casinos without the overhead.
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