Regulators gear up for casino bankruptcies

Apr 9, 2009 12:46 AM
Staff & Wire Reports |

Nevada's casino regulators are forming a special team of securities experts, auditors and other staffers to handle what they fear could be several bankruptcy and major debt restructuring moves within the gambling industry.

State Gaming Control Board Chairman Dennis Neilander said in a letter to Nevada's industry licensees that the special team's activity could disrupt some of the board's usual routine, but is needed to help bring resorts out of bankruptcy.

"Unfortunately, Nevada gaming and tourism have not been spared consequences of the ongoing economic challenges facing the country," Neilander said, adding, "The duration of the current recession and how quickly recovery will occur are unknowns."

"Already, there are a few large gaming companies in bankruptcy, along with a few smaller licensees," Neilander said. "More are anticipated and, potentially, there could be several."

Neilander said the board and its parent Nevada Gaming Commission may have to handle several cases "within a limited timeframe," and that's where the special GCB team will be most needed.

Related Articles:
Nevada revenues hit new low
Casino revenues still in freefall
Nevada revenues continue to slide
Also Check out Casino Industry News

The team will include staffers drawn from the board's seven divisions, covering areas including corporate securities, audits, tax and license, technology, enforcement and investigations.

In recent weeks, Las Vegas-based Herbst Gaming Inc. announced plans to give up control of its casino businesses while it seeks to restructure its debt in bankruptcy court. Under the plan, Herbst will give up ownership of 15 casinos in Nevada, Iowa and Missouri, but will keep 90 percent control of its slot machine route operations in stores, bars and restaurants across Nevada.

Also, Tropicana Entertainment LLC, the owner of the 51-year-old Tropicana Resort & Casino on the Las Vegas Strip, said last month that it could emerge from Chapter 11 bankruptcy protection this spring.

The company has sent ballots to creditors on a restructuring plan that will wipe out the equity interest of former owner William J. Yung III. Confirmation hearings by a bankruptcy court are scheduled to begin April 27.

Regional casino operator Station Casinos Inc. recently extended its deadline to work through a plan to restructure its debt. Station wants to swap high-cost debt for low-cost debt and a $244 million capital infusion through a prepackaged bankruptcy filing.

MGM MIRAGE Inc., struggling under a heavy debt burden, last month made a $200 million equity contribution to its $8.7 billion CityCenter development on the Las Vegas Strip - including a payment that should have been made by Dubai World.

But MGM MIRAGE said $800 million in equity contributions are still necessary to access a $1.8 billion credit facility that will complete funding for the project.

Privately held casino operator Harrah's Entertainment Inc. recently extended a deadline and eliminated a cap on its latest offer designed to lower its debt and give the company more time to pay back lenders. Las Vegas-based Harrah's had $23 billion in long-term debt at the end of 2008.

Also last month, casino operator Riviera Holdings Corp. announced it will miss a roughly $4 million interest payment and may be headed into bankruptcy.