Herbst Acknowledges Bankruptcy Potential

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.