Herbst Gaming Inc., the owner of 15 casinos, won court permission for a reorganization plan that will hand the company to its lenders, leaving nothing for noteholders owed $363 million.
U.S. Bankruptcy Judge Gregg W. Zive approved the plan Friday, overruling objections from the noteholders and other low-ranking creditors, who claim the three Herbst brothers drove their company into bankruptcy by doubling its debt to $1.15 billion through a pair of acquisitions in 2007.
As part of the reorganization plan, the company agreed not to file lawsuits related to the 2007 expansion, a decision opposed by unsecured creditors. The creditors argued they could potentially be paid more by suing lenders and the Herbst family.
“I find the probability of success to be very low,” Zive said in court, referring to the potential lawsuits. The Las Vegas-based gaming company filed for bankruptcy March 22, claiming that it had a deal with creditors to cut debt and to turn over one of the units to the Herbst brothers. That deal fell apart after noteholders attacked it.
The lenders, represented in the case by their agent, Wilmington Trust Co., are owed $876.5 million. Their identities were not made public as part of the company’s reorganization plan. They will get all of Herbst Gaming once the company reorganizes along with a new loan of $350 million owed to them.
Timothy P. Herbst, Edward J. Herbst and Troy D. Herbst will have their equity wiped out by the reorganization, according to court documents. The men held their shares in the company through family trusts.
Brothers Will Continue
The brothers are directors of the company and will continue in those roles after the reorganization, according to court documents. Troy Herbst is the company’s chief executive officer.
Herbst, which has about 5,400 employees, owns 12 casinos in Nevada, two in Missouri and one in Iowa. It has more than 6,800 gaming machines throughout the state of Nevada.
In 2007 it bought casinos in the Nevada cities of Reno and Primm, including the Sands Regent and Whisky Pete’s on the California border. The company also owns Terrible’s Hotel & Casino in Las Vegas.