The president of Affinity Gaming’s largest shareholder on Thursday defended his questioning of a $300,000 payment made to the casino operator’s board chairman, telling the Nevada Gaming Commission that the 2011 action was “very uncommon.”
James Zenni, whose Illinois-based private equity firm Z Capital Partners owns roughly 25 percent of Affinity, was found suitable along with his company by the commission to invest in Affinity.
During the hearing, gaming commission member Joe Brown asked Zenni about his criticism of the payment to Affinity Board Chairman David Kornstein, who helped negotiate a three-way asset swap and sale between the company, Golden Gaming and JETT Gaming. Affinity disposed of its Nevada slot machine route operations and acquired three Colorado casinos.
Zenni told Brown that it was highly unusual for board members to earn investment banking success fees for brokering deals.
“We communicated our view to the board,” Zenni said. “Board members can’t be acting as investment bankers. I’m a tip of the iceberg kind of guy. When I see things like that, I wonder what other items are under discussion.”
Z Capital announced in November it planned to increase its ownership in Affinity to more than 33 percent but still requires regulatory approval for two separate stock purchases.
In a filing with the Securities and Exchange Commission, Z Capital revealed plans to take control of Affinity, which owns the off-Strip Terrible’s, the three Primm casinos, as well as casinos in Northern Nevada, Iowa, Colorado and Missouri.
Z Capital is expected to seek a seat on Affinity’s board of directors.
Zenni told the gaming commission that the investment firm is pleased with the management of Affinity Gaming, including CEO David Ross, as well as the direction the company is headed.
Z Capital was formed in 2007 and has made more than 100 transactions and invested more than $1.2 billion into various businesses. Among the company’s holdings are Mrs. Fields Cookies and Real Mex Restaurants, which includes the El Torito and Chevy’s brands.
The company bills itself as investing in “distressed companies.” Zenni bristled somewhat when commission Chairman Pete Bernhard used the term “vulture” investors.
“We prefer value investors,” Zenni said.
Also Thursday, Affinity Gaming announced it was converting from a Nevada limited liability company to a Nevada corporation. The company was formed after the bankruptcy reorganization of Herbst Gaming.
Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871. Follow @howardstutz on Twitter.