Las Vegas-based Affinity Gaming shuffles holdings

Las Vegas-based Affinity Gaming remade a portion of its operations Thursday through a series of transactions, including a deal that will put the Herbst family back in the gaming business.

In one transaction, Affinity -- which was known as Herbst Gaming before it was restructured in a bankruptcy reorganization -- sold its Searchlight casino and part of its slot machine route operation covering the Terrible Herbst convenience stores to JETT Gaming, a slot machine route operator owned by the Herbst Gaming Trust.

Affinity sold the remainder of its slot machine route business to Las Vegas-based Golden Gaming, which operates several taverns in Southern Nevada and a Pahrump casino.

In addition, Golden Gaming acquired the Terrible's Town Casino and Terrible's Lakeside Casino & RV Park in Pahrump from Affinity Gaming.

In a separate transaction, Golden Gaming sold its three casinos in Black Hawk, Colo.; Golden Mardi Gras Casino, Golden Gates Casino, and Golden Gulch Casino; to Affinity Gaming.

Sales prices for the transactions were not disclosed. The transactions are expected to close in 2012 pending approval of Nevada and Colorado gaming authorities.

JETT Gaming was licensed by Nevada earlier this year as a slot machine route business. Company Chairman Jerry Herbst, who is the CEO of Terrible's Oil Co., told gaming regulators the business was set up to buy back the slot machine routes at the Terrible's convenience stores.

Jerry Herbst's sons, Ed, Tim and Troy Herbst, operated Herbst Gaming, growing the company from a slot route operator into a gaming business with more than 15 casinos in three states.

Herbst Gaming had trouble managing more than $1.1 billion in debt after spending $349 million to buy the Primm casinos and $140 million to acquire five Northern Nevada properties, all in 2007. The bankruptcy reorganization, which was finalized in December, reduced the debt to $350 million, but also removed the founding Herbst family from the business.

"The properties have been an important part of Herbst for a considerable length of time, and we welcome the employees from those operations back to the Herbst family," Jerry Herbst said in a statement.

Separately from the transaction, Z Capital Partners, an Illinois-based financial firm, increased its ownership stake in Affinity Gaming to 13.4 percent, paperwork filed with the Securities and Exchange Commission shows. The company had previously owned more than 6 percent of Affinity.

Silver Point Capital, a Greenwich, Conn.-based hedge fund, is Affinity's largest owner with 16 percent of the company.

The slot machine route business sold by Affinity had more than 6,000 games in bars, taverns, restaurants, grocery stores and other locations in Nevada, and is considered one of the state's largest.

In the second quarter, Affinity said its slot route produced about $45 million in revenue, down from $46.7 million a year earlier.

Affinity Gaming operates casinos in Nevada, Iowa and Missouri. Chief Executive Officer David Ross said the deals fall within the company's long-term strategic plans.

"We are selling several noncore assets (while) ... acquiring attractive casino assets in Black Hawk, Colo., further diversifying our geographic footprint," Ross said.

Affinity's holdings include the off-Strip Terrible's and the three casinos in Primm.

When the deals close, Golden Gaming, through its Golden Route Operations, will operate approximately 8,000 slot machines in Nevada, across 640 locations.

"These transactions exemplify my family's commitment to the entire Nevada gaming market and belief that the long-term growth and vibrant economic trends in the state will resume over time," Golden Gaming Chief Executive Officer Blake Sartini said.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.
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