Operator aims to maintain casinos in smaller towns

Pam Borda is 777 Gaming's biggest fan.

As executive director of the Elko Economic Diversification Authority, Borda was faced with a horrifying problem. Two of Elko's largest casinos were facing closure due to the bankruptcy of their owner.

Any shutdown at Stockmen's and the Commercial Casino would have put several hundred employees out of work and left a gaping hole in Elko's economy.

It wasn't the kind of picture Borda wanted to have painted for potential business owners looking to move to or set up shop in the northeastern Nevada community.

But when Nevada gaming regulators allowed Las Vegas-based 777 Gaming to take over the casinos in January on behalf of the properties' lenders, Borda was relieved.

"Those casinos are right in the center of downtown and the have served the community for many years," Borda said. "Not only would their closing have meant a lot of people would have been out of work, it would have been very damaging to Elko and created a negative perception."

Understanding rural Nevada is one reason why 777, founded by businessman Rory Bedore, was retained to help guide six small-town Nevada casinos out of bankruptcy.

In addition to Stockmen's and Commercial, 777 is overseeing operation of the Scoreboard in nearby Spring Creek, the Model T in Winnemucca and El Capitan in Hawthorne. Those two properties were also in danger of closing because financial issues.

777 also controls the Silver Club in Sparks, which has been closed for 17 months. Bedore said the casino would stay closed for now.

"We want to focus on what we have open right now and stabilize those properties," Bedore said. "At some point, we'll see what we can do with the Silver Club."

Bedore, owner of Las Vegas-based slot machine route operator Silver State Gaming, grew up in rural Colby, Kan., a town of about 5,000 residents 53 miles east of the border with Colorado. Bedore, an avid fisherman and hunter, has always enjoyed rural Nevada and understands casinos in small towns are not just gambling joints.

"I know what these properties mean to these rural communities," Bedore said. "In some cases, these properties are the town's largest employers. They are not just casinos. They are hangouts. The properties are important to the people of those communities."

Bedore formed 777 Gaming in 2006 to provide management and consulting services to casino operators. The recession changed the gaming industry's operating dynamics, sending some operators into bankruptcy and forcing others to make cutbacks. Bedore changed 777's business model and the company found opportunities to manage distressed casinos.

Northern Nevada Assets Holdings, which is based in Colorado Springs, Colo., took over the six rural casinos from the Holder Hospitality Group by acquiring a $33 million note for $8.5 million from the Federal Deposit Insurance Corp. The FDIC picked up the note when the bank that made the original loan to Holder filed for bankruptcy.

Bedore's company was the solution for keeping the businesses operating and employees working. 777 is running the casinos under a management contract while Northern Nevada Assets seeks a gaming license. It's unclear how long 777 will be in charge, but that wasn't a concern, Bedore told Nevada Gaming Commissioner Dr. Tony Alamo during in December licensing hearing.

Alamo asked whether 777 would remain on the job if the investigation of the owners exceeded six months.

"I'll be there as long as it takes," Bedore said.

Gaming Control Board Chairman Dennis Neilander, during a hearing into 777 in December, said the application was the first matter regulators undertook through a special division created to deal with distressed properties.

"This is a very unique circumstance where you have a foreclosure, creditors who are under Nevada law exercising their rights, and you have the separate bankruptcy track," Neilander said.

Bedore, who has two nonrestricted Nevada gaming licenses and more than two decades of gaming management experience, said the initial idea was to get in the door, steady the operations and keep employees working. Combined, the five casinos employ about 550 workers.

An undisclosed amount of money was invested to upgrade slot machines and re-establish restaurants. Table game pits were closed in a couple of the casinos to streamline operations.

At end of April and in early May, the casinos sponsored celebrations to introduce the new management teams to the community and assure residents that the casinos were staying open.

"With some new capital and tender care you can transform these properties back to the town's local hangouts," 777 Vice President of Gaming Operations Jason Tate said. "We are always being very mindful of the townspeople and what their traditions are when we go into these properties."

Several of the casinos lack ticket in-ticket out systems for cashless gaming and thus remain some of Nevada's last gambling halls that have coin-operated games.

Winnemucca's Model T is one of three casinos in the community, but a closure would have made the property an eyesore.

"It would have been a dead spot in the middle of downtown," said Kim Petersen, the director of the Winnemucca Convention and Visitors Authority. "It wouldn't have been good for anybody. It seems like the new owners are here to support the community and we'll support them."

Borda said it would have been much more damaging to Elko if Stockmen's and Commercial had closed temporarily. Because of the buildings' age, that move might have permanently shuttered the facilities.

Rural Nevada casinos have suffered through Nevada's economic downturn over the past two years, but gaming revenues there haven't collapsed as much as they have in Las Vegas or Reno. Much of the rural market is too small to be counted separately in Gaming Control Board monthly revenues figures. The numbers are lumped under the "other" category.

Elko County, which has four additional casinos operated by the Las Vegas-based Navegante Group, had gaming revenue declines in 2009 and 2008, but not the 10.4 percent and 9.7 percent drops experienced statewide those years.

In Elko, gaming revenues were $265 million in 2009, off 7.8 percent, and $287.5 million in 2008, down 5.3 percent. The figures followed annual increases in eight out of the previous 10 years, including an 11.5 percent jump in 2007 and an 11.2 percent hike in 2005.

Borda said Elko casinos are suffering from the same malady as Las Vegas casinos. Customers are not spending as much. Still, Elko draws business from Interstate 80 and special events, such as the annual cowboy poetry festival.

In Winnemucca, Petersen said the community's 96,000-square-foot events facility continues to draw attractions.

In both Elko and Winnemucca, as with much of rural Nevada, the mining industry remains a vibrant economic tool.

Bedore believes giving the casinos some much needed care and attention could bring the properties back. He admits the run with these particular rural casinos might be short, which means 777 is looking for other management opportunities.

"So far, we've taken these properties, that were close to the brink, and have been able to turn things around by paying attention to the business, the customers and the employees," Bedore said. "We've been focused on employee programs and we've made some cosmetic changes. If we're successful, it's a win-win for everybody."

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