Bad times for gaming a boom for some

The gaming industry's swoon has been good for certain jobs. Bankruptcy attorneys and corporate restructuring specialists are finding a plentiful client base.

Last week, Herbst Gaming set a tentative date to file a prepackaged bankruptcy plan that will reorganize the company into two separate businesses.

As 2009 continues, Herbst may not be alone in bankruptcy.

A year ago, who would have thought MGM Mirage, Harrah's Entertainment and Station Casinos would be on a Chapter 11 watch list? No one predicted that shares of Las Vegas Sands would fall from $149 to less than $2. Did anyone dare say that both Terry Lanni and Bill Weidner would be unemployed?

By the end of the year, the gaming industry may have a far different makeup.

The Herbst reorganization means the family will lose ownership of its 15 casinos, but retain its Nevada slot machine route.

Some speculate Herbst grew too fast and overpaid for its acquisitions ($140 million for five Northern Nevada casinos and $349 million for the Primm properties). The faltering economy, however, sank the portfolio.

One gaming insider wondered why lenders would want to own the casinos in Nevada, Iowa and Missouri.

There are several answers.

Herbst bondholders, owed $847 million, wanted something in return for their investment.

Bankruptcy and gaming licensing in three states could take a year to complete. By that time, the market may create a new pool of perspective casino buyers for the Herbst properties.

Meanwhile, Herbst's bondholders, after a year of negotiation, found new worries. Some of the lenders have money tied up in other gaming industry debt, such as Harrah's $23 billion and MGM Mirage's $13.5 billion.

By comparison, the Herbst debt looks like pocket change.

Putting the Herbst matter aside allows the bondholders to focus on similar but more pressing matters.

That may be the 2009 rallying cry.

***

Texas lawmakers may give the slot machine industry something to smile about. Legislation that would legalize casinos in the Lone Star State is expected to be brought up in the next three or four weeks.

Approval, which would also have to come from voters, might lead to 40,000 or 60,000 new slot machines in Texas.

Previous attempts to legalize casinos in Texas have failed. But Janney Montgomery Scott gaming analyst Brian McGill said the tax revenue gambling could generate might outweigh opposition on moral grounds.

"It will be difficult to get approval for gaming," McGill told investors. "At this point, after speaking with multiple contacts, we believe legalization this year is still somewhat of a long shot."

Howard Stutz's Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871. He blogs at lvrj.com/blogs/stutz.