Herbst Gaming Expects to File Chapter 11

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Herbst Gaming Expects to File Chapter 11

LAS VEGAS -- Given the size and complexity of Herbst Gaming Inc. and its debt structure, the company and its financial advisors determined the most effective means to implement a restructuring plan will be through pre-arranged Chapter 11 filings by the company and certain of its subsidiaries, which are expected to take place shortly. The company expects the Chapter 11 cases will move through the bankruptcy court system expeditiously.

"My brothers and I want to say how pleased we are that we are able to resolve the company’s financial issues in a way that helps to protect the jobs of our valued employees, ensures that all our loyal vendors will be paid fully, and that all our casinos and route operations will continue to function on a ‘business as usual’ basis throughout the restructuring process," said Troy Herbst, CEO of Herbst Gaming. "Neither our customers or vendors should experience any impact from our planned financial restructuring and change of ownership of the casino businesses."

Herbst’s route business owns and operates more than 6,800 gaming machines located in grocery stores, drug stores, convenience stores, bars and restaurants throughout the state of Nevada.

The casino business owns and operates 12 casinos in Nevada, two in Missouri and one in Iowa, employing a total of 5,400 people.

Under the terms of the proposed restructuring plan, the company’s casino and slot route business will be separated into two holding companies. The plan provides that the Herbst family will receive 90 percent of the new equity in the new slot route company, in exchange for the contribution of a new gaming device license agreement, the company reported.

The restructuring plan also provides for conversion of all the company’s outstanding obligations under its Senior Credit Facility (approximately $847 million plus accrued and unpaid interest) into debt and equity of the reorganized companies, with the bank lenders receiving 100 percent of the new equity of the reorganized casino company and the reorganized casino company owning 10 percent of the new equity in the new slot route business.

Additionally, the plan provides for termination of all outstanding obligations under the company’s 8.125 percent Senior Subordinated Notes and 7 percent Senior Subordinated Notes ($330 million, plus accrued and unpaid interest), as well as the cancellation of all existing equity in the company.

Consummation of the proposed restructuring plan is subject to, among other things, the confirmation of a Chapter 11 plan of reorganization by the U.S. Bankruptcy Court and approval by gaming regulators in Nevada, Missouri and Iowa, the company reported.