Terrible Herbst C-Stores Unaffected by Gaming Reorg

Herbst Gaming prepares for Ch. 11 filing, reaches agreement with bank lenders

LAS VEGAS -- As Herbst Gaming Inc. begins a reorganization, company officials told CSP Daily News that its Terrible Herbst convenience store division is unaffected by the developments on the gaming side of the business. Herbst spokesperson Robert Emmers said the situation "involves only the casino and slot operations, and the Terrible Herbst gas stations are not affected whatsoever."

Las Vegas-based Herbst Gaming had its beginnings in 1987 as an offshoot of the family business, Terrible Herbst Oil Co. The Terrible Herbst brand and "Bad Guy" cowboy logo has been [image-nocss] continuously used in Nevada since 1959 and is currently used at the company's casinos and 80 gas stations and c-stores. 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.

Herbst Gaming announced yesterday that it has reached agreement with lenders holding approximately 68% of the loans under its Senior Credit Facility on a financial restructuring plan. Under the proposed restructuring plan, all operations of the company will continue under current management on a "business as usual" basis throughout the restructuring process. The proposed restructuring plan allows for continued timely payments to vendors under normal trade terms, as currently being made, without interruption.

"All of our casinos and the route business are generating positive EBITDA, even in the current challenging economic environment," said Troy Herbst, CEO of Herbst Gaming. "Our problem is a balance sheet issue; we have more debt than our operations can support. This agreement with our bank lenders is designed to resolve our balance sheet problem by restructuring our debt."

Given the size and complexity of the company and its debt structure, the company and its financial advisors have determined that the most effective means to implement the 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 said it expects that the Chapter 11 cases will move through the bankruptcy court system expeditiously.

"To ensure that all of our operations continue to operate normally throughout this process, the proposed restructuring plan provides that all vendors would be paid on the same current terms on which they presently are being paid for all goods and services provided to Herbst Gaming, including goods and services provided immediately prior to the contemplated Chapter 11 filing," Herbst said.

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% of the new equity in the new slot route company in exchange for the contribution of a new gaming device license agreement.

The restructuring plan also provides for conversion of all the company's outstanding obligations under its Senior Credit Facility (currently approximately $847 million plus accrued and unpaid interest) into debt and equity of the reorganized companies, with the bank lenders receiving 100% of the new equity of the reorganized casino company and the reorganized casino company owning 10% 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% Senior Subordinated Notes and 7% 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.

"All our casinos and route operations will continue to function on a 'business as usual' basis throughout the restructuring process. Neither our customers or vendors should experience any impact from our planned financial restructuring and change of ownership of the casino businesses," Herbst concluded.