Herbst Gaming in noncompete, consulting deal with Rampart Casino
9 May 2011
9 May 2011 7:11 p.m.
Herbst Gaming LLC on Monday announced a four-year deal to provide consulting services to the Rampart Casino in western Las Vegas.
Herbst Gaming LLC, the company that last year took over the assets of the bankrupt Herbst Gaming Inc., won't be managing the casino once Cannery Casino Resorts LLC's management contract expires next year, Herbst CEO David Ross said.
Rather, it will assist casino owner Hotspur Casinos Nevada Inc. as Hotspur begins to manage its own casino.
Hotspur Casinos owns the Rampart Casino at the JW Marriott Las Vegas Resort & Spa at Rampart Boulevard and Summerlin Parkway.
Hotspur’s sister company owns the hotel and Hotspur Casinos has a revenue sharing and sublease agreement with Cannery Casino Resorts.
Hotspur has made the decision to manage the hotel and casino as an integrated resort, Ross said.
For Herbst, the deal could lead to additional management and consulting agreements with other companies in the future, Ross said.
"We like our name in that space,'' he said.
Cannery’s 10-year lease at the Rampart expires in 2012 and records filed with the Securities and Exchange Commission show Cannery and its investors have been "evaluating potential transition options at the end of the lease term."
Herbst, in the meantime, said in its disclosure Monday that its consulting contract started on May 1 and the "company will advise and make recommendations to Hotspur concerning Hotspur’s operation of its casino."
The consulting will be directed and supervised by Ross and the consulting services to be provided include, among other things, "the preparation and submission to Hotspur of a proposed five-year strategic plan for the casino and the preparation of an annual budget for the operation of the casino."
Under the deal, Herbst is entitled to receive a monthly interim fee until a "commencement date" of April 1, 2012, or "the date on which certain third party approvals have been obtained by Hotspur."
Following the commencement date, Herbst is entitled for three years to receive an annual consulting fee, payable monthly, and, subject to certain approvals from gaming authorities, an incentive fee if Hotspur’s EBITDA exceeds certain targets. EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.
Herbst, which has no casino in the area, has agreed not to acquire any interest or enter into any management or consulting agreement in any nonrestricted-license casino within 5 miles of Hotspur’s casino – unless Hotspur approves of such a deal.
A message for comment was left with Cannery Casino Resorts.
The 50,000-square-foot Rampart Casino has some 1,200 slot machines, 25 table games, a race and sports book, three restaurants, a bar and three lounges.
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