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November 19, 2018

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Golden Nugget buyers land four-year license

The Golden Nugget hotel-casinos in downtown Las Vegas and Laughlin opened this morning under new ownership, though customers and passerbys probably wouldn't notice any changes.

Thursday, Nevada regulators approved a four-year license for Golden Nugget buyers Tim Poster and Tom Breitling and also granted them the option of obtaining a permanent license within a year.

"When I moved here in 1993 Tim said 'One day we're going to own a hotel-casino,' " Breitling said. "We think we bring something new to the gaming business."

The approval by the Nevada Gaming Commission follows a recommendation from the Gaming Control Board Jan. 7 and allowed the entrepreneurs to close on the $215 million purchase of both casinos from gaming giant MGM MIRAGE.

The men have pledged to retain all 3,600 employees at both casinos, including rank-and-file workers as well as managers. They also plan to keep the properties in top condition while working behind the scenes to boost hotel business through Internet bookings. Gradual changes will come over the next several months as the company spends an estimated $8 million or so to replace older slot machines with "cashless" devices and attract big-name entertainment to the showroom in downtown Las Vegas.

The biggest change for the downtown property also won't be readily noticeable.

A Fox network camera crew was on hand at the commission meeting Thursday to tape footage for an upcoming reality show that will focus on the takeover of the downtown casino by Poster and Breitling as well as the experiences of customers and employees.

The show, called "The Casino," will give a camera crew the run of the property. In return, millions of Americans nationwide are expected to watch the show when it airs this summer, vaulting the status of downtown Las Vegas and the entire city to new highs, Breitling said.

"There are thousands of stories here -- there's a natural mystery and natural drama that surrounds this business," he said.

Hundreds of potential customers have already contacted the company expressing interest in somehow being featured on the show, he said.

To obtain a permanent license, Poster and Breitling must appear again before the Control Board and the Gaming Commission to receive approval.

The Control Board had initially recommended a one-year license for Poster and Breitling based on the duo's friendship with Rick Rizzolo, the owner of the Crazy Horse Too topless club in Las Vegas who is the target of an FBI probe into alleged ties with organized crime.

Debt-rating agencies interpreted the one-year limitation negatively, implying that there was no assurance that Poster or Breitling would be licensed permanently in a year, Poster Financial attorney Frank Schreck said.

After the Control Board recommendation, Moody's Investors Service downgraded the outlook on Poster Financial's proposed $155 million debt offering to "negative" from "stable." The downgrade didn't affect the bonds' credit rating or the company's expected performance but noted a risk involved in licensing Poster Financial executives.

Before a packed room of onlookers, photographers and video cameras, Control Board members said Thursday that they agreed instead to approve Poster Financial's request for a four-year license, which would appease ratings agencies and potential investors while still empowering regulators to issue or revoke a permanent gaming license.

The Gaming Commission meeting was decidedly less tense than the Control Board meeting, during which the three-member board pounded Poster and Breitling with questions about their relationship with Rizzolo and his social network, including associates of Rizzolo with ties to organized crime.

Control Board members said Poster in particular didn't go far enough to sever his relationship with Rizzolo.

Thursday, Gaming Commission Chairman Peter Bernhard instead focused on concerns that Poster Financial's board of directors isn't independent enough and lacks people with experience in the gaming industry.

The five-member board includes Poster, Breitling and associates of both including Perry Rogers, who runs a management company for tennis star Andre Agassi, hedge fund manager Ed Borgato and Richard Barton, former chief executive of Internet travel giant Expedia Inc.

Agassi and Barton are equity investors in the Golden Nugget. Poster is a childhood friend of Agassi and a client of Borgato. Barton heads the company that eventually bought the Internet hotel booking business Travelscape.com from Poster and Breitling. Poster told commissioners that board members were chosen for their entrepreneurial spirit as well as their management and marketing expertise.

Bernhard questioned whether the board members would have the independence to "say no" to Poster and Breitling and not simply "rubber stamp" executive decisions. He also questioned whether Poster and Breitling would be able to make decisions independent of the other.

"These are people I can rely on to give honest and forthright answers," Poster said.

"I will stand up to Tim and Tim will stand up to me," Breitling said.

Commissioner Arthur Marshall cited recent federal rules requiring independent boards at public companies and urged the men to expand their board by appointing members with gaming experience who are also further removed from their business.

Commissioners also commended the pair for their ability to raise financing, their desire to revitalize downtown and their pledge to retain Golden Nugget employees.

Rank-and-file employees will maintain their salaries while top managers have renegotiated contracts at higher wages, Poster said.

"I know it was a tough experience but I think (the Control Board) has done you a great service," Marshall said, referring to the stiff questioning by the Control Board weeks earlier.

At that meeting, Poster and Breitling told regulators they have since terminated their relationship with Rizzolo and have never been involved in any business deals with the strip club owner. Rizzolo -- a sought-after high-roller at major casinos across Las Vegas -- has never been a customer of the Golden Nugget, casino officials told regulators Thursday.

Poster, a Las Vegas native, began the hotel booking company Las Vegas Reservation Systems in 1990 with $5,000. Breitling, a former newscaster in Victorville, Calif., arrived in Las Vegas in 1993 "with $100 in my pocket" and bought half a stake in the company. Later called Travelscape.com, the company began to focus on Internet bookings in 1998 and was sold to competitor Expedia Inc. in 2000 for $95.5 million. At the time of the sale the site boasted more than $30 million revenue as the largest Internet booking agent of hotel rooms in Las Vegas.

Poster and Breitling, 35 and 34, respectively, are among the youngest casino bosses in the history of the industry since gaming's golden boy Steve Wynn, himself in his 30s, bought the nondescript Golden Nugget and transformed it into downtown's most luxurious property.

The youthful dot-com millionaires-turned casino owners have achieved a kind of rock star status and have transformed a local story into an national event, said Tom Bradley, a spokesman for Poster Financial's Las Vegas advertising and publicity agency Brown and Partners.

"They've reached a level of celebrity that I don't think they envisioned," Bradley said. "And they're handling it exceedingly well."

Built in 1946, the Golden Nugget has evolved into downtown's largest and most expensive casino through the ownership of Wynn and continuous upgrades by his successor, MGM MIRAGE. The company most recently spent $35 million over the past three years or so to upgrade the property's 1,906 rooms and other features. The Golden Nugget generates high room rates as well as some of the city's biggest profits per slot machine, Poster Financial officials said.

The property boasts about 100,000 "active members" in its slot player loyalty club.

Regulators have questioned Poster Financial officials about how they would be able to improve on the property's already impressive performance.

Poster said his company anticipates introducing a hotel booking and promotional website that will allow the property to book more rooms on the Internet and introduce new customers to the casino. The Internet can be better used to target more profitable hotel guests for each room, he said.

The company also expects to introduce "cashless" slot machines on the casino floor for the first time, a move that is expected to reduce operating costs by at least $500,000 as well as improve gambling revenue as customers gravitate toward paper vouchers and away from coins, Breitling said. Agassi's star power also will help the property's efforts to draw big-name entertainment downtown, he added.

"We want to bring headliners back to the showroom. We're exploring bringing back the poker room," he said. "Thematically, we're going for Old Vegas with a modern approach."

Max Rubin, a Las Vegas casino consultant and author who used to work for Wynn, said the business plan is promising.

"The premise of making your casino the (forum) for a television show works. (Palms resort owner) George Maloof showed us that it works. More than that, I think a throwback to the Old Vegas days -- what you saw with Steve Wynn before his company got too big, what you see at the Palms, when players know the owners -- is an absolute recipe for success."

"Thousands of people would come to The Mirage because they knew Steve Wynn. Wynn also had that going for him at the Golden Nugget."

The Golden Nugget will still cater to an older crowd than the Palms and the Hard Rock, off-Strip resorts that cater to a hip, rock 'n' roll crowd, officials said.

"There's a rich history there with a loyal customer base," Breitling said.

The ultimate goal is to work with other downtown casinos to boost the area's fortunes amid increasing competition, he said.

"We can't afford as a city not to have downtown succeed," he said. "Downtown needs to be a destination ... like Bourbon Street in New Orleans."

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