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May 26, 2019

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Leaders named at gaming companies after bankruptcy

New CEOs and boards of directors have been named for two Las Vegas-based casino operators as they emerge from bankruptcy.

Taking over as CEO at post-bankruptcy Riviera Holdings Corp. will be former Las Vegas Sands Corp. executive Andy Choy, Riviera said in a court filing Friday.

And Herbst Gaming LLC, the company created by lenders to take over bankrupt Herbst Gaming Inc., has designated Herbst executive David Ross as CEO once that bankruptcy is completed this quarter.

Riviera Holdings owns the 2,075-room Riviera hotel-casino on the Las Vegas Strip and the Riviera Black Hawk casino in Colorado.

It's being taken over by investors who gained control of its debt. The investors are led by longtime hotel and gaming executive Barry Sternlicht, who will be chairman of the board once the bankruptcy process is completed.

In its court filing, Riviera said the new CEO, Choy, had senior management roles with investor Carl Icahn's portfolio of distressed assets before serving as a manager at Las Vegas Sands' Venetian Las Vegas from August 2007 to July 2008 and as a senior vice president at the Venetian Macao in China from August 2008 to November 2009.

After the April 18 death of longtime Riviera CEO and Chairman William Westerman, Riviera created an Office of the CEO to run the company. The office consisted of Tullio Marchionne, secretary and general counsel; Robert Vannucci, president and chief operating officer; and Phillip Simons, treasurer and chief financial officer.

Sternlicht, the chairman-designate, is chairman and CEO of Starwood Capital Group, a private investment firm he formed in 1991. From 1995 through early 2005, Sternlicht was chairman and CEO of Starwood Hotels & Resorts Worldwide Inc., which in the late 1990s included the Caesars Palace and Desert Inn hotel-casinos in Las Vegas. Caesars Palace eventually became part of Harrah's Entertainment Inc. while the Desert Inn was imploded by Steve Wynn to make way for his Wynn Las Vegas resort.

Besides Sternlicht and Choy, the directors of the reorganized Riviera will be:

• Victor Khosla, managing partner of Strategic Value Partners LLC.

• Derek Stevens, a big Riviera shareholder and manager of Desert Rock Enterprises LLC and an affiliate, Golden Gate Casino in downtown Las Vegas, where he has been CEO since September 2009.

• Marcos Alvarado, a vice president of Starwood Capital Group.

Riviera Holdings last reported earnings for the second quarter, when it lost $4.2 million or 34 cents per share vs. a loss in the year-ago quarter of $13.5 million or $1.08.

Net revenue of $32.3 million was down from $34.6 million.

At Herbst Gaming, CEO-designate Ross has been serving as Herbst's chief operating officer.

Ross opened the Suncoast hotel-casino in western Las Vegas in 2000 as the property's general manager for Las Vegas-based Coast Casinos Inc.

From 2004 to 2008 he was Coast Casinos’ chief operating officer. Coast was acquired in 2004 by Boyd Gaming Corp. of Las Vegas.

A Herbst Office of the CEO was created in 2008 that included brothers and Herbst owners Edward, Timothy and Troy Herbst.

That office also included Ross, and after the bankruptcy wraps up Ross will be the only person with the CEO title.

In recent regulatory filings, Herbst Gaming LLC also said longtime gaming executive Ferenc Szony will serve as president of Herbst post-bankruptcy -- the same title he now holds.

Szony previously was an executive at Hilton Hotels Corp. and was president of the Reno Hilton resort from 1994 to 1997. He was CEO of the Sands Regency hotel-casino in Reno in 1997, when it was acquired by Herbst.

The post-bankruptcy board of directors of Herbst will consist of Ross and lenders' designates Don Kornstein (chairman), Thomas Benninger, Scott Henry and Michael Rumbolz.

Kornstein founded and has served as the managing member of financial consulting firm Alpine Advisors LLC since March 2002. He's a director of Gala Coral Group, a gaming company based in the United Kingdom; and was a director of Cash Systems Inc. of Las Vegas, which in 2008 was sold to casino ATM and gamblers' credit information provider Global Cash Access Inc. of Las Vegas.

Benninger is a founding managing general partner of Global Leveraged Capital, a private merchant banking firm specializing in distressed debt. He is a director of Squaw Valley Ski Corp., a director of the DAPER Investment Fund and was a board member of Tropicana Entertainment LLC before that company was broken up in a separate bankruptcy case.

Henry was senior vice president-finance through April 2009 at Las Vegas Sands Corp., and earlier was an investment banker.

Rumbolz is a managing director of Acme Gaming LLC, a consulting company providing development, merger, acquisition, strategic planning, legal and compliance services to various businesses. He had been CEO and a director of Cash Systems and now is an independent corporate strategy advisor to Global Cash Access. Rumbolz in 2008 was appointed to the board of directors of Seminole Hard Rock Entertainment Inc. and as a manager of Seminole Hard Rock International LLC. Seminole Hard Rock, a cafe and casino owner, owns the Hard Rock brand and is suing the Hard Rock hotel-casino in Las Vegas just down the street from one of the Herbst casinos.

In its most recent regulatory filings, Herbst said the company earned $13.7 million in the first six months of 2010 on net revenue of $323.9 million; a turnaround from a loss of $28.4 million on net revenue of $344.4 million during the same period of 2009.

The 2009 period included interest expense of $29.5 million, which dwindled to just $21,000 in the 2010 period because of the bankruptcy.

The Herbst assets consist of:

• A gaming route with some 6,100 slot machines throughout Nevada in bars, restaurants and stores.

• Southern Nevada casinos in Las Vegas, Henderson, Searchlight and Pahrump.

• The Buffalo Bill's, Whiskey Pete's and Primm Valley hotel-casinos on I-15, south of Las Vegas on the California border.

• Northern Nevada operations and real estate including the Sands Regency, Rail City, Gold Ranch and Dayton casinos.

• Midwest casinos in Osceola, Iowa; LaGrange, Mo.; and St. Joseph, Mo.

Bondholders standing to lose hundreds of millions of dollars in the Herbst bankruptcy have appealed approval of the Herbst reorganization plan and that appeal is pending. No major opposition has surfaced from creditors in the Riviera case.

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