Published Thursday, Feb. 24, 2011 | 11:01 a.m.
Updated Thursday, Feb. 24, 2011 | 3:07 p.m.
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The Nevada Gaming Commission and the state Gaming Control Board today approved a complex set of registrations and licensing of several companies that will enable the casino at the Hard Rock Hotel to remain open during a transaction that would resolve financial issues stemming from the threat of foreclosure by lenders.
Regulators of both boards approved the plan unanimously in separate special meetings today in Carson City.
In an unusual procedure forced by a March 1 term sheet deadline, the Control Board recommended the action in a 90-minute hearing and minutes later, the commission voted to approve that recommendation.
Under the structure approved, Warner Gaming LLC of Las Vegas would take over casino operations and Hard Rock lender Brookfield Asset Management Inc. of New York is listed as the registered licensee. Brookfield is a real estate management company with $1.3 billion in investment capital.
Warner Gaming is headed by former Station Casinos Inc. chief operating officer William Warner, who founded his casino management company in 2008 and has tribal casino management contracts in Ruidoso, N.M., and Spokane, Wash.
Regulators have stressed that they wanted a plan that would allow the property to stay open while details of the transaction are completed. Minority investor Morgans Hotel Group of New York has operated the 1,500-room resort and under the approved structure senior and junior lenders would retain their positions as the ownership transition occurs.
The Hard Rock has struggled to keep up with loan payments on $1.4 billion in debt during the one of the worst recessions on record. Earlier this month, the Hard Rock fended off an involuntary foreclosure attempt by a minority lender.
Regulators agreed that while the quick transaction is not an ideal solution, the fact that it is keeping the property open and was a consensual deal by the current owner and the lenders is the best possible outcome. In essence, Brookfield is stepping into the shoes of Hard Rock Hotel Holdings and Morgans with additional capital and will preserve agreements with various contractors.
On Feb. 28, escrow and loan documents will be delivered to the Gaming Control Board to assure the surrender of the license by Morgans and the issuance of a new license to Warner.
Board members and commissioners were told no layoffs are planned for any of the property’s 2,800 employees. Customers should see little, if any, change at the property.
Control Board Chairman Mark Lipparelli also addressed a big issue that has dogged the property – regulatory concerns about drug use, underage drinking and management issues that led to the Hard Rock being fined $650,000 last month.
Gaming Commission Chairman Peter Bernhard expressed some concern about Brookfield attempting to oversee gaming operations with unlicensed personnel and whether Warner has the experience to manage a casino the size of the Hard Rock. Brookfield officials and Warner assured him that they know their responsibilities.
Warner said not only would he monitor security and surveillance programs in place, but he would maintain a presence on the property – not just 8 to 5, but at times when the property’s nightclub is open.
He also said he would consider hiring “outside shopping services” to monitor behavior behind the scenes. Referencing regulatory scrapes the Hard Rock had several years ago, Warner said he would personally review all marketing messages before they would be distributed publicly.
Earlier in the day, the Gaming Commission denied a gaming license to a former West Wendover casino executive, effectively banning him from working in the industry.
Robert Patterson, former manager of Leisure Gaming Inc.’s Pilot Wendover property didn’t attend this morning’s meeting in Carson City as requested by regulators.
Gaming Control Board investigators said Patterson was fired for embezzlement and they questioned some of the statements he made on a key employee license application.
At a Feb. 9 Gaming Control Board meeting, Patterson said he plans to move out of state and would not oppose a recommendation for denial, which would put him on the so-called “gray list” banning him from working in the casino or contracting with an operator.
Commissioner requested his presence at today’s meeting and voted unanimously to deny licensing when he was a no-show.