Troubled downtown casino looks set to open

The end is in sight for the financial headaches at Binion's Horseshoe Casino and Hotel with the closing of a deal to sell the property to West Virginia-based MTR Gaming Group, which will operate it jointly with Harrah's Entertainment.

The agreement will make Harrah's responsible for routine daily operations at the property for one year, with two one-year options for renewal, to provide time for the smaller MTR to adjust its company structure to absorb Binion's Horseshoe Casino.

Once divested of its managerial duties at the end of the agreement, Harrah's will walk away with the rights to the „Horseshoe“ brand name and the World Series of Poker (WSOP) which prompted the giant casino operator to rescue the 52-year old Binion's Horseshoe from bankruptcy in the first place.

Although the precise terms of the deal, including the price, were not revealed, MTR statements both financial and those released by MTR officials indicate that Harrah's might have acquired the two key promotional and marketing enhancements for a paltry sum in the end.

„It was never our intent to hold the property for a long period of time,“ says Harrah's spokesperson Gary Thompson. „The two things we've always said we were interested in were the Horseshoe brand and the WSOP.

In January, Harrah's entered into an agreement to buy Binion's Horseshoe from Becky Binion Behnen, daughter of celebrated Horseshoe founder Benny Binion, after federal marshals acted on a U.S. district court order and seized about 1 million USD from the casino to pay off debts to health care and pension funds, thereby shutting down the casino. Owned and operated by Behnen since 1998, the casino and hotel owed money to a number of creditors and was near insolvency.

Harrah's reportedly paid 50 million USD for that transaction. The sum, however, included a $ 20 million IOU from Behnen that was acquired as part of a 1.45 billion USD deal with Jack Binion, Behnen's brother, to purchase the three riverboat casinos in Horseshoe Gaming Holdings Corp. and own the Horseshoe name outside of Nevada, making Harrah's total actual cost closer to 30 million USD.

While the terms of the deal with MTR were not disclosed, a joint statement from Harrah's and MTR stated that MTR had received the necessary credit approvals for the purchase but that the company „anticipates that it will close using its cash on hand.“

According to MTR's most recent financial statement, the company had 29.8 million USD in cash at the end of the third quarter last year. Although it is unlikely that any company would empty its pockets for any purchase, it is theoretically possible that Harrah's achieved its stated goal of acquiring the Horseshoe name in Nevada and the WSOP for virtually no money.

„The transaction demonstrates Harrah's interest in reducing the overall net cash outflow as part of the acquisition of the property and name,“ says Brian Gordon, principal at local market research firm Applied Analysis. „Harrah's is looking at it as a name recognition transaction and got a third party looking at it as a real estate transaction, which is basically what the earnings on the property [could be].“

MTR executives were not available for comment.

Because the original deal with Behnen has yet to close, MTR will receive title to the property directly from Behnen through simultaneous closings, expected later this month, meaning that direct ownership and its responsibilities will never touch Harrah's hands. The deal still needs appropriate regulatory approval, including a hearing before the state Gaming Control Board this week.

Nonetheless, Harrah's is intricately involved in the effort to put Binion's Horseshoe back on its feet. The joint operating agreement requires Harrah's to pay MTR an undisclosed monthly fee to operate Binion's, with a revenue sharing arrangement as well. All operations, while managed by Harrah's, will be overseen by a joint committee of the two companies.

„Any major capital expenditures will be reviewed by both companies,“ says Thompson. „It will be MTR's property.“ Plans call for Binion's Horseshoe to open its doors by April 1, with the 35th annual WSOP to be played at the site beginning April 22.

MTR owns and operates a racino in West Virginia as well as the Ramada Inn and Speedway Casino in Las Vegas.

Although completely experienced in gaming operations as well as the Las Vegas market, the joint operating agreement will give MTR time to digest the deal and bring its management structure up to speed. With 1,860 total employees, MTR would be increasing its current workforce by about 50 percent with the addition of the more than 900 workers from Binion's Horseshoe.

Last week, Harrah's told former Binion employees the rehiring process had begun in order to make the April opening date.

MTR issued a statement last week reaffirming „that its primary external growth strategy remains the pursuit of racetrack opportunities.“ The company signed a letter of intent to acquire a 50 percent stake in North Metro Harness Initiative LLC to develop a harness racetrack and card room near Minneapolis.

The joint operating agreement will allow MTR to fine tune its business while leaning on Harrah's experience to maintain and grow the new Horseshoe. „MTR has the management strength to run the property, but if they took over immediately, it would put a strain on them, particularly in hiring all new frontline operations,“ says Thompson. „The goal is to get [Binion's Horseshoe] on a profitable basis.“