Herbst Gaming sets price for 10¾% tender offer

New York, June 8 - Herbst Gaming Inc. (B2/B-) said it set the price it is offering to pay holders of its outstanding 10¾% senior secured notes due 2008 in its previously announced tender offer for the notes.

The company said that, using a previously announced formula, its had set total consideration for holders who tendered their notes before the now-expired May 24 consent deadline, at $1,148.32 per $1,000 principal amount of notes validly tendered and accepted by the company for payment. Total consideration includes a consent payment of $30 per $1,000 principal amount. Tender offer consideration to be paid for notes tendered after the consent deadline but before the scheduled offer expiration (at 5 p.m. ET on June 10) would be $1,118.32 per $1,000 principal amount but would not include the consent payment.

All tendering holders would also receive accrued and unpaid interest on the notes up to, but not including, the payment date. The company anticipates payment would be made on June 11, subject to possible extension.

As previously announced, Herbst Gaming, a Las Vegas-based gaming company, said on May 13 that it had begun a cash tender offer and consent solicitation for any and all of its $217 million outstanding 10¾% notes.

It set a now-expired consent deadline of 5 p.m. ET on May 24 and said the offer would expire at 5 p.m. ET on June 10, subject to possible extension.

The company said that tendering holders would be required to consent to amendments to the proposed note indenture that would, among other things, eliminate substantially all of the restrictive covenants. It said holders could not deliver consents without tendering.

The company said the price for the tender offer would be set on June 8.

It said the total amount would be set according to a 50 basis points spread over the yield to maturity of the 2% U.S. Treasury note due Aug. 31, 2005, based on the call price of $1,053.75 per $1,000 principal amount on the notes' first call date of Sept. 1, 2005.

The total consideration would include a $30 per $1,000 principal amount consent payment, payable only to holders tendering by the consent deadline.

On May 25, Herbst said it had received the required consents from noteholders to the proposed indenture changes. The consent solicitation expired as scheduled at 5 p.m. ET on May 24 without extension, and as of that time, holders of $203.929 million of the notes, or 94%, of the outstanding $217 million principal amount, had tendered their notes and had delivered their consents to the indenture changes.

Adoption of the proposed amendments required the consent of holders of at least a majority of the outstanding notes. Accordingly, Herbst Gaming and The Bank of New York, in its capacity as Trustee under the indenture, executed a supplemental indenture incorporating the proposed amendments. However, those amendments will not become operative until the notes are accepted for purchase by the company and payment is made to the tendering holders under the terms of the offer. Once the proposed amendments to the indenture become operative, they will be binding upon the holders of the notes, including any not tendered.

Conditions of the tender offer include the now-fulfilled requirement that holders tender at least a majority of the outstanding principal amount of the notes, and that the company obtain financing on acceptable terms. It was heard by high-yield market sources to be preparing to sell a $150 million issue of new eight-year senior subordinated notes (Herbst in fact did price an upsized $160 million offering of new 8 1/8% senior subordinated notes due 2012 on May 27).

Lehman Brothers Inc. is dealer manager and solicitation agent (800 438-3242 or call collect or 212 528-7581). D.F. King & Co. Inc. is information agent and tender agent (800 431-9642 or call collect 212 269-5550).

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