HERBST GAMING NEEDS TO HOLD ON - THEY HAVE A GOOD BASE

Implications: Herbst Gaming has some tall ladders to climb. It seems that they may have over extended themselves. It would seem they must consider doing some soul searching - restructuring their debt should be the first order of business..... New direction is also a serious thought they will have to put in motion.

Analysis: Herbst gaming has been hit with some very serious setbacks over the past year. The problem that they must find the hardest to swallow would be the sharp decline in the Slot Route business. The general downturn in business, new non smoking properties on their routes, makes for some drastic decline on dollars coming into their coffers. The purchase in Primm, Nevada seemed at the time to be a perfect fit for them. Again, the timing could not have been more unfortunate. Primm is a location just about 35 to 40 miles south of Las vegas. It houses several casinos and a discount shopping mall. Just a mile or so south of that is the Primm Golf and Country Club. They were hit very hard by the sharp rise in gasoline prices, housing markets, and less people making the trek from Los Angeles to Las Vegas. It's a stop that is not necessary, but usually done by a large majority of drivers. It's a place to take a break from the four hour plus drive from LA to LV.

Their main interest should be the restructuring of their debt service. They also should look at either selling off their route business and concentrating on their casinos and looking to drop a couple of their under achieving existing properties. Possibly both. Their need is for fresh dollars in hand - to become fluid again. It's hard to maintain stability in a down market when their is plenty cash on hand. Even the big boys are dropping room prices, giving away food and adding incentives for people to start coming in larger numbers.

I would hate to see them not make a go of it - they have a sound business with a terrific brand and need some better advice as to how to set the business on the right track again.