Banks' role key in Rail City acquisition

The acquisition of the Rail City Casino by The Sands Regent of Reno has been years in the making, and bankers were part of the discussions from the earliest stages.

The $38 million acquisition $35 million cash along with a $3 million note carried back by the seller, Alliance Gaming Corp.

involves a significant financing commitment from a five-bank group.

Well Fargo, which operates a large gaming finance unit, is the lead bank in the group.

Fernec Szony, president and chief executive officer of The Sands Regent, said last week his company had been talking with Alliance Gaming about acquisition of Rail City for several years.

Szony has been telling investors in his publicly traded company for months that the company was scouting acquisitions in northern Nevada.

The deal took shape only recently, however, as Las Vegas-based Alliance decided to focus on its manufacturing and gaming systems businesses.

From the earliest contacts, however, Szony said he kept his bankers in the loop.

"The whole way along, we worked with our banks," Szony said.

The bank group's interest in financing the acquisition, he said, is a strong vote of confidence in The Sands Regent.

One of the bankers, Nevada State Bank President Bill Martin, said his lenders have confidence in the northern Nevada gaming market despite the challenges presented by Indian gaming in California.

"You never would make a loan if you didn't have confidence in the industry," he said.

Martin said, too, his bank likes the diversification of The Sands Regent.

The company, whose centerpiece property is the 850-room Sands Regency Hotel in downtown Reno, also owns the Gold Ranch Casino and RV Resort in Verdi.

With the acquisition of Rail City, Szony said the company believes it can leverage its marketing dollars by crosspromoting the three properties along the Interstate 80 corridor.

In an interview, he declined to estimate the effects of the acquisition on overall revenues for The Sands Regent.

In its most recent quarter, the company reported earnings of $1.1 million on revenues of $15.9 million.

Both figures were essentially flat compared to year-earlier figures.

The 16,000 square feet of casino space at Rail City will add about 40 percent to the company's existing capacity - 29,000 square feet of gaming at Sands Regency and 8,000 square feet at Gold Ranch.

While Rail City provides a sports book, family restaurant and lounge, the property in Sparks' Victorian Square doesn't include any hotel rooms.

As a result, its customers are largely locals.

The acquisition is expected to close next spring if regulators approve.

The final sale prices will be based on the financial performance of Rail City in the 12 months prior to the time the sale is closed.