Hooters: What next?; PE fools and their money; Deal or no-Deal in Georgia?

It’s all over for the current administration at Hooters Casino Hotel. They’ve given up trying to fight efforts by Canyon Capital Realty Advisors to have the money-losing property sold via foreclosure auction. If Canpartners wins at auction, it may go after additional money by seeking deficiency judgments. Hooters’ hired gun, Innovation Capital, continues to plumb the crevasses for potential new suckers investors, willing to trade shares in the low-value casino for a quick cash implant. (It’s called a “new value plan” but “boob job” would definitely be more like it.) But Tuesday’s raising of the surrender flag pretty much puts the lie to Innovation’s claims of “very active interest” on the part of wannabe financial rescuers. Canpartners has been saying for months that there wouldn’t be any takers for the sagging hotel-casino and it knew whereof it spoke.

Those “very active” theoretical sugar daddies could still materialize at auction and grab Hooters for as much as $80 million (John Knott of CB Richard Ellis thinks $70 million is a more realistic figure), there’s one obstacle. With a combined $50.5 million of direct and repurchased debt, Canpartners is firmly positioned to block anyone else with a “credit bid” (a debt-for-equity swap). Throw in Knott’s estimate that Hooters needs another $50 million in capex and that’s a tall order for a small casino. Then again, does Canpartners have anything in mind other than a pure real estate play? If it wins the bankruptcy auction, will it be in the position of the dog that caught the car?

The company formerly known as Herbst Gaming now goes by the moniker of Affinity Gaming. But, as might be expected of a company whose ownership consists of literally scores of debtors, it hasn’t shown any great affinity for gaming yet. But it has landed a capital infusion, by dint of selling 20% to Z Capital Partners, an Illinois-based firm. East Coast private equity firm Silver Point Capital already owns 19% of Affinity but has, rather foolishly, declined to take a seat on the board — a bonehead play straight out of the Colony Capital manual. Way to safeguard your investment, boys! By refusing to take the seat offered, Silver Point’s Edward Mule displayed the obstinacy characteristically associated with his namesake.

Z Capital’s James Zenni Jr. (left) appears bent upon following Silver Point’s mulish example. That’s highly imprudent when you’re holding an option to buy as much as 25% of Affinity. However, one doesn’t associate good business decisions with Affinity these days. It shucked its Terrible Herbst-based Nevada slot routes and a Searchlight casino back to old Jerry Herbst. The slot routes were less-lucrative part of the Herbst gaming empire (one hesitates to employ the term for such a rattletrap outfit), so that didn’t look too bad on the face of it.

Unfortunately, Affinity doubled down by purchasing three casinos from Golden Gaming … in the over-the-hill Colorado market. Golden picked a golden moment to get out. CEO Blake Sartini (right, bagging an Affinity executive) must have been dumbstruck with disbelief at finding such a credulous buyer, not to mention getting the remainder of Affinity’s slot routes in the balance. With that sort of acumen in the executive suite, it’s no wonder that Affinity can’t even properly air-condition one of its hotels.

The domino effect of gaming debates in Florida continues to provoke the previously unthinkable in blood-red Bible Belt states. Voters in Georgia recently approved Sunday liquor sales, giving rise to hopes that they’re similarly amenable to gambling. Legislative gutting of the Peachtree State’s education budget heightens the appeal of gaming revenues, which could theoretically put schoolbooks back in the hands of students. Also, a loophole in Georgia law would permit the legalization of VLTs without a constitutional amendment. State Rep. Harry Geisinger (R) is also pushing a veto-proof scheme for permitting wagering on horse races. (Without betting, what’s the point of racing horses?) At least Geisinger’s proposal won’t have to cross the desk of Gov. Nathan Deal (R, above), who’s dead set against any form of gambling, period. However, if lawmakers have to keep chopping away at the school system, they may decide it’s Deal who’s dead wood, and that those VLTs and betting windows are looking might good indeed.