Bryan Patrick / Bee file, 2007

Joe Maloof shows off a luxury suite that includes a swimming pool at the Palms Casino Resort in Las Vegas. Loans to expand the complex have severely eroded the Maloofs' finances.

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Maloofs will own just 2% of Palms casino

Published: Saturday, Jun. 18, 2011 - 12:00 am | Page 1B

The Maloof family will soon own just 2 percent of the Palms Casino, its trendy Las Vegas property, according to regulatory documents filed in Nevada.

The revelation comes just days after George Maloof, who runs the resort and is a co-owner of the Sacramento Kings, confirmed that his family had given up majority control of the casino and hotel, on which it spent about half a billion dollars over the past decade. At the time, he would not specify the size of the family's remaining ownership stake.

In an interview late Thursday, Maloof said the family could regain a more significant share – up to 20 percent – under buyback options granted by the creditors who are taking control.

The Maloofs' stake in the Palms has direct relevance to its stewardship of the Kings. While the two are operated as separate companies, the Maloofs' overall financial health affects how much money the family can plow into the Kings as the team enters a crucial offseason.

After operating this past year with the NBA's lowest payroll – and threatening to move the team to Anaheim – the Maloofs say they are committed to turning the Kings around. City leaders and the NBA also expect the Maloofs to contribute financially in some way to construction of a new arena.

The family's finances have been under a microscope the past several months as the Kings flirted with Anaheim and the Palms struggled with its debts.

Maloof said this week's deal improves the family's finances by erasing the casino's debt burden.

According to documents filed with the Nevada Gaming Control Board, the Maloofs will own just 2 percent of the casino once regulatory hurdles are cleared, and the deal is complete. The casino's creditors, investment firms TPG Capital and Leonard Green & Partners, will own 49 percent each.

But Maloof said the family's stake is expected to grow. TPG and Leonard Green granted the Maloofs a series of options and warrants – contracts giving them the right to buy additional equity.

"We could own up to 20 percent when it's all said and done," he said.

He wouldn't go into details about the options and warrants.

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