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Station Casinos said to be near brink of default

Leverage of $5.4 billion estimated to put company at risk of breaking bank debt

Station Casinos Inc., which operates Las Vegas-area properties including Red Rock Casino and the 2-month-old Aliante Station, may be on the brink of default, an analyst said Friday.

Station Casinos carried $5.4 billion in debt in the third quarter ended Sept. 30, much of it from the November 2007 management-led buyout with Los Angles-based real estate firm Colony Capital.


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  • That leverage puts Station at risk of breaking terms of bank debt, said Peggy Holloway, a Moody's Investors Service analyst.

    "From a liquidity perspective, they are on the brink of bankruptcy," New York-based Holloway said in an interview. "It depends on their ability to negotiate with lenders and willingness to amend the debt."

    Robert Chatfield, a finance professor and director of the master's of business administration program at the University of Nevada, Las Vegas, said Friday if the casino company defaults, "creditors would have standing to take actions to attempt recovering their loans," depending on the companies ability to negotiate with lenders.

    "The questions to be considered are will the debt be restructured, what kind of new restrictions will be placed on the management of Stations, or who will own the properties," Chatfield said.

    The locals casino company stumbled in December when it failed to persuade bondholders to swap securities for debt that was worth less and came due later. Apollo Management and TPG Capital successfully used the same strategy the same month to reduce debt at Harrah's Entertainment.

    An infusion of $450 million to $500 million by the owners was contemplated as part of the failed debt exchange, but no additional details have been given since November.

    Station Casinos then drew down the remaining $257 million on its credit line in late December in a move analysts said was in anticipation of a default.

    Station Casinos spokeswoman Lori Nelson and Colony spokesman Owen Blicksilver both declined comment.

    Station said in a Nov. 10 regulatory filing that it was at risk of breaching covenants in a credit agreement by the end of 2008. The company hasn't said whether that occurred. Station has a bond payment due Monday, according to Chris Snow, an analyst at CreditSights in New York. It has probably breached the covenants, Snow said.

    The payment is for $450 million of 6.5 percent notes due in 2014, Snow said. The securities now trade at 2.5 cents on the dollar, down from 70 cents in February 2008, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

    All told, Station has $900 million of bank loans rated by Moody's, $2.3 billion of bonds and a $2.475 billion commercial mortgage-backed facility.

    Review-Journal writer Arnold M. Knightly contributed to this report.

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    Rac wrote on February 19, 2009 07:59 AM: In regards to Jills comment:

    Yes it can happen!


    Steverino wrote on February 04, 2009 12:46 PM: Yo lorenzo Ill give you a 5 spot for alliente + ill comp you a room to keep you out of the elements


    Craig Taylor wrote on February 03, 2009 03:01 PM: Station Casinos are exceptionally nice local casinos. We especially like Green Valley + Red Rock.
    I assume if a BK filing is imminent,a reorganization follows suit.
    What I find most interesting are two mentions:
    1)Station drew down their remaining $275 million credit line in Dec. "in anticipation of a default" . How is it that the larcenous banks and extortionist credit card companies jump in a nanno-second to reduce credit lines and HELOCs even for those of us borrowers who are excellent ? Yet, the lender(s) in this case have no problem permitting Station to keep drawing down, with the lenders full knowledge of the dire straits of the company, no less !!Is that unbelievable ? Is it me ?
    Hence, we see how our inept government is simply bailing out banks and brokers who appear to be "mentally challenged" at the very least ..Small wonder our banks are failed institutions.!!
    2) I notice the Fertitta's, as opposed to the actions of Sheldon Adelson (who keeps pouring his family's money into a "black hole", are not throwing in $500 million of their own dough. I don't blame them..I wouldn't be betting on a casino outfit in '09 either !
    Most of all, we hope that the reorganization will result in retaining as many jobs as possible. Station employess, as are most all casino floor people, are all good people. This is a disaster no emploee deserves.


    jimbojones wrote on February 03, 2009 08:22 AM: Bye Bye Vegas. Bye Bye!
    ha ha ha ha ha ha ha ha ha ha ha ha ha.


    ex gambler wrote on February 02, 2009 03:46 PM: I can understand 'sick of its' frustration as the majority of those compulsive degenerate gamblers are also stiffs. You grind all night and then make no money from these fleas. Just the way Stations wants it so Stations get all the money and nothing for the employees.


    Jill wrote on February 02, 2009 10:16 AM: Do you know what will happen to the city of Las Vegas if Stations goes BK?? They employ 14,000 people in the city of Las Vegas!!! This will have a a HUGE impact on the economy of Las Vegas, this cannot happen!!!!!!!


    Wake UP wrote on February 02, 2009 10:07 AM: To sick of it:

    Wake up,if it wasnt for the so called greedy,compulsive gambler, you would have half your business disappear..be greatful for what you have...stop moaning about the gamblers they keep you employed PERIOD !


    ex gambler wrote on February 02, 2009 04:19 AM: That will never happen 'sick of it.' It will never happen because that is exactly who Stations caters too. The sick, compulsive degenerate gambler down on his luck and looking for the big score on a $20.00 bill.


    sick of it wrote on February 02, 2009 01:34 AM: I work at stations in a busy restaurant, we are always busy and unfortunately we have half the staff we used to, we are running on empty and it's a joke, we constantly run out of silverware, glassware and ice! It's not only the Fertittas to blame its the greedy,compulsive gamblers who want speedy service and everything for free and they complain about everything even when its free! I hope it closes down so all the cheap compulsive gamblers will have to go gamble their social security away in a gas station with no free food!


    Bruce wrote on February 02, 2009 12:02 AM: If there ever was a casino that was totally unresponsive to its customers it is Stations. Texas has become a joke, with old machines that breakdown constantly leaving you sitting for 15 minutes until help arrives. Tight machines? Thats an understatement - they are likely the worse in all Vegas. This month's player flyer has free cash almost 4X a week -- but whats the point? You have to put money in to get it, and then you just know you stand a chance like a snowball in hell.


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