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Fertittas' bid seen as highest for Station Casinos
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LAS VEGAS REVIEW-JOURNAL
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LAS VEGAS REVIEW-JOURNAL
Updated: Aug. 6, 2010 | 11:01 a.m.
A bankruptcy court auction of 11 casinos, land holdings and American Indian gaming agreements belonging to Station Casinos could be over before the judge's gavel hits the base.
A "stalking horse" bid of $772 million by the founders of the locals gaming giant was determined Thursday to be the highest and best bid by the independent firm brought in to evaluate the process.
However, much of the mystery surrounding today's hearing at the federal courthouse in Reno was removed a week ago.
Unsecured creditors, who had opposed all aspects of Station Casinos' two-pronged Chapter 11 reorganization, reached an agreement with the company on July 28 to provide a financial investment and support for the plans in exchange for equity ownership in the reconfigured company.
Two days later, Boyd Gaming Corp., Station Casinos' chief rival in the locals gaming market, said it wasn't going to participate in the auction because the court-approved process made it difficult for qualified bidders to compete fairly.
The move left Fertitta Gaming, a business formed by Station Casinos founders Frank Fertitta III and Lorenzo Fertitta, in position to retain an ownership stake in the company, which filed for Chapter 11 bankruptcy more than year ago with almost $6 billion in debt.
Fertitta Gaming holds the stalking horse bid of $772 million for today's auction that will be administered by U.S. Bankruptcy Judge Gregg Zive. According to court records, the Fertitta Gaming bid includes $455 million in new debt and is supported by Station Casinos' primary lenders, Deutsche Bank, JP Morgan Chase & Co. and real estate investment firm Colony Capital.
Resorts up for bid include Texas Station, Santa Fe Station and the two Fiestas, smaller casinos, certain land holdings and American Indian gaming contracts. Zive planned to sell the grouping as one entity.
Financial adviser Lazard Freres & Co. said only six qualified bids were submitted for the Station Casinos assets, but only one, an offer submitted by Boyd Gaming, covered the entire portfolio of assets offered in the auction. Other bids were submitted for just selected assets.
In an affidavit filed with the court, Lazard Managing Director Daniel Aronson said 39 parties expressed interest in participating in the auction and 26 executed confidentiality agreements.
Only eight of those parties submitted letters of intent that they would participate in the process.
"Lazard believes that the stalking horse bid is the highest and best bid for the assets available to the debtors to date," Aronson wrote in his affidavit. "Moreover, Lazard does not believe that it would be in the best interests of the debtors to terminate the sale process or extend the deadlines set forth in the bidding procedures."
Aronson said the stalking horse price was set in April following a "robust" mini auction between Fertitta Gaming and Boyd Gaming. He said the $772 million bid was an increase of $135 million over a proposed purchase price.
Aronson disputed Boyd's claims that the auction process was unfair.
"I believe that the sale and bidding process was conducted in accordance with the bidding procedures, that potential bidders were provided with fair and open access to all reasonable diligence materials and that the bidding procedures provided an open and level playing field for all potential bidders," Aronson said. "At no point during the process did any potential bidder voice any complaints to me about the bidding procedures or request that the debtors deviate from or modify the bidding procedures."
Nancy Rapoport, a professor of bankruptcy at the University of Nevada, Las Vegas Boyd School of Law, said the judge's primary concern is for the assets being acquired to attract reasonable value. She said that's one reason preference is given to the stalking horse bid.
"In the judge's mind, the stalking horse bid sets the real value for the assets, and anything above that bid provides additional value," she said.
Last week, Boyd CEO Keith Smith said a requirement known as the "Texas Station put," which forces an outside buyer to acquire the leased land under Texas Station for $75 million, favored insiders. Fertitta Gaming would not need to pay that since the land is owned by Victoria Fertitta, the mother of Frank and Lorenzo Fertitta.
Rapoport said the Texas Station put was not unusual in bankruptcy. She said the clause was similar to credit bidding, where bids are taken on an asset that is secured by collateral and one party might have to pay extra for the collateral.
"This bankruptcy case is bigger than life in a lot of ways," Rapoport said. "Station Casinos is a major player in the local economy."
In their agreement announced last week, the bondholders agreed to invest up to $100 million in the reorganized company in exchange for an ownership stake in the auctioned properties. The bondholders' investment could be used to support the auction process.
The agreement will give the bondholders a stake in the other properties that will be spun off into a new holding company under the reorganization proposal.
Four Station Casinos properties -- Red Rock Resort, Palace Station, Sunset Station and Boulder Station -- along with the Wild Wild West and its adjoining 110 acres, will be spun off into a new holding company owned by Colony Capital, Deutsche Bank, JP Morgan and Fertitta Gaming.
Once today's auction is concluded, the judge is expected to confirm the reorganization plan in a hearing on Aug. 27 in Reno.
Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.
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This would be the same as if I defaulted on my house, then bought it at the auction for about ten percent of what I owed.
It could only happen in Vegas.
Frank & Lorenzo should be in jail for grand theft.
Vivalaraza. You love Boulder Station because it's like a freak show in Tijuana.
i love boulder station!
@ScottNV-- you are somewhat right, but not totally right. Sure, there is some construction debt.. but the BULK of the debt that they couldn't continue to pay was from the leverage they incurred when they sold the company! That money went to the Fertittas. If all the company had was construction debt it would never of had to declare BK. I could care less about the banks and investors who got shafted on that, but Stations also shafted their suppliers (the unsecured creditors, many of whom are small businesses), and the employees took a beating with benefit cuts, lay-offs, and hours cuts. Then the Fertittas buy back the company for pennies on the dollar? That stinks. The judge should have allowed that only if they paid off all the suppliers etc. But that's not how the system works. To an extent, you could say that the Fertittas got even richer on the backs of the suppliers and employees. Their lifestyles haven't changed a bit, but I guarantee you the small business suppliers and employees felt the pain.
And people say these Greaseball Fertitta's aint smart -- Frankie3Sticks should get a trophy for pulling this off. -- Here is how it all worked -- 1.Sell your company for millions. --2.Put said millions in your pocket. --3.Continue to run company and continue to get get paid huge salary and perks. --4.Over-expand and over-leverage company..(those dumb bankers are easy marks, fall for it everytime).. --5.Totally mis-manage company and run-off customers .. --6.Bankrupt company and totally shaft the suppliers, banks, and your employees .. --7. Buy back company for pennies on the dollar. Nice job!
What we have witnessed is an example of how the rich and powerful twist the laws to their advantage. According to the powers that be, what the Fertittas have accomplished was all 'within the law.' Maybe so, but that law was also the product of Corporate lobbying that allows for this travesty to take place. Wish the Fertittas well? I don't think so. I don't wish anyone well that manipulates laws that favor the rich and take advantage of those less fortunate.
TWISTED DEALINGS AND BRIBES HAVE TO BE GOING ON HERE! THE ATTORNEY'S ARE AT WORK, LEAVING OTHER PEOPLES MONEY, IN THE GUTTER. THIS DEAL HAS TO BE CRIMINAL! IF IT'S NOT IT SHOULD BE!!
How can they bid on themselves? What a fricken SCAM.
The casinos are covering operating expenses, but not enough to pay the debt of construction. Sort like saying you are doing OK because you can pay your electric bill and buy food, but not pay your mortgage.
So their construction creditors traded that debt for an ownership stake. Hope the Fertittas don't take them to the cleaners again.