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Company emphasizes need to restructure debt; casino operations unaffected




Station Casinos on Tuesday filed for Chapter 11 protection after reaching an impasse in months-long negotiations with creditors on a plan to restructure the gaming company’s $5.7 billion debt load.

“We have been working with the various creditor groups for months and it has been very difficult to get all of the creditors to come to a consensual agreement among themselves and with the company,” Chief Accounting Officer Thomas Friel said.


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  • The bankruptcy case, which includes parent company Station Casinos Inc. and 17 of its noncasino affiliates, was filed Tuesday afternoon in U.S. Bankruptcy Court in Reno. The noncasino subsidiaries control the company’s landholdings in Reno and other nongaming assets.

    The company’s 18 casino properties and their affiliates were not included in the bankruptcy filing, and Friel stressed that the company’s properties will “continue to operate exactly like they do today” while in bankruptcy.

    Chief Operating Officer Kevin Kelley added that the bankruptcy will not affect employees or vendors getting paid or the company’s reward point system.

    “It is business as usual at our 18 operating properties,” Kelley said. “Team members, guests and vendors are going to be treated just as they always have been for the last 33 years.”

    Station Casinos’ filing listed $5.7 billion in assets against $6.5 billion in debt. The filing said the company has 510 holders of unsecured and subordinate debt totaling $4.4 billion.

    Most of the debt helped finance the company’s management-led buyout nearly 21 months ago, and raised the Fertitta family’s ownership stake from 9.9 percent to 25.1 percent.

    The remainder of the company is controlled by Los Angeles-based real estate firm Colony Capital.

    Colony Capital declined a request for an interview, instead issuing a statement: “The decision was not taken lightly and we and our advisers believe this move represents the best alternative to protect the company and allow pursuit of our goal to maximize value to the benefit of all stakeholders.”

    Tuesday’s bankruptcy filing is not the prepackaged bankruptcy plan the company announced in February and has been trying to get bondholders to accept since then.

    Even before then, in October 2008, the company started discussing a possible restructuring of its debts with creditors, according to the filing.

    The prepackaged bankruptcy plan, which would have allowed the company to eliminate about half of its debt, asked investors holding $2.3 billion in unsecured bonds to swap high-cost debt for low-cost debt and cash. Station Casinos’ offer would have given the bondholders between 10 cents and 50 cents on the dollar in new secured notes and cash.

    Since first proposing the restructuring plan, Station Casinos has entered into a series of forebearance agreements while it continued trying to negotiate a prepackaged bankruptcy agreement with the bondholders. The latest one expired on July 17 and Station Casinos did not get a formal extension from the bondholders.

    Without an agreement with bondholders, Station Casinos decided a bankruptcy filing was the best way to get the company’s financial problems straightened out.

    Station Casinos, like other local gaming companies, has been struggling to make payments on the heavy debt loads it racked up over the past several years as casino companies were rapidly expanding with easily available credit.

    The recession, however, sent visitor volumes and spending plummeting in Las Vegas, hurting casino companies’ bottom lines.

    “The restructuring of our debt will provide us with the financial flexibility necessary to meet the challenges of the current economic environment,” Chairman and CEO Frank J. Fertitta III said in a statement.

    The gaming company said its secured lenders had also agreed to let Station Casinos borrow up to $150 million in cash from one of the company’s noncasino assets. The money would be used to pay normal operating expenses while the company is in bankruptcy. The bankruptcy judge would need to approve that loan, though.

    Bill Lerner, a principal analyst with Union Gaming Group, said Tuesday’s filing leaves unclear what Station Casinos is offering creditors in its bankruptcy proposal.

    “The operating assets of the casino are not included in the bankruptcy so that begs the question: What do the creditors get,” Lerner said. “For some reason, that’s not disclosed or not clear. It could be some cash consideration, or to-be-determined. But more likely, it would be equity, or an ownership stake in Station Casinos as it exits bankruptcy.”

    In November 2007, Station Casinos was taken private in a $5.4 billion buyout by the Fertitta family, the company’s founders, and real estate investment firm Colony Capital.

    Station Casinos, the dominant locals casino company in Las Vegas, owns and operates Red Rock Resort, Palace Station, Sunset Station, Boulder Station, Texas Station, Santa Fe Station, Wild Wild West, the two Fiesta properties, the Wildfire properties and vast land holdings in Clark County and Reno.

    The company also has a 50 percent interest in Green Valley Ranch and Aliante Station, which are owned outside the company.

     

    Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

     

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    jerry wrote on August 06, 2009 02:58 PM: i feel that the fettias should be able to keep some of their propertys i think
    a outside company should releave them
    of their other assets boyd gaming has
    enough propertys and should also be
    union. station has been eliminating
    positions since before 2007 and they
    are looking for stupid reasons to get
    rid of staff before they went private
    they were a awsome company to work for
    and before they brought the general
    manager from hell to redrock he also was all about money and not the staff
    they diffently don't have 13.0000 employees know. they started eleminating positions way before our
    economy issues they should be made union so they can't do what they do to their employees. they had a great general manager scott creger but they
    moved him from redrock to green valley.


    carlyg wrote on August 03, 2009 09:40 AM: As long as I can still get my lobster etouffee!


    anonymous wrote on July 30, 2009 04:36 PM: "whys lori nelson on there as a creditor.... that whole groups a mess... bring in the clown"

    All Corporate employees are listed as creditors.


    douglas wrote on July 29, 2009 01:08 AM: those who have some accumulated "points" best use them up, no matter what the press release says. those points are just another corporate liability. that's no different than some vendor-supplier accounts payable that, under direction of some bk overseer, can wipe out with the wave of the hand.


    hk wrote on July 28, 2009 11:48 PM: whys lori nelson on there as a creditor.... that whole groups a mess... bring in the clown


    Paul wrote on July 28, 2009 11:42 PM: Put me on the list of those who resent the poor service provided by Station Casinos.


    Kenneth wrote on July 28, 2009 10:41 PM: "alice wrote on July 28, 2009 09:12 PM: I helped put them in ruin i got tired of there $5.00 a night (SERVICE- RESORT)fee when you check into one of there hotel rooms they don't tell you until they have swiped your credit card its a big RIP-off so i always ran the hot water from the time i step into the room i turn on all the lites- TV- a/c-heat they should go back to there humble beginnings Bingo Palace"

    Alice, you are absolutely correct. First, Stations Casinos started charging a $3.00 energy surcharge in the year 2001 even though they were not impacted by the California electricity price spike from the Enron fraud. Then, they started charging the bogus daily service charge fee of $4.95 if you stayed at their hotel. A Station Casino employee told me upon my inquiring what I am getting for the daily service fee above what I am paying for the room: free parking and a 10% discount at the gift shop. Big deal! Then they raised the daily service charge for staying in one of their hotel rooms to $9.95 a day beyond what you were paying for the room. Recently, Sunset Station sent me a promotional brochure in the mail with daily room rates posted on a calendar for a 3 month block of months. In small print at the bottom of the brochure in print that was smaller in size than the cancer warning printed on a pack of cigarettes was information that there was a $14.99 per day service fee beyond the price of the room. What a scam. I have not stayed at a Station Casino hotel since these bogus gouging fees started being charged.


    Chris wrote on July 28, 2009 10:32 PM: Stations built 18 casinos with money from local paychecks. They have sucked billions of dollars out of the local economy and sent it out state to pay pay debt service, vendors, etc. Any good financial analyst can show that they have terribly hurt the Vegas economy. Imagine if those billions had stayed in the pockets of local employees? How many legitimate and productive businesses would have been created?


    -the chad wrote on July 28, 2009 10:06 PM: guess all the OJ publicity has died off and people have forgotten them...or forgot the money they took inside with them, one or the other. No pay, no go.


    AP wrote on July 28, 2009 10:03 PM: They just laid a bunch of people last week...I guess he means going forward, that "Team Members" won't be effected.


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