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Arnold M. Knightly

Judge delays Station bondholder ruling

26 January 2010

LAS VEGAS, Nevada -- The judge in Station Casinos' bankruptcy case wants more information before ruling on a request from bondholders that they be allowed to sue the company and its lenders over the gaming company's November 2007 buyout.

The gaming company has until late March to submit its own restructuring plan. The judge on Monday also said he wants to delay ruling on the motion until additional disclosure statements are filed and restructuring negotiations between Station Casinos and its lenders are further along.

"I have not determined not to grant the motion at a later time," Judge Gregg Zive said. "I'm simply deferring ruling. It is not because, I should make this clear, I'm unwilling to make a decision. But I truly believe there may be unintended consequences that could have considerable adverse effects."

Zive also said during the hearing on the bankruptcy that it would be good if Station Casinos and its lenders gave the bondholders "some ability to be a meaningful participant" in the restructuring discussions.

Zive said he has thought about sending all the parties to mediation but decided to wait.

During the hearing, attorneys for the company and lenders argued that even if the bondholders were allowed to sue, they have little chance of recovering any money because of their unsecured creditor status.

Zive, however, discounted that argument.

"I don't care if they're out of the money or not, they deserve to be heard," he said.

Bondholders filed the motion in late December seeking permission to sue insiders, led by the Fertitta family, and the banks.

The transaction saddled Station Casinos with additional debt, while the Fertittas and other insiders took out hundreds of millions of dollars and the banks collected hefty fees, the bondholders' attorney Susheel Kirpalani said.

Station Casinos was taken private 25 months ago in a $5.7 billion buyout funded by Colony Capital, bank loans and a rollover of equity from insiders. An additional $2.3 billion in existing debt was also transferred, bringing the value of the deal close to $9 billion.

Attorneys for the lenders and the company's owners told the bankruptcy judge that a lawsuit by bondholders would disrupt and possibly derail the restructuring talks that are happening on an almost-daily basis.

The attorneys also pointed out that Colony Capital, which owns nearly 76 percent of Station Casinos, and its investors put $2.7 billion in cash into the transaction, all of which is nearly wiped out.

The bondholders would also like to sue over a master lease that moves four properties outside the company and which they claim has devalued the company.

Judge delays Station bondholder ruling is republished from