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Arnold M. Knightly

Judge postpones Station hearing

1 October 2009

LAS VEGAS, Nevada -- The judge overseeing Station Casinos' bankruptcy case on Wednesday rescheduled a hearing to decide whether to approve requests to appoint an examiner to look into several aspects of the case.

A group of lenders controlling about 5 percent of the company's $5.7 billion in debt filed a motion on Sept. 3 asking Judge Gregg Zive to appoint an examiner.

Zive, however, postponed the hearing until Nov. 20 so the parties could file more motions explaining what the examiner's role would be.

"I would want far more specific detail on the proposed scope of the examiner if it is mandatory," Zive said. "If I were to find that it were in fact mandatory, there appears to be a great deal of discretion that a court has regarding the scope of the examination being conducted, which has to be placed in the context of the entire case."

Attorneys for Station Casinos said a group of lenders and the gaming company have narrowed their differences about what the examiner would look into but there are still disagreements.

"The request to continue the hearing was to continue to narrow that gap, either entirely or at least to find and restrict what we may need to come before you on," an attorney for Station Casinos said.

The gaming company's attorneys also said they want more time to respond to some of the small lenders' allegations about Station Casinos' actions since the company began discussing filing for bankruptcy.

The lender group believes Station Casinos' board may have had conflicts of interest when it rejected Boyd Gaming Corp.'s offer to buy most of Station Casinos' assets for $950 million and when it arranged financing for the company's November 2007 buyout.

The lenders are questioning whether the buyout's financing, which is divided into three stacks of loans, each with different investors but all controlled by Station Casinos' board and administrating bank, Deutsche Bank, might be improperly benefiting the company and its primary lenders at the expense of the smaller lenders.

Zive also approved the hiring of a law firm by the committee of unsecured creditors to, in part, look into the November 2007 buyout that heavily leveraged the company. Some of the unsecured lenders say the buyout, which took Station Casinos private, led to the company's current financial problems.

Station Casinos objected to the decision, noting that a special committee made up of the company's board had already looked into the issue.

The committee's review of the $5.7 billion buyout blamed the company's economic problems on the recession, not the buyout.

Station Casinos' attorneys also said that hiring another firm to look at the issue would create unnecessary economic hardship on the company."