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Arnold M. Knightly

Judge rejects propsal between Station and lenders

29 January 2010

LAS VEGAS, Nevada -- A bankruptcy court judge Thursday denied a proposal to give independent lenders access to information about Station Casinos' restructuring negotiations in exchange for not pursuing their request to appoint an independent examiner in the company's bankruptcy case.

The proposed agreement between Station Casinos and the lenders committee also called for the company to pay some of the lenders' attorney and financial advisory fees.

Station Casinos attorney Thomas Kreller said the company agreed to pay the lenders' fees because the cost of hiring an examiner would cost more.

Under the proposed agreement, Station Casinos would have paid attorney and advisory fees up to $900,000, plus $300,000 for a month.

In rejecting the agreement, Judge Gregg Zive said the price tag of the proposed payments suggested the lenders' request for an examiner would have little chance of success.

"That's pretty expensive," Zive said. "And if that is less than an examiner, which it is purported to be, it further indicates that the examiner motion has little chance of success."

The lenders' attorney, Eric Goldberg, told Zive he wanted to discuss the issue further with his clients before deciding whether to proceed with the motion to appoint an examiner.

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

The lenders believe 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 question 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.

Bondholders and administrative agent Deutsche Bank opposed the agreement, largely because of the size of the payments for the independent lenders' fees.

Bonnie Steingart, attorney for the bondholders, said Station Casinos failed to show that the fees were fair or reasonable.

"The quid pro quo here for the money, as well as the information, is the withdrawl of the examiner motion,' Steingart said.

Zive has expressed concern about the burden the fees for attorneys and financial consultants could have on the company as the bankruptcy continues. Station Casinos said in its monthly financial reports that it has paid $2.3 million in professional fees through November since filing for bankruptcy, $1.5 million of which came in November.

The judge approved a payment of $273,000 in attorneys fees during a hearing Monday and is scheduled to hear motions to approve fees of nearly $10 million at the next hearing scheduled for Feb. 25.