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Arnold M. Knightly

Station Casino owners consider cash infusion

26 November 2008

LAS VEGAS, Nevada -- Station Casinos' owners are contemplating putting more of their own money into the company to weather the current economic storm.

The owners could loan the company between $450 million and $500 million, as well as conduct a debt exchange, to reduce the locals gaming company's debt load and related interest payments, a filing Tuesday with the Securities and Exchange Commission said.

Station Casinos had $5.4 billion in long-term debt for the third quarter ended Sept. 30, paying $281.9 million in interest payments during that nine-month period.

The filing did not specify which of the owners -- the Fertitta family or Los Angeles-based real estate firm Colony Capital -- is infusing the locals gaming company with cash, saying that "entities affiliated with existing equity owners ... or institutions or persons who are investors" will provide the loan.

Colony Capital owns 75.9 percent of the company. Members of the founding family, the Fertittas, owning 24.1 percent.

The Fertitta family, which includes company Chairman and Chief Executive Officer Frank Fertitta III, Vice Chairman Lorenzo Fertitta and sister Delise Sartini, invested $870.5 million worth of stock toward the $5.4 billion buyout, which closed in November 2007.

Colony Capital invested $2.6 billion in cash for its equity share.

Station Casinos also announced Tuesday it hopes to issue a pair of 10 percent secured term loans due in 2016, pushing the earliest maturity date back four years.

The private exchange of up to $459 million would involve five sets of unsecured notes worth a combined $2.088 billion, with rates ranging from 6 percent to 7.75 percent.

Some of the notes, which were trading as low as 8 cents on the dollar on Friday, are being offered to be bought back at 54 cents on the dollar.

The exchange offer is contingent on 60 percent of the old notes being tendered before midnight on Dec. 5.

If 82.5 percent of the old notes are exchanged, the new ownership's loan would take the form of unsecured, junior subordinate loans.