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Arnold M. Knightly

Station Casinos' creditors file new objection

1 September 2009

LAS VEGAS, Nevada –- Unsecured creditors on Monday filed a second objection to parts of Station Casinos' plans to fund continuing operations while the locals gaming company is in bankruptcy.

The objection asks the judge to view portions of Station's proposals related to interest-rate swaps as illegal. The creditors argue that the fixed interest rate on some of Station's loans is higher than the current market rate and therefore detrimental to the company.

The objection comes two days before a bankruptcy judge in Reno is to hear arguments on the company's proposal for cash collateral to fund ongoing capital needs such as employee payroll and bankruptcy court fees.

The creditors also said fees and interest payments included in Station's proposal are inappropriate because the mortgage lenders could be undersecured.

The $2.475 billion in mortgage-backed securities are leveraged against Red Rock Resort, Sunset Station, Boulder Station and Palace Station, but the value of the assets could be below that loan amount.

Station is asking the court to allow the use of $30 million in cash collateral to pay capital and operational expenses for 13 weeks.

In its Chapter 11 bankruptcy filing July 28, Station Casinos said lenders had also agreed to access postpetition financing from a limited liability company that isn't part of the bankruptcy case. The motion says Vista Holdings, which owns 10.26 acres of undeveloped land on Sunset Road near the Las Vegas Beltway and Decatur Boulevard, has $194 million in cash on hand.

The hearing is scheduled to begin at 9:30 a.m. on Wednesday in front of U.S. Bankruptcy Judge Gregg Zive.

Deutsche Bank last week filed a response to a creditors' committee filing that claimed the $8.8 billion buyout of Station Casinos by the founding Fertitta family and Los Angeles-based real estate firm Colony Capital left "(Station Casinos) and its creditors questionable benefit in return, while insiders of the (company) benefited immensely."

Deutsche Bank, which is the lead bank on various loans to Station, said the claim that "there is some dark secret" trying to be concealed about parts of the $2.475 billion loan and the November 2007 buyout "is without basis."

"The committee ... admits it is in the initial stages of investigating the transaction," the Deutsche Bank filing said.

The unsecured creditors committee claimed in its filing last week that the facts suggest the buyout resulted in a "fraudulent conveyance."

The locals gaming giant has blamed the recession, which has reduced visitor travel and spending in Las Vegas, for its bankruptcy filing.

Station Casinos stopped making payments on its $5.7 billion debt load. Station's revenues for the first six months of the year dropped 20.5 percent, while second-quarter cash flow fell 37 percent.