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Arnold M. Knightly

Station Casinos gets another extension

1 June 2009

LAS VEGAS, Nevada -- Station Casinos on Friday was able to put off a bankruptcy filing until another day after getting a fourth extension so it can continue negotiating a restructuring plan, the company said.

Earlier Friday, company spokeswoman Lori Nelson declined to say how long of an extension the bondholders will grant the company or if the terms of Station Casinos' prepackaged bankruptcy proposal will be changed.

Station's last extension, which ended Friday, was only for a two-week period, a much shorter time period than its previous extensions.

However, Station's ability to get its debtholders to agree to another forbearance extension could signal several possibilities, bankruptcy expert Nancy Rapoport said.

"We don't know why, yet," Rapoport, said in response to a question about why Station Casinos' lenders would agree to another extension. "Four forbearance agreements in a row is awfully nice. Banks are not in business to be nice. They're also not in business to be mean. They're in business to make money."

Rapoport said Station Casinos' creditors could still be negotiating about which lenders will have priority in a bankruptcy case, she said.

"I wonder how secured any of these banks really are," Rapoport, a law professor at the Boyd School of Law at the University of Nevada, Las Vegas, said.

"They're sort of signaling they don't want to stand on their rights in the bankruptcy," she also said.

Creditors could also be concerned about how much Station's assets have been devalued during the recession, leaving the company without strong collateral, she said.

Or, she said, Station could quietly be trying to cut a deal with a buyer to sell some of its assets.

Boyd Gaming Corp. in February offered to acquire several of Station Casinos' properties for $950 million, although the company has rejected the proposal. Penn National Gaming, which has expressed interest in acquiring a Las Vegas casino, was also mentioned as a possible suitor this week.

Joe Greff, a JP Morgan gaming analyst, said that during a Tuesday meeting discussing possible acquisition possibilities, Penn National executives "appeared to express preference towards assets which would not likely remain in the hands of their current owners."

He cited Station Casinos properties along with the Planet Hollywood Resort and the under-construction Cosmopolitan as possible acquisition targets that would meet that criterion.

Station Casinos spokesperson Lori Nelson declined to comment Friday on the analyst's comments.

The gaming company in February proposed a prepackaged bankruptcy plan that would let it restructure and eliminate about half of its $5.7 billion debt load.

The company's current proposal asks investors holding $2.3 billion in bonds to swap high-cost debt for low-cost debt and cash so the company can enter into a Chapter 11 bankruptcy.

The company's owners, the Fertitta family and real estate investment firm Colony Capital, have said they will invest $244 million in cash into the company if the bondholders agree to its restructuring proposal.