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Arnold M. Knightly

Station Casinos heads to court

30 July 2009

LAS VEGAS, Nevada –- A bankruptcy court judge in Reno will begin hearing motions today in Station Casinos' bankruptcy case, which one analyst suggested could last at least a year.

By Wednesday, Station Casinos had already filed 15 first-day motions, ranging from routine requests for permission to continue paying employees and funding normal business operations to seeking permission to break a lease for office space the company no longer is using.

Another of the motions seeks permission to execute an agreement the gaming company made with its secured creditors to borrow up to $150 million to help finance its restructuring.

In its bankruptcy filing Tuesday, Station Casinos said lenders had agreed to let the company borrow the money from a limited liability company that is not 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.

Station Casinos' bankruptcy involves the parent company and its noncasino subsidiaries. The company's 18 casino properties are not included in the bankruptcy and remain open.

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

The company could no longer make payments on its $5.7 billion debt load. Station's revenues for the first quarter dropped 20 percent, while cash flow fell 28 percent to $98 million.

A majority of Station Casinos' debt was used to fund the $8.8 billion buyout of the company in November 2007 by a partnership between the company's founding family, the Fertittas, and Los Angeles-based real estate firm Colony Capital.

The gaming company had been negotiating with banks and its bondholders, who hold $2.3 billion of the company's debt, since October on restructuring proposals but those talks broke down, leading to Tuesday's filing.

Dennis Farrell Jr., a gaming analyst for Wells Fargo Securities, said Wednesday that the bankruptcy court would be able to help the company reach agreements on shedding some of its debts sooner than if it continued to try to negotiate a restructuring plan on its own.

"Now that they're working through the bankruptcy courts, it will accelerate the process for Station to emerge less burdened by debt," Farrell said. "We believe the Fertittas and Colony will maintain a role when the company emerges from bankruptcy."

Barbara Cappaert, a bond analyst with KDP Investment Advisors, said it could still be awhile before Station Casinos emerges from bankruptcy.

"The time value of money plays into this," Cappaert wrote Wednesday. "A restructuring, even if negotiations are ongoing, in a traditional Chapter 11 process suggests this company may not be ready to successfully restructure and emerge from bankruptcy for, in the very least, another year."

In its filing Tuesday, Station Casinos said it believes some of the $2.3 billion in unsecured bonds "will be restructured into equity to facilitate (its) restructuring." The company acknowledged in the filing, though, that "several hurdles remain to completing" restructuring efforts.

Several of the creditors listed in Station Casinos' bankruptcy filing declined to comment Wednesday on the bankruptcy. One attorney representing a group of debt holders said the group is waiting for guidance today from Bankruptcy Judge Gregg Zive before talking to the media.

The lease that Station Casinos is asking to be allowed to break was for office space that the company left in May 2008 that had been used in planning for the company's Viva project, a CityCenter-type development the company had hoped to build on 110 acres on Tropicana Avenue just west of Interstate 15, where the Wild Wild West hotel-casino is located.

According to the filing, Station Casinos employed 13,174 people on July 17, down from the 14,500 reported in 2008.