Station creditors request delay


Station Casinos unsecured creditors' want to delay an auction of the gaming company's properties while they appeal a bidding process they say will hurt their chances of recovering much of the $2.5 billion worth of debt they hold.

The Official Committee of Unsecured Creditors is asking the bankruptcy court for a stay of the auction while it pursues an appeal in U.S. federal court, bankruptcy court filings made this week show.

The bankruptcy court will hear arguments on the request June 21 in Reno.

"As a sale by (Station Casinos) will have to be unwound if the reviewing court determines that (bankruptcy) court did not properly approve the bidding procedures, the practical difficulties of undoing such a sale could wreak havoc upon the interests of (Station Casinos) creditors," a Wednesday filing said.

The committee added that Station Casinos would not be harmed by delaying the planned Aug. 6 auction because the company "will continue to operate, pay its operating expenses and generate revenues."

If approved, the stay could delay the auction of 11 Station Casinos properties, American Indian gaming contracts and land holdings.

Nancy Rapoport, a bankruptcy law professor at the University of Nevada, Las Vegas, said appeals such as the one by unsecured creditors are rare.

"The unsecureds taking things up on appeal is rare, but when they do it, it's because they're really, really angry about a result," Rapoport said.

The committee said it plans to ask the U.S. District Court to look at several issues, including if the bankruptcy court failed to establish an actual value for five hotel-casinos not included in the auction by allowing them to be foreclosed on.

The unsecured creditors also want the federal court to determine if the bankruptcy court imposed less restrictive conditions on the stalking horse bidder than it did on other bidders. The stalking horse bid was set at $772 million and will come from a group led by Fertitta Gaming. Fertitta Gaming is owned by Station Casinos' founders Frank Fertitta III and Lorenzo Fertitta.

The committee will also appeal Bankruptcy Court Judge Gregg Zive's approval of a clause known as the "Texas Station put," which involves an extra $75 million cost that any third-party bidder will have to pay if it wants to bid on the Texas Station.

The extra cost comes because Victoria Fertitta, the widow of Station Casinos founder Frank Fertitta Jr. and the mother of Frank Fertitta III and Lorenzo Fertitta, owns the land under the Texas Station.

If the Fertitta brothers and their partners win the auction, they will not have to pay the extra land cost.

Opening bids need to be at least $17.5 million higher than the stalking horse bid of $772 million.

The stalking horse bid is supported by primary lenders Deutsche Bank and JP Morgan, and gaming company co-owner real estate investor Colony Capital.

Five casinos -- Red Rock Resort, Sunset Station, Palace Station, Boulder Station and the Wild Wild West and adjoining 110 acres -- won't be auctioned because they would be foreclosed on by lenders controlling $2.475 billion, led by Deutsche Bank and JP Morgan Chase & Co.

The bankruptcy plan proposed by Station Casinos calls for those hotel-casinos to be managed and co-owned by Fertitta Gaming.

Zive's ruling establishing the auction came after nearly 15 hours of testimony on May 27-28. Much of it centered on motions by the unsecured creditors, who expressed concern that they had been left out of the process and that the proposed auction procedures were too favorable to secured creditors and the Fertittas.

Zive said during his ruling that representatives of the Fertittas and the company's secured lenders need to continue discussions with unsecured creditors.

"The economics indicate there is great difficulty for them to be in the money unless the auction generates interest," Zive said.

Station Casinos declined to comment Thursday.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

 

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