Boyd joins opposition to Station’s reorganization plans

Boyd Gaming Corp., which has been seeking to purchase all or a portion of Station Casinos for the past year, filed objections to its rival's bankruptcy reorganization plans Wednesday, saying the proposed concept would diminish the value of certain properties, thus eliminating offers from potential bidders.

Boyd, which operates the Coast Casinos brand, is a creditor in the Station Casinos Chapter 11 bankruptcy proceedings through the purchase of some of the casino operator's debt.

The company said the two plans submitted in the past month favor the Fertitta family, which founded Station Casinos, and its lenders.

The plans allow Station to "cherry-pick" certain assets while "destroying any opportunity for fair bidding or plan process ... and significantly hampering the ability to attract a fair price ... from noninsider competitors" for about 13 casinos and American Indian gaming contracts.

In its motions, Boyd asked the U.S. Bankruptcy Court in Reno not to rush any approval of the two reorganization plans so that creditors who object to the proposals can investigate alternatives.

Under one plan, Station Casinos would spin off five of its largest resorts, including Red Rock Resort and Sunset Station, into a separate holding company owned by its lenders, Los Angeles real estate company Colony Capital and members of the Fertitta family through the newly formed Fertitta Gaming.

The rest of Station Casinos, including Texas Station, Santa Fe Station and the Fiesta properties, would be sold through a bankruptcy court auction. On Monday, the Fertittas said they would pursue a $772 million stalking-horse bid through Fertitta Gaming for those assets.

A stalking-horse bid is an initial bid on a bankrupt company's assets. Once the stalking horse has made its bid, other would-be buyers can make offers.

Boyd Gaming's stance is similar to that of the official committee of Station Casinos' unsecured creditors, who also asked the court to slow the process, calling the company's proposals "the latest component of an overall scheme to ensure that the Fertittas retain control of the Station enterprise, at as low a valuation as they can get away with."

In its filing, Boyd Gaming said the Fertitta's "were only interested in pursuing an insider transaction at the expense of their creditors' interests in breach of the board's fiduciary obligations. The court should not sanction the debtors' ongoing blatant disregard for the creditors' interests by approving these one-sided bidding procedures."

Boyd Gaming said an initial reorganization plan by Station Casinos to spin off five of its largest casinos into a new holding company would strip the rest of the assets of their customer databases, players club membership rolls and other operating tools, thus reducing their value in the eyes of potential bidders.

"The modern casino business is a technology-driven enterprise operation that is heavily dependent on sophisticated (and often proprietary) information technology and intellectual property for successful operation," Boyd Gaming said in one motion.

Without the databases and customer lists, a buyer of any Station Casinos property sold through the auction "would be purchasing a lifeless shell."

Station Casinos spokeswoman Lori Nelson said the company would respond to Boyd Gaming's assertions through its own court filings.

"Many of the objections are simply wrong and we will so demonstrate in our responsive papers," Nelson said.

Boyd Gaming has made two public offers for Station Casinos. In February, the company offered $950 million for 14 casinos. In December, the bid was upped to $2.45 billion for the entire company. Both offers were rejected.

Company spokesman Rob Meyne said Thursday that Boyd Gaming was concerned the reorganization plan would have an "adverse impact on the value" of the casinos that would be sold through the bankruptcy court.

While Boyd Gaming "remains interested" in acquiring all or part of Station Casinos, Meyne said the proposed plan "is not competitive, open or fair -- standards that Station claims it is striving to meet."

Under the Station Casinos reorganization plans, the five resorts -- Red Rock Resort, Sunset Station, Boulder Station, Palace Station and Wild Wild West -- would become its own company that lenders Deutsche Bank and JP Morgan would own and sell a 46 percent stake to Fertitta Gaming for $85.6 million.

Fertitta Gaming would operate the casinos under long-term management contracts that would pay the company 2 percent of the properties' revenues and 5 percent of their cash flow.

The stalking horse bid would be in partnership with Colony Capital and the banks. The deal calls for $317 million in cash and $455 million in new credit, but it doesn't elaborate on how much money each party would commit.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.