Creditors’ concerns examined

Station Casinos’ board of directors is looking into some of the concerns raised by creditors about the buyout transaction that took the gaming company private 22 months ago.

Station Casinos’ attorney Paul Aronzon told the bankruptcy court in Reno on Wednesday that an independent special committee is preparing a report that should be presented to the board this month.

Aronzon said the board will decide then whether it needs to look further into any of the creditors’ charges.

“Until we see it, we don’t know what it says, we don’t know where we come out on the substance,” Aronzon told the court. “But in terms of the process, it applies the best practices. It will be sufficient to support whatever position the board needs to take from pursuit of action.”

In filings since Station Casinos filed for bankruptcy in July, bondholders have charged that Station Casinos’ $8.8 billion private equity buyout by the Fertitta family and Colony Capital amounted to a “fraudulent conveyance” that leveraged Station Casinos “to the hilt on four of its most valuable properties, leaving (Station Casinos) and its creditors questionable benefit in return, while insiders of the (company) benefited immensely.”

Debtholders in a recently bought-out company can allege “fraudulent conveyance” when they believe the new company is undercapitalized and unable to meet future obligations because of the buyout.

The buyout leveraged Red Rock Resort, Sunset Station, Palace Station and Boulder Station against $2.475 billion in mortgage-backed securities to help finance the transaction.

Some creditors would like to see the four properties, which are held outside the company’s debt structure, untangled from their current position and returned to Station Casinos. The claims and liens of the lenders would then be eliminated or subordinated.

The board will likely share the special committee’s report with parties involved in the bankruptcy, and decide whether to make it public, Aronzon said.

Aronzon recommended forming the special committee, which is chaired by Station Casinos’ independent director, James Nave, because of persistent questions raised during earlier talks aimed at reaching agreement on a prepackaged bankruptcy plan.

“Almost every time we met with those folks or met with their counsel, the conversation inevitably started with the entire financing and go-private transaction,” Aronzon said.

“I didn’t know we were going into bankruptcy,” Aronzon said. “I didn’t know how to stop this discussion (with creditors) without some analysis being done of it.”

The investigation has included interviews with the principals and financial advisers involved in the buyout and a review of all the documents related to the deal, Aronzon said.

Aronzon said he believes the report will “be (a) comprehensive, thorough and a complete analysis” of the buyout that will not be influenced by the Fertittas or Colony Capital.

Further, he told U.S. Bankruptcy Judge Gregg Zive on Wednesday that he believes “the board will listen to that report and follow the recommendations.”

In addition to Nave, Station Casinos’ board is composed of Chairman and Chief Executive Officer Frank Fertitta, Vice Chairman Lorenzo Fertitta and two members from majority owner Colony Capital.

Contact reporter Arnold M. Knightly at or 702-477-3893.

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