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Creditors oppose Station plan

Creditors of bankrupt gaming operator Station Casinos said they don’t approve of company executives’ latest plans to keep the company’s assets, and they’ve asked the bankruptcy court for more time to investigate reorganization proposals.

Members of the Fertitta family, which owns Station Casinos, said Monday that they’ll pursue a $772 million stalking-horse bid for the company’s hotel-casinos through their new Fertitta Gaming entity. The bid would happen in partnership with Los Angeles real estate company Colony Capital and banks Deutsche Bank and JP Morgan Chase. 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.

The gaming company also wants to spin off five of Station’s largest properties — Red Rock Resort, Sunset Station, Boulder Station, Palace Station and Wild Wild West — into a holding company that the partners would own. Lenders would then 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.

On Tuesday, the official committee of unsecured creditors filed an objection in bankruptcy court, calling the 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."

They said that the plan doesn’t enable recoveries for unsecured creditors of Station, including billions in debt that they are owed. They added that Station’s motions in the case would effectively block other bidders from acquiring Station assets.

"Debtors (Station) are simply focusing on one constituency — their equity holders — and wiping out over $2.5 billion of unsecured debt, as they have been trying to do throughout these bankruptcy cases," the filing said.

The deal wouldn’t just affect Station’s creditors, the committee said. It would also undermine bankruptcy code in general by encouraging debtors to maximize benefits for insiders rather than creditors.

Station Casinos wouldn’t comment on the committee’s statements.

The creditors’ committee also said Tuesday that a "hyperexpedited" hearing scheduled for May 4 in Reno won’t give creditors enough time for discovery in the case. Because the deal is between insiders, the group said, it requires critical investigation of Station’s negotiations and compromises with executives’ partners.

The committee said it "fully intends to explore how it came to pass that Fertitta Gaming was able to place itself in a position to lock into place the preferred position it now finds itself."

Boyd Gaming Corp., a locals gaming rival that offered to buy Station in December for $2.45 billion, said Wednesday that it wouldn’t comment on the creditors’ filings.

But a company representative said Monday that Station hadn’t been clear about efforts to reorganize its debt.

"We remain interested in acquiring Station assets and look forward to reviewing the plan when it is made available to the rest of the creditors," Boyd spokesman Rob Meyne said.

Under Station’s current proposals, which bankruptcy court must approve, the company would emerge from bankruptcy intact by the end of 2010.

Station’s Monday plan comes less than a month after the company offered a reorganization plan that included the sale of its 13 casinos, land holdings and Indian gaming contracts as one entity.

Station said Monday that its proposals have the support of holders of 90 percent of the company’s secured debt.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

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