Judge hints he might like Station plan

RENO -- The judge overseeing the bankruptcy of Station Casinos on Tuesday told all parties involved in the complicated Chapter 11 proceedings that he sees arguments in favor of approving the company's two-pronged reorganization plan.

However, Federal Bankruptcy Judge Gregg Zive cautioned attorneys representing Station Casinos, lenders and unsecured creditors that they need to quote relevant case law and not overwhelm the court with documents and motions that bog down the process.

Zive also said during an afternoon hearing at the U.S. Bankruptcy Court that he was in no rush to make a final decision.

"We're not in the same situation as Chrysler-General Motors," Zive said in reference to the automakers' recent bankruptcies. "We don't have to do this in two weeks. We can show some flexibility."

The hearing on several issues in the Station Casino bankruptcy will continue today at 9 a.m. The judge didn't formally rule on the company's request to further extend the exclusivity period by 60 days where Station Casinos alone can propose a reorganization plan.

But Zive did hint that he would rule on the exclusivity motion on June 10 when he is expected to rule on the company's overall reorganization. In essence, Zive told the parties the plan of exclusivity was extended by at least a month.

"This case is unique," said the judge in making his first comments about the two plans Station Casinos has proposed to reorganize the locals casino giant, which filed for bankruptcy protection in July with about $5.6 billion in debt.

Under one plan, five of the company's largest properties would be spun off into a new holding company owned by Station Casinos' lenders and members of the company's founding family through its newly created Fertitta Gaming.

The second plan calls for the company's remaining 13 casinos, some land holdings and American Indian gaming contracts to be sold in a bankruptcy auction as one entity.

The judge said he has not seen competing proposals from unsecured creditors and other parties that could be considered by the court. Station Casinos had asked that the exclusivity period run from mid-May to mid-July and coincide with the proposed sale process.

Station Casinos is asking the judge to roll both plans into one joint plan of reorganization. Zive said he could see how the two plans are in unison, but he was far from ready to give his OK to the reorganization.

"It's not difficult to see how all the factors are connected, but I am also concerned on how the plans work together," Zive said.

Toward the end of the nearly three-and-a-half-hour hearing, Zive told the courtroom filled with attorneys, financial consultants and interested parties his philosophy on the case, which concerns the future of one of Las Vegas' largest companies, which employs 12,000 workers.

"I think this was productive and you have a general idea of how I analyze the situation," Zive said. "Let's get right to the meat of it."

About 10 members of Culinary Local 226, all employees of Station Casinos, made the trek to Reno to sit in on the hearing as the "Informal Committee of Station Casinos Employees."

The union's attorney noted his appearance but did not participate in the hearing.

Zive spent the hearing's first 90 minutes tongue-lashing attorneys for the volume of motions and pleadings filed in the case, including a slew of documents in just the past month.

"I will make decisions based upon facts of this case," Zive said. "Some lawyers think two varieties of the same declaration needs to be filed. Because pleadings are not evidence, I'm not going to allow matters to be raised in a reply that are not known to exist at time of the original motion. No sandbagging is allowed."

Arguments will be heard today on the planned procedures for the auction. Station Casinos believes the package would fetch a larger price than selling the assets in part or individually. The company is seeking to establish a 45-day qualification period for potential buyers. If approved, Station Casinos hopes to complete its sale before hearings in mid-July and emerge from bankruptcy by the end of the year.

Fertitta Gaming is seeking to establish a $772 million stalking-horse or preliminary bid for many of the company's assets.

The bid would be in partnership with Los Angeles-based real estate investment firm Colony Capital and lead banks in the bankruptcy, Deutsche Bank and JP Morgan Chase.

The lone objection to the plan is by the official committee of unsecured creditors.

Late Monday, Las Vegas-based Silver State Capital Advisors expressed interest in acquiring some of the company's small properties, including Barley's Casino & Brewing Co., Gold Rush Casino, Lake Mead Casino, The Greens Gaming & Dining, Wildfire Casino-Boulder, Wildfire Casino-Lanes and Wildfire Casino-Rancho.

Barley's, The Greens and Wildfire Casino-Lanes are owned in partnerships between Station Casinos and the Greenspun Corp. The companies are also partners in Green Valley Ranch Resort and Aliante Station.

Silver State now manages Club Fortune Casino in Henderson. The company's managing director, Jay Fennel, is a former Station Casinos executive. Silver State said it is working with its private equity partners to finance this acquisition.

Several issues will be raised today over whether the package of casinos should be divided. One argument concerns the land underneath Texas Station, which is owned by the widow of Station Casinos founder Frank Fertitta Jr., who died last year.

If the Fertitta brothers' stalking-horse bid is accepted, they would not have to pay their mother for the costs of the land. However, any other buyer would have to pay about $48 million above the bid.

Zive told the parties some of the company's problems with the bankruptcy case go back to when Station Casinos went private in a $5.5 billion buyout.

"It's inconceivable that sophisticated lenders did not do their due diligence and should have anticipated what would have occurred if there was a default like we had in this economic crisis," Zive said. "The fact we have to unwind what was created should not be a great surprise."

Still, Zive hinted the plans proposed might be the best alternative.

"Even though I say that, I'm not sure that constitutes sufficient reason to depart from the plan for a piecemeal process," Zive said.

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