Station Casinos wants bankruptcy auction to proceed

Station Casinos and its lead bank said an attempt by unsecured creditors to delay an upcoming auction will hurt the company’s value and other creditors, according to court filings made late Wednesday.

The locals casino company is asking the bankruptcy court not to grant an Official Committee of Unsecured Creditors request to delay the Aug. 6 auction.

Judge Gregg Zive will hear the unsecured creditors’ request in bankruptcy court in Reno on Monday. The creditors want to delay the auction while they appeal in federal court a bidding process they say will hurt their chances of recovering much of the $2.5 billion worth of debt they hold.

The filing by Station Casinos said the unsecured creditors committee’s “likelihood of success on the merits on appeal is low” and that the committee “will not be irreparably injured if the stay is not granted.”

The gaming company said the committee’s concerns were discussed in court hearings and denied before the bidding procedures were being established in late May.

“Even if the ... auction were structured exactly as the (committee) wishes, there is absolutely no evidence that the auction will result in any recovery for the unsecured creditors,” the filing said.

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

The auction procedures approved by Zive establish a stalking horse bid of $772 million by a group led by Fertitta Gaming. Fertitta Gaming is owned by Station Casinos’ founders Frank Fertitta III and Lorenzo Fertitta.

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

The committee argues that Station Casinos would not be harmed by delaying the auction because the company “will continue to operate, pay its operating expenses and generate revenues.”

Station Casinos disputed that claim Wednesday.

“A stay of the bidding procedures ... would result in the potential for a substantial destruction of value for the (auction) estates and its creditor constituencies,” the filing said. “Any delay will place in substantial jeopardy the $772 million stalking horse bid.”

The bid provides an 87 percent recovery for the company’s secured lenders, the filing said.

In a separate Wednesday filing, Deutsche Bank said the unsecured committee has not identified an alternative stalking horse bid that would provide the substantial recovery the current starting bid offers.

“The committee should not be afforded the opportunity, through the imposition of a stay pending appeal, to jeopardize the stalking horse bid and the auction process resulting from a year and a half of negotiations in the hope, however remote, that by gambling further an unspecified better alternative might just materialize,” the bank’s filing said.

The auction was established 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.

Five casinos — Red Rock Resort, Sunset Station, Palace Station, Boulder Station and the Wild Wild West and adjoining 110 acres — won’t be auctioned and will be foreclosed on by lenders controlling $2.475 billion, led by Deutsche Bank and JPMorgan.

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

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