Station: Nothing evil to plan

RENO -- Unsecured lenders to Station Casinos, who are facing the loss of about $2.5 billion in investments in the bankrupt casino operator, argued Wednesday that company executives had a vested interest in negotiating a two-pronged reorganization plan with the company's largest creditors.

An attorney representing Station Casinos, however, said the two restructuring plans are interrelated and need to be approved. If one were to be denied, it could jeopardize the entire restructuring of the bankrupt locals casino operator.

Los Angeles attorney Thomas Kreller, who represents Station Casinos, said there was nothing nefarious about how the reorganization plans were negotiated and that unsecured creditors have tried to confuse matters.

Members of Station Casinos founding family, through the newly created Fertitta Gaming, and its lenders are proposed to spin off five resorts into a separate holding company while putting the rest of the company up for a bankruptcy court-supervised auction.

"This is a crafted and well thought-out separation plan," Kreller said. "The unsecured creditors want this to be like pulling on a wishbone and hoping for the larger piece. The bottom line is to preserve a living and breathing business."

Federal Judge Gregg Zive told the audience inside the U.S. Bankruptcy Court during the daylong hearing he was not going to decide on the issues being argued until the next set of scheduled court sessions May 27-28.

Several points brought up during opening statements by Kreller and fellow Station Casinos attorney Paul Aronzon of Los Angeles have been listed in court documents but were aired in open court for the first time.

The familiar Station Casino name could disappear from some parts of the Las Vegas landscape. Aronzon said the Station name could be removed from the Boulder Station, Sunset Station and Palace Station properties if the judge approves those casinos being split into a new holding company along with Red Rock Resort and Wild Wild West.

He said the properties would have to rebrand if the reorganization goes through -- replacing everything that includes a Station name. The properties that would be auctioned, however, could retain the Station name if they wished.

Aronzon said he suspects the Station Casinos management company that operates Aliante Station will file for bankruptcy much as Green Valley Resort's operating company did in February.

Station Casinos' 50 percent ownership in Green Valley Ranch Resort and Aliante Station are worth zero. Aronzon said Aliante Station has a first lien debt of $350 million while Green Valley Ranch Resort has $850 million of debt.

"Sitting here today, those properties are debt impaired and the debt is worth nothing," Aronzon said.

Secured creditors will receive about 87 cents on the dollar if a planned auction of 13 Station Casino properties along with land holdings and Indian Gaming management contracts goes through.

"Both sets of (secured) lenders and debtors worked to get these interlocking agreements that are designed to get to a consensual plan," Kreller said. "The companies need to be separated to preserve value for each estate."

Aronzon explained to the judge that the top 25 percent of each individual casino's customer list would remain with that property once the company is divided. Also, the split companies would each have their own computer systems.

"Never in a million years did I think we would have a fight about this," Aronzon said.

During the hearing, Station Casinos general counsel Richard Haskins was questioned for several hours by New York attorney Bonnie Steingart, who represents the company's unsecured creditors, on how company executives could negotiate both reorganization plans that seemingly have competing interests.

Haskins, however, testified he thought Boyd Gaming Corp., which had been negotiating with secured creditors of the 13 casinos, was going to emerge with the stalking-horse, or preliminary bid, for the company's assets.

In the end, Fertitta Gaming, in partnership with Los Angeles-based real estate investment firm Colony Capital and lead banks in the bankruptcy, Deutsche Bank and JP Morgan Chase established a $772 million stalking-horse bid.

"The lenders wanted an auction and they wanted a stalking horse bidder," Haskins said.

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