Green Valley Ranch Resort may be headed toward restructuring

While Station Casinos continues to negotiate a potential bankruptcy with its creditors, one of its joint ventures held outside the company could be headed toward a possible restructuring of its own.

Moody's Investor Service today downgraded Green Valley Ranch Resort's probability of default rating to Caa3, or in poor standing, from Caa1, which reflects a probable risk of default.

The Henderson casino, which has $760 million debts and posted a $23.2 million loss last year, is a joint venture between Station Casinos and the Greenspun Corp.

The debt rating firm said in a note to investors that the downgrade "considers the increased likelihood" the property will not be able to meet its debt payments this year without a cash input from outside the property. Additionally, its "capital structure is not sustainable ... and may require a restructuring."

Moody's also downgraded the property's corporate family rating to Ca, or extremely speculative, from Caa1.

The rating firm said the lowered rating reflects the lender's potential loss if the property defaults.

"Moody's believes that in the event of default, lenders should receive a lower than average recovery given (Green Valley Ranch's) current operating performance and continued exposure to very weak demand trends," Keith Foley, Moody's senior vice president, wrote in a note to investors.

The property's net revenues dropped 12 percent last year to $245 million from $277.8 million driven by a 15.1 percent drop in the fourth quarter.

Cash flow fell 25.7 percent in 2008 to $82.9 million driven by 45.2 percent drop to $15.8 million in the fourth quarter.

The property's first term loan due 2014 was lowered to Caa3 from B3, or highly speculative, and the second lien loan due 2014 dropped to Ca from Caa3.

The debt load is part of the $830 credit facility taken on the property Feb. 16, 2007 used to repay a previous credit facility and loans.

The 490-room hotel and casino opened in 2001.

Station Casinos and the Greenspun Corp. are partners on four other properties including Aliante Station which opened in November in North Las Vegas.

The locals gaming company is currently operating under a forbearance agreement with its creditors until May 15. The company is trying to negotiate a prepackaged bankruptcy with bondholders controlling $2.3 billion of the the company's debt.