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Casino operators buckling under debt burden

Dec 24, 2008 7:33 PM
by David Stratton |

Casino operators such as Las Vegas-based Station Casinos could face restructuring or even bankruptcy in 2009 because of their huge level of debt, coupled with diminishing revenues.

Station Casinos, which owns 13 casinos in Las Vegas, is under increasing pressure to renegotiate its debt. Earlier this week, the company reported it had drawn down $239 million of the $257 million remaining on its credit facility after an attempt to get its bond holders to swap their notes for new ones failed.

The company was bought in February last year by private equity firm, Colony Capital, and the Fertitta family for $5.5 billion, which included $3.4 billion in debt.

Six months later, Australia-based Crown Ltd. invested $242 million for a 4.9 percent stake in the company.

Wall Street analysts have suggested Crown might have to inject more money into Station, which had a $23 million loss in the third quarter, compared to a profit of $4 million last year. They’ve also speculated that Station’s move to draw down its credit facility was a precursor to restructuring its debt load.

"We think there is a good likelihood that Station undergoes a more substantial restructuring in or outside of bankruptcy," Barbara Cappaert, an analyst with the debt advisory firm KDP, told Reuters.

An analyst with CreditSights, Christopher Snow, said the Station move could be part of a plan to negotiate a waiver from its bankers. "If they don’t get the waiver they have additional financing to get through any kind of restructuring that happens."

The Station plight as well as that of other casino operators will be further explored in next week’s 2009 Preview, beginning Tuesday in GamingToday.