Station rejects Boyd’s purchase offer

Mar 4, 2009 8:31 PM
by David Stratton |

On Tuesday, Station Casinos announced it had rejected Boyd Gaming’s offer to purchase a portion of Station’s assets for $950 million.

In a filing with the SEC, Station Casinos’ board of directors indicated it was "in the best interests of the company and our stakeholders to proceed with the current restructuring plan."

The restructuring plan includes offers to bondholders ranging from 10¢ to 50¢ on the dollar in new notes and cash.

According to one analyst, Boyd’s offer equated to about 16¢ on the dollar for bondholders.

Among its reasons for rejecting Boyd’s offer, Stations cited the "highly conditional nature" of Boyd’s proposal, the "risks" of sharing sensitive and confidential information with a "significant competitor," and the "feasibility" of getting all the necessary regulatory approvals.

Most important to Stations, however, was the possibility it could spend critical time transacting a sale agreement with Boyd that might never come to fruition.

"The Board also considered the potential harm that would result to the Company’s stakeholders if such a proposal was delayed or could not be completed, whether as a result of the foregoing factors or Boyd’s potential inability to perform due to its own financial position," Stations said in a letter to Boyd Gaming.

The rejection of Boyd’s offer came as no surprise to sources inside Station Casinos. On Tuesday, GamingToday published a report in which some executives viewed the offer as "laughable" and merely a ploy to "muddy the water."

"All Boyd did was muddy the water," said a source close to Station’s upper management. "The board of directors at Stations believe the offer to bondholders is a fair one."

If bondholders don’t accept the buyout offer and the company goes into Chapter 11 restructuring, Boyd indicated it would act as the minimum price bidder in a bankruptcy auction sale.

However, it might not get to that point, if a bankruptcy court trustee "requires" the bondholders to accept a stipulated "fair offer" from management.

Bondholders now have until April 10 to accept or reject Stations’ offer.

The previous deadline was midnight on March 2, which coincided with the ending grace period on a missed interest payment on Feb. 2.

On Tuesday, Station Casinos announced it had entered into "forbearance agreements" with the majority of bondholders and the lenders holding most of the commitments under its Credit Agreement, dated as of November 7, 2007.

The company said that these forbearance agreements will provide the company with additional time to continue discussions regarding the terms of its plan of reorganization with its lenders and the holders of its senior and senior subordinated notes.

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