Station Casinos files for Chapter 11 protection

Jul 29, 2009 1:05 AM
Staff & Wire Reports |

Station Casinos Inc. last week voluntarily filed for Chapter 11 bankruptcy protection after the casino operator and its bondholders failed to reach a full agreement during months of negotiations.

The company, which blamed the faltering economy for a falloff in its finances, has $5.7 billion in debt, Chief Accounting Officer Tom Friel said.

Most of Station’s assets, including 18 casinos and resorts, are maintained in casino-operating subsidies and affiliates and were not included in the filing with the U.S. Bankruptcy Court in Reno.

The assets included in the filing are "nominal," Friel said. Executives said operations at the 33-year-old company will continue as usual, with no effects on customers, employers and vendors.

Station has between 100 and 1,000 creditors, Friel said.

"This is a global economic issue that has forced us to have to go back and reset our debt," Chief Operating Officer Kevin Kelley said during an interview.

"The restructuring of our debt will provide us with the financial flexibility necessary to meet the challenges of the current economic environment," Chairman and CEO Frank J. Fertitta III said in a statement. "Equally important, it will provide the resources necessary for us to continue to invest in our properties, take advantage of opportunities as they arise and ultimately enable us to emerge as a stronger company."

Station Casinos has struggled to pay down its debt since becoming private in 2007 when shareholders agreed to sell the company to the founding Fertitta family and Los Angeles financial firm Colony Capital LLC for $90 a share. The new owners assumed $3.4 billion in debt in the buyout.

Colony Capital, which invests in casinos and distressed assets and finances real estate deals, also provided a last-minute loan to deceased pop star Michael Jackson, preventing him from defaulting on a $23 million loan that would have forced him to give up his Neverland ranch last year.

Also last week, Station Casinos announced that, with court approval, it planned to borrow up to $150 million in cash from a subsidiary.

Station Casinos, which owns and manages 18 casinos and resorts, primarily in Nevada and in California, announced in February that it might file then for bankruptcy court protection as part of a prepackaged restructuring deal, but it never reached a deal.

"We made a lot of progress toward a consensual plan, but we think it’s helpful to have the formal court process to resolve the remaining issues," Friel said. "We’re hopeful we’re able to find more common grounds through the court-supervised process."

The company has also rebuffed a buyout offer from competitor Boyd Gaming Corp., which offered to pay $950 million for most of Station’s assets in March, except for those secured by certain loans.

In May, the company said it lost $33.7 million for the first quarter. That compares with a loss of $70.9 million a year earlier.

Station’s results were lifted partly by a $40.3 million gain related to early debt retirement.

Revenue fell 20 percent to $282.7 million from $352.3 million on declines in room, casino, food and beverage revenue.

Occupancy slipped to 85 percent from 88 percent, while total costs and expenses dropped to $255 million from $292.4 million.

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