Station bond deal delayed, analyst cites Calif. recall

Monday, Oct. 6, 2003 | 11:21 a.m.

SUN STAFF AND WIRE REPORTS

Station Casinos Inc. has terminated a tender offer for $199.9 million in company bonds due in 2008. All notes that had previously been bought back will be promptly returned to holders, the Las Vegas company said Friday.

The bonds were callable in December, though the company had initially decided to buy the bonds back early, Station Chief Financial Officer Glenn Christenson said.

The company expected to finance the transaction with another bond deal, but wasn't comfortable enough with the financial markets to refinance the bonds, Christenson said.

"We want to keep our options open," he said.

The company is still determining whether to reinstitute the tender offer, wait to call the bonds in December or do nothing, he said.

Station can afford to wait and to be particular about pricing its bonds because it has enough free cash flow that it isn't pressed to do this deal, said Jacques Cornet, managing director, high yield research, at CIBC World Markets.

It's possible that Station may be waiting on the outcome of the California State gubernatorial recall election next week, Cornet said.

Leading Republican candidate Arnold Schwarzenegger has said that at the top of his agenda, if elected, is finding a way to tax Indian tribes that operate casinos in the state, which are currently exempt from paying state taxes. Station Casinos manages the Lincoln, Calif.-based Thunder Valley Casino, on the United Auburn Indian Community's land. Station Casinos' has said it expects to generate $75 million a year from its relationship with Thunder Valley.

This possible tax is an issue investors could take up that might affect the bond's pricing, said Cornet.

The company had planned to offer the bonds this month in a private placement market via joint lead mangers Bank of America Securities and Deutsche Bank. Bankers weren't available for comment.