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April 17, 2014

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Station Casinos swings to loss in second quarter

Station Casinos properties

The clock tower of the Boulder Station hotel-casino obscures the resort's 15-story tower. Boulder Station has won three Launch slideshow »

With unemployment in the Las Vegas area running at 12.3 percent in June, locals are spending less and Station Casinos Inc. appeared to be hit hard by that trend in the second quarter ended June 30.

The company, which filed for bankruptcy reorganization on July 28, today said second quarter revenue fell 21 percent year to year, from $339.1 million to $267.2 million.

The decline in revenue contributed to a quarterly loss of $65.3 million vs. a profit in the year-earlier quarter of $18.6 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a measure of profitability, for the quarter were $79.2 million, down 38 percent from 2008's second quarter.

The 2009 results include $4.5 million in legal fees related to Station's proposed debt restructuring and other non-recurring costs.

Revenue for the company's big Las Vegas hotel-casinos, excluding its Green Valley Ranch Resort and Aliante Station joint ventures, was $245.9 million, down 20 percent. Adjusted EBITDA decreased 33 percent to $71 million and the net loss was $15.6 million vs. a profit of $1.6 million in the year-earlier quarter.

Station earned $5.6 million from its Green Valley Ranch joint venture with affiliates of the Greenspun family, owner of the Las Vegas Sun.

Station's earnings at the Henderson resort represent a combination of its management fee plus 50 percent of Green Valley Ranch’s operating income.

For the second quarter, Green Valley Ranch generated adjusted EBITDA before management fees of $15.2 million, down 31 percent compared to the same period in the prior year. Green Valley Ranch reported a net loss of $3.8 million for the second quarter vs. a net loss of $1.2 million in the same period in the prior year.

The company said casino revenue in the quarter fell 20 percent and hotel room revenue was off 21 percent as the occupancy rate dipped from 91 percent to 87 percent and the average daily room rate fell from $88 to $69.

Station sought bankruptcy as the recession hurt its ability to service its $5.7 billion in debt and an agreement wasn't reached with lenders on a pre-packaged deal in which they would have made concessions while Station's owners would have pumped additional capital into the company. Court records show the lenders couldn't agree among themselves on potential restructuring deals presented to them.

Station's bankruptcy case is in its initial stages, with the company receiving approval for initial cash handling and spending procedures and now asking for court approval to hire several professionals to assist it and key lenders in the bankruptcy process.

Station and affiliated companies in bankruptcy, controlled by Colony Capital of Los Angeles and members of the Fertitta family, this week asked the court for permission to hire:

--The firm Milbank, Tweed, Hadley & McCloy LLP as counsel for the debtors on bankruptcy, financial restructuring, corporate, tax, litigation and securities matters.

--Lazard Freres & Co. LLP as financial advisor and investment banker.

--The law firm Squire, Sanders & Dempsey LLP as counsel to Station's "Special Litigation Committee to the Board of Directors." Station said the committee was formed in March to investigate and deal with any potential claims, including "derivative claims," arising from the 2007 deal in which Station was taken private by Colony and the Fertittas.

--Odyssey Capital Group LLC as financial advisor and investment banker to the special litigation committee. Station proposes that Odyssey review and analyze the going-private deal to determine if it was reasonable and review and analyze Station's solvency, on a going-concern basis, at the time of and following the transaction.

--The law firm Gibson, Dunn & Crutcher LLP as special counsel for certain lenders.

--FTI Consulting Inc. as financial advisor for certain lenders and Station.

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