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StumbleStation Casinos bondholders want permission to sue
Bondholders say 2007 deal left gaming company crippled with debt
Tuesday, Dec. 29, 2009 | 9:43 a.m.
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- AG says any Station Casinos trustee must be licensed by gaming regulators (12-3-2009)
- Station Casinos, lenders agree to rent decrease at 4 properties (11-20-2009)
- Creditors want to expand probe of Station Casinos deal (11-19-2009)
- Station Casinos’ loss widens on reorganization costs (11-16-2009)
- Station Casinos wants more time to restructure finances (10-16-2009)
- Judge grants request of Station Casinos creditors to probe 2007 deal (9-30-2009)
- Station Casinos opposes creditors’ request to probe 2007 deal (9-29-2009)
Station Casinos Inc.'s bondholders asked the Las Vegas company's bankruptcy court Monday for permission to sue the company over the 2007 leveraged-buyout deal that took Station private, charging the transaction crippled the company by saddling it with excessive debt.
Attorneys for Station have not yet responded to Monday's request, but they have argued the going-private deal -- valued at $8.8 billion including debt -- was not successful because of the recession; as opposed to the terms of the deal that creditors say encumbered the company with an additional $1.7 billion in debt.
The bankruptcy case's Official Committee of Unsecured Creditors charged in court papers Monday that the additional debt was "a crushing burden that offered virtually no value in return."
"This debt crippled the company to the detriment of all of its stakeholders, including employees, who looked to the insiders for protection, not self-dealing," the creditors charged, complaining top Station executives received hundreds of millions of dollars from the deal that included cash payments of $90 per share.
The unsecured creditors propose to sue Station insiders including executives and members of the founding Fertitta family as well as at least three banks involved in the buyout: Deutsche Bank, Deutsche Bank subsidiary German American Capital Corp. and JP Morgan Chase Bank.
"The bank defendants profited handsomely as well -- they received millions of dollars in fees, they lent funds at profitable rates and they obtained liens on nearly all of the assets of the debtors and the debtors' non-debtor affiliates, thereby leapfrogging the pre-existing claims of innocent creditors," the unsecured creditors' filing charged.
The "innocent creditors" refer to some of the holders of $2.3 billion in bonds issued in 2004 and 2006 -- debt assumed by the company that emerged from the buyout involving members of the Fertitta family and Los Angeles buyout company Colony Capital.
The creditors also repeated their longstanding complaint about a provision in the buyout in which Station leases four of its most profitable hotel-casinos from itself. Those properties are Red Rock Resort, Sunset Station, Boulder Station and Palace Station and are encumbered by $2.475 billion in debt.
The creditors have complained the rental payments are diverting money from all creditors to the banks to cover the mortgage payment.
Rent under the 15-year lease has been costing the company $249.5 million annually, but was recently reduced by $7.7 million per month for December, January and February as Station works on a reorganization plan.
Station and its hired experts insist the lease deal is legitimate, but the unsecured creditors call it a financing transaction subject to rejection or adjustment in the bankruptcy case.
"Slapping a 'lease' label on a loan does not make it a lease," the unsecured creditors charged in their filing Monday.
The creditors, who have already asked that a trustee supervise Station during the bankruptcy proceedings, proposed filing a lawsuit challenging the lease deal and another lawsuit asserting claims of fraudulent transfers related to the $90 per share buyout and allegations of breach of fiduciary duty against Station's officers and directors.
Station, with 18 gaming properties in the Las Vegas area and a big Indian casino in the Sacramento area, reported for the third quarter a loss of $455.5 million, including $370.7 million in costs related to its bankruptcy reorganization.
The company said quarterly net revenue of $255.7 million was down from $317 million in 2008's third quarter as high unemployment in the Las Vegas area reduced spending at Station's properties.
The company, in the meantime, has been resisting efforts that it be acquired by Boyd Gaming Corp. of Las Vegas. Boyd on Dec. 16 offered $2.45 billion for the company.
The creditors, in Monday's filing, noted the $2.45 billion -- if accepted -- would fall far short of covering Station's debt and liabilities last reported at $6.8 billion.
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The only people making money with Stations are the Lawyers! This litigation will take years and the bondholders will get SCREWED!
What else is new?
Ya Think ?
and round and round we go.
The insiders made billions when they went public and even more when Stations went private. Doesn't pass the smell test
Go to: http://www.kccllc.net/stationcasinos
Go to tab on left Court Documents, click that tab, and then when you see the list of document titles click on documents 738 to 743 if you want to read them.
Documents 739 and 740, not posted by the Sun, are the interesting ones. However, you need to read Document 742 to understand all of the short hand defined terms in what has been filed.
Read 'em fast because Document 743 is an emergency ex-parte motion to seal the Motion posted by the Sun and the exhibits to Document 740.
I forgot to mention that the tone of the Motion where Stations Unsecured Creditors Committee asks the judge for permission to sue the Stations insiders, posted by the Sun, is almost defeatist.
The unsecured creditors have been so repeatedly hosed by the Bankruptcy Court judge in Reno that the tone of their motion suggests that they think this one won't succeed either.
Outside of the Banana Republic of Nevada bankruptcy court proceedings look very different.
Enough said.
Here we go again.
Another group of un-busy lawyers who want multiple jurisdictions in a bankruptcy case.
Bankruptcy court is Federal Court that has jurisdiction over ALL the filers finances.
ALL of them.
(Is this twisted multi-juridictional technique-ism taught in Law school, or picked up at the local lawyer cocktail-party bar...)
The bondholders are toast, and suing Station Casinos is just going to send more of the money the way of the lawyers, as others have rightly pointed out here.
Give it up.
As a prior stockholder in STN, here's my observation in regard to the insider trading:
Check out the vast wealth which -- between STNs IPO in 1994 and 2007 -- that the Ferittta's, Sardeni's (sp?), Christianson, and Warner, raked in. Some of these names became the highest paid execs in Nevada for the respective years with the "gifting" and "optioning" approach they took. These are felons who should have been stopped long-before, yet we sadly ignored the reality due to our increased stock value return(s)
Lawyers get rich from suing, not from working.
BOYCOTT THE THEIVES! Fertitta's, Sartinni'...they're all laughing to the bank!
Eurotraveler, that's exactly what Colony and the Fertittas wants you to do. Give up so they can continue in their malicious, self serving ways.
If you understood how this transaction was structured you would see how greedy the Fertitta's and all the insiders were in this deal. The essentially stole the unsecured bond holders money without giving them anything. They walked away with hundreds of millions of dollars and left station crushed under a mountain of new secured debt. The bond holders should have been paid off first before the thiefs on the inside were able to exercise all their unvested stock options.
It is unbelievable how the dirty scum bags did this deal. Fertitta, Christiansen, Nave, Satrini, Neilson and a few others. All greedy scum bags.