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Published Tuesday, Feb. 3, 2009 | 7:05 p.m.
Updated Tuesday, Feb. 3, 2009 | 7:21 p.m.
Station Casinos on Tuesday announced a restructuring plan aimed at strengthening the company’s financial position and keeping lenders at bay.
Under the plan, known as a prepackaged bankruptcy, Station's parent company would file for Chapter 11 bankruptcy protection in court under a plan prepared in cooperation with lenders. Bondholders would vote on the plan before the bankruptcy filing, expediting the process.
The company could emerge from bankruptcy by summer.
The plan, which has received the support of senior lenders, would allow the company to continue operating as normal by requiring Station executives Frank and Lorenzo Fertitta and private equity partner Colony Capital to put up $244 million in cash.
With the cash infusion, Station expects to dodge a bullet by appeasing creditors who have the power to demand repayment on outstanding loans and comes at a time when the Las Vegas community is concerned for the health of one of its largest employers.
Last year, lenders turned down Station’s offer to exchange their debt for a discounted price. At the time, Colony was seeking to raise money to pay down bank loans. When Colony couldn’t get the money, this plan emerged in discussions with senior lenders, which dictated the terms.
As part of this process, Station elected not to make a $14.6 million interest payment due Monday on $450 million in notes due in 2014. That payment schedule has a 30-day grace period which ends March 3. Lenders have until the end of day March 2 to vote on the plan.
The plan requires approval from two-thirds of senior lenders as well as the same percentage of unsecured lenders, who are repaid after senior lenders in the event of bankruptcy. Station’s owners have offered to pay unsecured lenders a combination of cash and new notes. If enough lenders approve the plan, all creditors would be bound to the terms of the agreement.
Station has about $350 million in cash on hand – enough to pay bills and make interest payments. The bigger problem for Station has been paying down more than $2 billion in debts incurred when the company went private in a $9 billion deal in 2007. Earnings soon plummeted in the recession.
Frank and Lorenzo Fertitta own about 20 percent of the company and Colony, which put up most of the money for the management-led buyout, owns about 75 percent. Their ownership stakes would remain the same under the deal.
Station expects a 19 percent decrease in revenue and operating losses of $2 million in the fourth quarter compared with the same period a year ago – further evidence that business worsened toward the end of 2008 during an already slow period for Las Vegas. Earnings before interest, taxes, depreciation and amortization – a commonly used profit benchmark in the casino business – is expected to decrease in the range of 23 percent to 26 percent, executives said.
“We have an outstanding company, a loyal customer base and we believe we have the best team members in the industry,” Station Chief Executive Frank Fertitta III said in a statement. “It is no secret that current economic conditions in our country have had an adverse effect on Las Vegas in general and the casino business in particular. However, we believe that the steps we have taken and those we are proposing to take will result in our company being well positioned for the future.”
Station has been one of the hardest hit locally by the downturn, as its earnings growth was dependent upon the population and real estate boom in Las Vegas as well as discretionary income – all of which have been battered in the recession.
The company has laid off workers and reduced operating expenses but hasn't sold any properties or development opportunities for new casinos in the pipeline.
I really wish the employees well, but they have to realize that the shareholders, who own almost half the shares in the company, are being asked to take a "haircut" while the banks who own the other half are praying that this specious offer is accepted. In reality, if the shareholders say "screw you", Stations goes into a regular BK, and the banks lose a lot. Along with the Fertittas and Colony Capital. Look up "Trump, Donald" to see how this game is played. Vote "No" shareholders, and let's see what happens. Don't allow the Fertittas to live in luxury, while their employees are collecting UI-as in unemployment...
We need to increase state taxes on businesses to help with this issue with the Stations company.
Companies that are struggling to make payroll and pay the bills need higher taxes.
Without higher taxes, these companies are doomed.
I have to agree with bdover. Why would bondholders accept pennies on the dollar and allow banks and the Fertittas to lose nothing on the deal? If I were a bondholder, I would force the bankruptcy and demand full immediate payment. Who is to say Stations plan will work and the bondholders are forced to accept even less? At least, if Stations is forced to sell assests, the bondholders will have some immediate compensation. It may not be full reimbursement, but at least it will be something.
"we believe that the steps we have taken and those we are proposing to take will result in our company being well positioned for the future."
Well then, let's raise their gaming taxes to the national average for gaming establishments and get state government out of it's slump and provide some decent level of services for Nevada's citizens.
I love persons who post about how raising taxes on corporations will put them in the dumper. How twisted is this logic? First, if corps were to pay their fair share, Nevada would be in less of a hole than were are currently in. Tax breaks for these same corps would only benefit ONE entity, the corp. It has been proven over and over, never more so than now, that all the tax savings would just be put in the bank. It is not spread to the employees. "Just give them tax relief and we will trickle down the savings to wage earners". What crap. I am not talknig about small business. Under $250K in earnings a year deserve a tax break.
Maybe it would help Stations Casino's reputation if they would stop outsourcing their reservations dept. - or was that just an ugly rumor? If they want locals to patronize the place they need to be willing to hire locals and not cut-rate worker in a foreign country. If this IS just an ugly rumor then I offer my apology to Stations Casino's.
fccfirstclass,
and who owns corporations ?
people do. and it is not just rich people,
it is just about anyone with a 401k or ira.
so you WILL hurt the average person by raising
corporation taxes by indirectly lower share value.
i hope this is not over your head ?
"Don't allow the Fertittas to live in luxury"
As they should and deserve to. They are an example of how to be successful that none of their employees have ever learned. That's the way it goes in business. Don't like risk? Be an employee. Want to live in luxury? Create a large successful company that employs many people.
And seriously, how stupid is it to imagine that anyone would ever create a company like Station and live like an employee of same? What, exactly, would be the motivation then?
the power to tax is the power to destroy.
Corporations do not pay taxes. The tax, as every business expense, is passed on to the customer in the form of higher prices. If the customer refuses to buy the corporation's product or service, then the corporation, after restructuring, layoffs, default on corporate debt, etc., eventually goes out of business.
Why is always that those who can most afford to pay taxes rarely do - the loopholes are only available to the wealthy and they use every one of them and then some. This country was built on the backs of the middle class - we need to be put on the endangered species list.
maybe they should have cancelled the new casino they just opened in november - i have reservations for 4 rooms foR NASCAR - BETTER FILL THOSE REQUESTS