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Station responds to lawsuit, misses $15.5M payment

Updated Tuesday, Feb. 17, 2009 | 4:20 p.m.

Station Casinos issued a prompt response to a shareholder lawsuit filed last week.

In a filing with the Securities and Exchange Commission today, the company said the lawsuit is without merit because all bondholders are entitled to participate in its exchange offer, which is part of a plan to recapitalize the company. No old notes would remain outstanding if bondholders approve the restructuring plan, the company said.

In his complaint, bondholder S. Blake Murchison said some bondholders are at risk of losing everything in a bankruptcy liquidation because they haven't been given the chance to exchange their bonds for new ones that would be ahead of existing notes in bankruptcy court. He owns two bonds.

The company restructuring plan proposes that bondholders exchange their bonds for notes worth less money. If a majority approve the offer, Station owners will put $244 million in new equity into the company, reducing the company's debt and keeping bank lenders at bay.

In the filing today, Station also said it had elected not to make a $15.5 million interest payment due February 15 following a similar move by the company to skip a $14.6 million interest payment due Feb. 1.

The company hopes bondholders will approve the exchange offer by a midnight deadline March 2. That's when a 30-day grace period on unpaid interest ends nd bondholders can force immediate repayment on the notes. If the restructuring plan isn't approved and the interest isn't paid, bondholders could force the company into a traditional bankruptcy, which could have the owners losing control of their company and could force the sale of the company's casinos.

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