Station rejects Boyd’s offer, extends debt deadline

LAS VEGAS SUN file

The Texas Station and the Fiesta are part of the package that Boyd Gaming offered to purchase from Station Casinos, which is on the verge of bankruptcy, for $950 million.

By Steve Green (contact)

Published Tuesday, March 3, 2009 | 8:53 a.m.

Updated Tuesday, March 3, 2009 | 5:33 p.m.

The Board of Directors of Station Casinos, Inc., together with our financial and legal advisors, has reviewed Boyd’s unsolicited non-binding preliminary indication of interest set forth in your February 23, 2009 letter. As you know, our Company is in the process of soliciting consents from our lenders with respect to a pre-packaged plan of reorganization that would result in a restructuring of substantially all of our debt. Our Board has made no determination to pursue, nor has the Company taken any steps toward pursuing, a sale of all or any portion of the Company’s assets. In reviewing Boyd’s indication of interest letter, the Board considered, among other factors, the non-specific, non-binding and highly conditional nature of the Boyd proposal, the risks to the Company in sharing sensitive and confidential information with a significant competitor, and the uncertainties and timing risks associated with pursuing the proposal, including the feasibility of obtaining necessary third party consents and required regulatory, antitrust and other governmental approvals. The Board also considered the potential harm that would result to the Company’s stakeholders if such a proposal was delayed or could not be completed, whether as a result of the foregoing factors or Boyd’s potential inability to perform due to its own financial position. In light of the foregoing, and for other valid considerations, our Board has concluded that it is in the best interests of the Company and our stakeholders to proceed with the current restructuring plan. Should circumstances change, we will contact you.

Boyd makes play for Station Properties (2-24-2009)
Boyd Gaming offers to buy Station (2-23-2009)
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Harrah’s hit with class-action lawsuit over debt plan (2-16-2009)
Station Casinos sued over reorganization plan (2-13-2009)
Regulators keep tabs on Station, proposed restructuring (2-13-2009)

Station Casinos Inc. of Las Vegas said Wednesday it's not interested in entertaining Boyd Gaming Corp.'s offer to buy part of Station.

And with bondholders apparently hoping for a better deal, Station said today it extended the deadline for the note holders to vote on a debt-exchange deal that would leave the current owners in place after a proposed bankruptcy reorganization.

The deadline of Monday night was extended until April 10.

In a letter to Boyd that Station disclosed today and that was dated today, Station Chairman and Chief Executive Officer Frank Fertitta III said Station will continue pursuing its previously announced reorganization plan. That plan would leave he and his brother Lorenzo Fertitta and Colony Capital in charge of Station.

"In reviewing Boyd’s indication of interest letter, the (Station Casinos) board considered, among other factors, the non-specific, non-binding and highly conditional nature of the Boyd proposal, the risks to the company in sharing sensitive and confidential information with a significant competitor, and the uncertainties and timing risks associated with pursuing the proposal, including the feasibility of obtaining necessary third-party consents and required regulatory, antitrust and other governmental approvals,'' the letter said. "The board also considered the potential harm that would result to the company’s stakeholders if such a proposal was delayed or could not be completed, whether as a result of the foregoing factors or Boyd’s potential inability to perform due to its own financial position.''

"In light of the foregoing, and for other valid considerations, our board has concluded that it is in the best interests of the company and our stakeholders to proceed with the current restructuring plan,'' the letter said.

Boyd spokesman Rob Stillwell said Boyd planned to respond to the Station letter on Wednesday.

"We remain interested in acquiring all or some of the assets of Station Casinos,'' he said in response to Station's letter.

Separately, Station said it entered into forbearance agreements with its key note holders and lenders -- meaning they won't take action against Station during the forbearance period, ending April 15, for the company falling behind on debt payments for those notes.

"These forbearance agreements will provide the company with additional time to continue discussions regarding the terms of its plan of reorganization with its lenders and the holders of its senior and senior subordinated notes,'' Station said.

Analysts have said bondholders may be looking for a better offer from either Station's owners or from Boyd, the Las Vegas company that offered to buy some of Station's Las Vegas casinos for $950 million and has expressed interest in buying the entire company.

Station, the dominant player in the big Las Vegas locals gaming market, said Feb. 3 it was proposing to swap high-cost debt for low-cost debt and cash. It also proposed a capital infusion of $244 million by casino executives and owners Frank Fertitta III, and Lorenzo Fertitta, vice chairman; and by co-owner Colony Capital; and a plan to have the transaction approved through a prepackaged bankruptcy filing.

Station has offered some investors 10 cents to 50 cents on the dollar, depending on the bonds they hold, in secured notes and cash, in exchange for about $2.3 billion of existing bonds. The plan has been challenged in court by some bondholders, but Station says their case has no merit.

The plan would save Station an estimated $100 million per year in interest and debt expenses, a key savings considering the company's cash crunch caused by the recession.

Station has projected revenue fell 19 percent in the quarter ending Dec. 31 to $290 million.

Steve Green can be reached at 990-7714 or steve.green@hbcpub.com.

Discussion: 11 comments so far…

By dave202

3/3/09 at 11:39 a.m.

Suggest removal

Makes sense, but the bondholders getting virtually nothing will have trouble with this decision. Let's see if they have the power to force a sale.
By tvegas

3/3/09 at noon

Suggest removal

Another Fertitta scam
By BorisR

3/3/09 at 12:37 p.m.

Suggest removal

of course Station is rejecting. They're trying to play time and have Boyd raise the offer. Matter-of-fact is that STation has no more money and a lot of debt coming up. The bondholders will hate the Station management for that. And Wall Street will hate Boyd stocks for that offer. I was betting on the deal to come true by buying into Boyd stocks. Obviously chances are slim that this was a good bet.
From Switzerland, Europe
By SMB

3/3/09 at 12:38 p.m.

Suggest removal

Should have taken the offer. The company needs to get back down to its basics. Trim down, streamline and get rid of wasteful assets. Then maybe they could find that culture of really taking care of locals, you know the one they lost. Focusing on better value, quality and price all targeting locals.
By chazbean

3/3/09 at 2:17 p.m.

Suggest removal

What about the Ferritas and Colony offering more money to the bondholders? They are just stalling for time and business will continue to decrease. Make sure you use your points at Fiesta because they will not not be worth anything soon!
By dmg

3/3/09 at 2:30 p.m.

Comment removed by staff.
By pacman720

3/3/09 at 3:51 p.m.

Suggest removal

what it really says is..."We're still trying to screw the bondholders...we need more time to do that..if that doesnt work we'll get back to you"
By tvegas

3/3/09 at 3:55 p.m.

Suggest removal

Bondholders need to get together (or with Boyd) and file their own pre-packaged plan.
By ninemile

3/3/09 at 6:42 p.m.

Suggest removal

Boyd's and Stations are competitors for the local's in Las Vegas market, and they haven't always played nice with each other. This move by Boyd's is brilliant, thou some what cutthroat. It is a win win situation for Boyd's, and a loser Stations. Here they thought that they were going to reduce their debt by pennies on the dollar at the expense of their bond holders. Then to add insult to injury the Fertitta's would maintain their control of Station Casino's. So here comes Boyd's with an offer to buy most of their casinos, which is a better offer than what Station management offered. Now many analysts are telling the bond holders not to except this offer from Station, because a better offer is out there, because of Boyd's offer. So, if Station had accepted the offer, their presents would have been reduced in local market and Boyd's would have been increased. That's a win for Boyd's. Now Station's management will have to sweeten the deal for their bond holders, or maybe forced in to some kind of sell off by the bond holders. Bottom line Station Casinos are not getting out of debt as cheap as they hoped. Once again Boyd's wins.
By pmmart

3/4/09 at 6:28 a.m.

Suggest removal

With all of the filings by its competitors how far behind can Boyds be?

I think that Boyds should stay committed to cleaning up the mess on the strip that they created whey they imploded our favorite strip casino.
By Dark_Gable70

3/4/09 at 2:42 p.m.

Suggest removal

The Boyd crime family got dissed today! Hooray!!