Station Casinos reports widening loss in fourth quarter

By Liz Benston

Published Tuesday, March 31, 2009 | 3:52 p.m.

Updated Tuesday, March 31, 2009 | 4:46 p.m.

Losses widened for Station Casinos in the fourth quarter of last year as the company reported net losses at its major Las Vegas casinos.

Station today reported a net loss of $3.2 billion in the fourth quarter compared with a loss of $437.4 million for the same period a year ago. Net revenue fell 19 percent to $289.8 million.

Station released selected fourth quarter earnings results Feb. 3 as part of a larger announcement about a potential restructuring plan.

Station reported $3.39 billion in write-downs and other charges against earnings. That includes a $3.34 billion write-down in the value of Station assets because of lower earnings projections, decreased values assigned to casinos during the recession and turmoil in the credit markets, the company said.

Net revenue for the company's largest Las Vegas casinos, excluding Green Valley Ranch, fell 20 percent to $262.3 million in the fourth quarter compared with a year ago. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, fell 8 percent to $81.8 million over the same period. Those properties reported a combined net loss of $1.2 billion in the fourth quarter.

Green Valley Ranch, the only single property to report earnings, posted adjusted EBITDA of $15.8 million in the fourth quarter, a 45 percent decrease from a year ago. That figure is before management fees paid by 50 percent owners the Greenspun family, which also owns the Las Vegas Sun. Green Valley Ranch reported a net loss of $23.2 million in the fourth quarter.

In 2008, Station's casino revenue fell 11 percent, food and beverage revenue fell 8 percent and room revenue fell 6 percent from the prior year. Profit margins fell in the casino and rooms department but rose in the food and beverage department as the company was able to reduce expenses by a greater percentage.

All three departments have cut staff in the downturn.

Hotel occupancy in 2008 fell two percentage points to 88 percent while average room rates fell $8 to $85 compared with 2007.

Station Casinos is expected to file for Chapter 11 bankruptcy protection, either as part of a prepackaged reorganization plan that lenders have agreed upon ahead of time or in the form of a traditional bankruptcy in which the company creates a reorganization plan that is approved by the court.

Station Casinos has a forbearance agreement with its bank lenders that expires April 15 and prevents lenders from demanding immediate repayment of debts. The banks could agree to extend that agreement past the April 15 deadline.

The book value of Station's long-term debt was $5.8 billion at the end of 2008 compared with $5.2 billion a year earlier.

Station is negotiating with bondholders to swap outstanding bonds with others worth less money and with longer maturity dates. The exchange would reduce Station's debt by billions and expedite the bankruptcy reorganization process. A two-thirds majority of bondholders must agree to the deal for a prepackaged bankruptcy to move forward.

Bondholders have until April 10 to vote on the exchange – an extended deadline giving bondholders more time to consider the offer. The parties could agree to extend that deadline.

In a recent interview, Station executives said the company had sufficient cash and cash flows to maintain operations after the April 15 deadline.