Station expects extension of restructuring talks

By Steve Green

Published Thursday, May 14, 2009 | 7:55 a.m.

Updated Thursday, May 14, 2009 | 5:39 p.m.

Station Casinos Inc. reported lower revenue Thursday and said it expects to reach agreement with key bondholders to continue restructuring discussions past Friday's deadline of an existing forbearance agreement.

As the recession continued to reduce activity at the company's casinos and hotels, the Las Vegas-based locals gaming operator today reported first quarter gross revenue of $307.6 million vs. $378.8 million in the same quarter of 2008.

A measure of profitability, operating income and earnings from joint ventures fell from $68.5 million in the 2008 quarter to $29.4 million in the 2009 quarter.

Overall, the company reported a first quarter 2009 loss of $33.7 million vs. a loss in the year-ago quarter of $70.8 million. Those numbers include changes in the value of financial derivatives and expenses or benefits from income tax provisions.

Because of reductions in cash flow tied to the recession, the company is having difficulty serving its debt load of $5.74 billion and is negotiating with key bondholders regarding a proposed prepackaged bankruptcy filing in which bondholders would make concessions and Station's owners, the Fertitta family and Colony Capital, would invest another $244 million in the company and remain in control of Station.

Under forbearance agreements in which key bondholders agreed not to take action against Station, the company in recent months has not made interest payments on some of its debt during these negotiations. The latest forbearance agreement expires Friday and will likely be extended.

"We expect to receive a forbearance extension from our lenders tomorrow and are awaiting the paperwork," Station spokeswoman Lori Nelson said Thursday.

In a regulatory filing today, Station said cash flows during the quarter ended March 31 were affected by a decrease of $78 million in cash paid for interest vs. the 2008 period due to the decision not to make scheduled interest payments on certain notes.

The company has also incurred $17.9 million in fees from legal and financial advisory firms for the lenders with whom it is in debt restructuring talks.

Other highlights from today's quarterly financial report:

-- Net revenue in the quarter of $282.7 million was down 20 percent vs. the 2007 quarter.

-- Adjusted EBITDA -- earnings before interest, taxes, depreciation and amortization, another profitability measure -- was $98 million, down 28 percent.

-- The company incurred $5.3 million in write-downs and other charges, of which $4.8 million related to a loss related to a disposition of a land parcel, $100,000 was for a loss on asset disposals and $200,000 related to severance expense as the company continued to reduce costs by reducing staffing levels.

-- The company also reported $600,000 in costs to develop new gaming opportunities, $2.8 million of expense related to equity-based awards, $1.7 million of preopening expenses and $4 million in legal fees related to the proposed debt restructuring and other non-recurring costs.

-- Station also bought $48 million in principal amount of its outstanding senior subordinated notes during the first quarter, resulting in a $40.3 million gain on early retirement of debt.

-- At Green Valley Ranch Resort, a partnership with Las Vegas Sun owner the Greenspun family, Station said its quarterly earnings were $6.7 million, which represents a combination of its management fee and 50 percent of the resort's operating income. In the first quarter, Green Valley Ranch generated adjusted EBITDA before management fees of $17.4 million, down 31 percent from the 2008 quarter. Green Valley Ranch reported net income of $1.3 million for the first quarter vs. net income of $1.4 million in the same period in the prior year.

-- Net revenue from the company's major Las Vegas-area casinos, excluding Green Valley Ranch, fell 19 percent to $258.8 million while adjusted EBITDA declined 24 percent to $87.1 million. The net loss for these properties was $5.7 million vs. a profit of $6.7 million in the year-ago quarter.

Station's properties are Red Rock Casino Resort Spa, Palace Station Hotel & Casino, Boulder Station Hotel & Casino, Santa Fe Station Hotel & Casino, Wildfire Rancho and Wild Wild West Gambling Hall & Hotel in Las Vegas; Texas Station Gambling Hall & Hotel and Fiesta Rancho Casino Hotel in North Las Vegas; and Sunset Station Hotel & Casino, Fiesta Henderson Casino Hotel, Wildfire Boulder, Gold Rush Casino and Lake Mead Casino in Henderson.

Station also owns a 50 percent interest in Green Valley Ranch Station Casino, Barley's Casino & Brewing Company, The Greens and Wildfire Lanes in Henderson; a 50 percent interest in Aliante Station Casino + Hotel in North Las Vegas; and a 6.7 percent interest in the joint venture that owns the Palms Casino Resort in Las Vegas. Station manages Thunder Valley Casino near Sacramento on behalf of the United Auburn Indian Community.