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October 23, 2014

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Lenders with mortgage want to give Station more time to plan reorganization

Station Casinos properties

The clock tower of the Boulder Station hotel-casino obscures the resort's 15-story tower. Boulder Station has won three Launch slideshow »

Additional Station Casinos Inc. lenders have weighed in on the Las Vegas company's request that it be allowed an extra four months to exclusively propose a plan of reorganization.

In U.S. Bankruptcy Court filings Tuesday, lenders holding a mortgage against four of the company's most valuable properties said they are fine with the extension, as long as Station doesn't try to cancel a lease covering those four properties.

When Station was taken private in 2007, a company called PropCo was created to own Red Rock Resort, Sunset Station, Boulder Station and Palace Station.

Station now pays itself — technically it pays PropCo — $250 million per year to lease those properties.

The rental payments under the master lease cover payments on the $2.475 billion in debt against the four hotel-casinos. The debt is called CMBS, meaning commercial mortgage-backed securities.

Creditors not involved in the mortgage say this deal should be changed because the recession has reduced the value of the four hotel-casino properties. They say the rental payments are excessive and are diverting cash that all creditors have claims against.

"As a general matter, the CMBS lenders support the debtors' request for extension of exclusivity, so long as the debtors perform their obligations under the master lease during the extension period," said a filing by key CMBS lenders German American Capital Corp., a Deutsche Bank subsidiary, and JP Morgan Chase.

The lenders agreed with Station that the extension of the exclusivity period is warranted given the complexity of the case and said the Station debtors and the mortgage lenders have worked diligently to craft a consensual reorganization plan.

"The debtors have done a good job so far in conducting this case" and have worked constructively with the mortgage lenders to share information, the lenders said.

The mortgage lenders, however, said they are worried about assertions by Station that Station is in a good position to craft a reorganization plan given the competing interests of different sets of lenders under its complex corporate structure.

"To suggest, as the debtors do, that they seek to 'balance the interests' of the stakeholders of different debtor entities necessarily implies a willingness to compromise the rights of one debtor estate for the benefit of a different estate. This is not an argument in favor of continued exclusivity," the lenders said in their filing.

The lenders added they have been active in proposing terms and offering "substantial financial concessions" that would keep the four PropCo casinos under the Station Casinos umbrella.

The four properties are responsible for the bulk — 67 percent — of Station's earnings before interest, taxes, depreciation and amortization, the lenders said.

Station's motion for an extension of the exclusivity period, along with other issues, is set to be heard during a hearing Nov. 20.

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