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October 20, 2014

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Station Casinos, lenders agree to rent decrease at 4 properties

Station Casinos Inc. and key lenders have reached an agreement to temporarily slash the rent that Station pays to lease from itself four of its most valuable hotel-casinos.

Station said in a court filing late Thursday that under the deal with Deutsche Bank and other lenders, the rent will be reduced by about $7.7 million per month for December, January and February. The rent will be about $13.8 million per month during this period, Station said.

It's unclear if the agreement will be considered during a bankruptcy court hearing today for Station in Reno.

Station, in its court filing, noted the recession has reduced cash available to pay the rent and that the rental arrangement has been under attack by creditors in the bankruptcy case.

When Station was taken private in 2007, four hotel-casinos were spun off into a company called PropCo, which is managed by Station.

Station has been paying $250 million per year to lease the PropCo properties, with the rental payment covering debt encumbering the properties totaling $2.475 billion.

Creditors have demanded this arrangement be reworked, saying the rental and mortgage amounts are unrealistic given the recession that has reduced the value of the hotel-casinos. They want some of the cash used for the rent to be made available to all creditors.

The four properties in PropCo are Red Rock Resort, Sunset Station, Boulder Station and Palace Station.

The deal disclosed Thursday includes provisions in which Station, should it choose to reject the lease and turn the properties over to lenders, would continue to operate the properties under Station's gaming licenses for up to 150 days.

The deal also says if Station turns the properties over to the mortgage-holders, it will re-pay the lenders the deferred rental amount.

"The provisions in the compromise agreement ... enable the debtors to operate effectively in Chapter 11, while simultaneously preserving the rights of Station Casinos and PropCo ... under the master lease until such time as Station Casinos makes a decision to assume or reject the master lease either as part of a plan of reorganization or otherwise," Station said in its court filing.

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